Germany: Minimum wage bears liability risks for homeowners and property management

Written on 2 Mar 2015

As of 1 January 2015 a minimum wage of 8.50 Euro per hour is mandatory in Germany.

This legal change implies liability risks for homeowners and property managers.

According to the new law, a homeowner or property manager is not only responsible for his own employees but also for employees from hired external companies. If a homeowner or a property manager commissions a contractor or subcontractor on behalf of the homeowners association, he has to ensure that the employees are paid the minimum wage. Otherwise, the employee is entitled to claim the minimum wage directly from the homeowners association or even the homeowner himself, since the general liability of contractors is obligatory with the commencement of the minimum wage law.

A mandatory prerequisite is always the entrepreneurial behaviour of the homeowner or the property management.

How can homeowners and property manager minimise their liability risks?:

  • The announcement should already refer to the necessity of a minimum wage as a precondition for tendering.
  • The contract negotiations should always include an agreement which secures that the contractors or subcontractors compensate their employees according to the minimum wage law.
  • Attention should also be paid to the fact that only entrepreneurs are affected by this rule. Therefore, each case must be checked individually whether the homeowner or property management appears as a consumer or entrepreneur.
  • The property manager or homeowner should choose work or service companies carefully and check the offers from these companies especially regarding reliability.
  • Guarantees, duties of disclosure and rights to inspection, due diligence obligations as well as compensation claims should be agreed by contract. Depending on the range of the liability risk, it might even be of use to obligate the subcontractor to provide securities.