Germany’s Draft Employee Data Act

Employment Law Outside the United States and What You Need To Know

Various permutations of the German government have debated employee data protection legislation for the past few decades. No significant laws emerged from those various rounds of discussions. With the rapid advance of AI, however, that inertia has changed.

The Federal Ministry of Labor and Social Affairs and the Federal Ministry of the Interior and Home Affairs have jointly drafted a proposed law titled the “Draft of a law to strengthen the fair handling of employee data and for more legal certainty for employers and employees in the digital world of work.” This draft Employee Data Act is now undergoing coordination with other ministries and could become law before the end of this legislative period in October 2025.

This draft law aims to establish comprehensive regulations for handling employee data, replacing the much-criticized Section 26 of the Federal Data Protection Act. The proposal emphasizes providing employers with clearer legal guidelines while ensuring employees’ data rights are robustly protected. Key highlights include detailed provisions on recruitment, monitoring, data profiling, and the use of artificial intelligence (AI) in employment.

Recruitment and Data Deletion Obligations

The language of the draft bill allows employers to process applicant data if necessary for determining suitability, but they would be prohibited from requesting or deriving information about severe disabilities during the application process. The draft also mandates applicant data deletion within three months of the conclusion of the hiring process unless a legal dispute is pending or likely.

Applicants withdrawing their candidacies are entitled to immediate data deletion. These provisions aim to ensure that recruitment processes are conducted with fairness and respect for applicants’ privacy.

Monitoring and GPS Tracking

The bill distinguishes between short-term monitoring measures and longer-term surveillance. Short-term monitoring would be permitted for purposes such as ensuring workplace safety or preventing criminal activity, provided the scope and necessity of the measures are balanced against the circumstances. Longer-term monitoring, however, would require justification based on specific purposes like protecting employees or operational interests, and it explicitly excludes performance monitoring. This sounds an awful like the 4th Amendment jurisprudence that has developed in the United States for the past 75 years.

The draft bill introduces regulations for GPS tracking. Tracking is permitted for managing employee deployments at different locations, but privacy considerations must be upheld, such as allowing employees to disable tracking in company vehicles also authorized for personal use.

Profiling, AI, and Biometric Data

Profiling and the use of AI systems would be tightly regulated. Employers leveraging profiling for purposes such as training and development opportunities must conduct a balancing of interests and comply with transparency requirements, including disclosures about input data, AI involvement, and decision-making logic. Importantly, profiling that analyzes employees’ emotions or social relationships would be prohibited, safeguarding workers from intrusive data practices. This seems to be a trend in AI regulation as it matures. Regulators have a keen interest in the nascent ability of AI to aggregate data and deduce a person’s mental or emotional state. They all seem very concerned about the invasion this kind of internal life gaging will have on citizens.

The proposed law also addresses the use of biometric data for authentication in security-critical areas. Such practices would only be permitted if justified by heightened security needs, further balancing innovation with privacy concerns.

Intra-Group Data Processing

The law also regulates the sharing and forwarding of employee data within corporate group structures. Employers would be allowed to transfer employee data for purposes like centralized administrative tasks or cross-company deployment, but only after weighing the interests of all parties involved. Obviously, leaving it to employers to conduct this balancing leaves both employers and employees uncertain where the boundary is that once crossed equates to a violation. Perhaps this will be clarified before the law is presented for enactment later in 2025.

Key Implications for Employers

This draft law represents a significant development in Germany’s employment law landscape, providing much-needed clarity for employers navigating complex data protection challenges. With detailed regulations on AI systems, monitoring, and group-wide data sharing, the legislation aims to reduce uncertainty and legal risks for employers while strengthening employees’ rights. For businesses, the new framework would streamline compliance with data protection laws and foster a more transparent digital workplace.

Although the legislative process remains in its early stages, the draft law signals a strong push toward modernizing Germany’s employee data protection framework. Employers should begin preparing for these changes by reviewing their current data processing practices and aligning them with the proposed requirements, particularly in areas involving AI and monitoring. If passed, the law will mark a major step forward in balancing technological advancements with employee privacy and fairness.

Finally, given that Germany is part of the European Union a pre-emption consideration of sorts appears.

Key Considerations:

1. EU AI Act as a Regulation:

If the EU AI Act is adopted as a regulation (which is the current legislative proposal), it has direct effect in all member states. This means it is binding and applicable without the need for national implementation measures. Any national law, such as Germany’s AI data privacy law, would need to comply with the provisions of the EU AI Act.

2. Conflicts Between EU and National Law:

If Germany’s AI data privacy law contradicts the EU AI Act, German courts would be obligated to apply the EU AI Act. National laws conflicting with EU regulations are invalid to the extent of the conflict.

3. Complementary Laws:

Member states can adopt additional or complementary laws in areas where the EU provides flexibility. For example, Germany could enact stricter employee data protection measures, provided these laws do not undermine or contradict the objectives of the EU AI Act.

4. Potential Challenges:

If there is uncertainty about whether Germany’s law contradicts the EU AI Act, the case could be referred to the Court of Justice of the European Union (CJEU) for interpretation. The CJEU is the ultimate arbiter in resolving disputes about EU law.

5. Exceptions:

Some EU laws allow member states limited discretion in certain areas, such as public security, data protection, or labor law. If Germany can demonstrate that its law falls within a permissible exception, it may still apply alongside the EU regulation.