German Labor Law and Leica

[ArtZ]

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I'd like to improve my understanding of the ways in which German business and labor laws - and general cultural tradition - influence Leica's business plans and decisions.

 

I do see complaints about, for example, the slow production rate of the M9 or availability of the X1/S2 (wondering why Leica does not just hire more workers, or closes shop for stock-taking in the face of huge demand).

 

And I get the feeling that people from other "business cultures" just don't realize the rules and assumptions Leica works under.

 

Here's what I think I know:

 

Features of German Labor and Employment Law | WilmerHale

Germany - National Labour Law Profiles - Information Resources - Social Dialogue, Labour Law and Labour Administration Department

Labor - Germany - average, sector

 

German holidays: German Holidays -- U.S. Commercial Service Germany

 

Some key points being: Something like 90% of German workers are hired under permanent or open-ended employment contracts - and those few contracts for a specific limited period of time have significant requirements for justifying the limited duration of the contract.

 

The open-ended contracts, after a probationary period, provide that termination is highly regulated, and can require notice of from one to seven months.

 

In other words, from the employees' point of view, why take a limited-term contract when 90% of jobs available to you don't lock you in to a limit.

 

And from the employer's point of view, if you need well-trained, specialized workers, you'll need to offer open-ended contracts, so they may well be with you for a long time.

 

The short version being: Hiring a bunch of good people on short notice to solve a short-term production problem is not that easy. And means long-term commitments on both sides - regulated by law.

 

Anyway - looking for knowledgable discussion from those who know something about the subject.

 

 

Andy,

 

Maybe if I return you another question you may understand better: Why in the States there's no Public Health Care as we have in Europe?

 

The political, economical and social models are different here than in the other side of the Atlantic (with the exception, maybe, of the UK, closer to American models).

 

Personally, I prefer the EU models where individuals (citizens) are more like members of a family (if you allow me this comparison) or of a group. The word solidarity has a real meaning for us: Public Health retirement pensions, unemployement... are covered by ALL of us.

 

PS: Just to give you an exemple, I've been one month is hospital (from Dec. 17th till Jan 17th) in Bilbao, Spain. I had in France the vaccin for the influenza A (H1N1) on Dec. 3rd and when I left Paris for holidays in Bilbao on Dec. 14th, I started to feel very bad. I went to see a doctor in Bilbao on the17th and she sent me straight away to hospital. I had a very serious allergy to the H1N1 vaccin and I almost passed away (not kidding). Between Xtmas Day and New Year's Eve doctors thought I could die at any time...

 

The reason I´m telling you this is the French Health Service has covered ALL my expenses in Spain, no my private insurances. The bill from Hospital was more than 75,000 EUR (I didn't even need to advance the money) because, in Europe, if you get sick in another EEC Country you're fully covered as if you were in your own Country. Don't you think that's great?

 

In France, as in Gemany, Spain, Holland, Italy and most European Countries, workers are hired under permanent or open-ended employment contracts. I think this indeed is a good thing because it protects workers, like a father would protect his children (using my previous comparison). If you had a disable son (or daughter), you would take care for him/her, won't you? Well, that's exactly what our social model does.

 

Yes, we do pay a lot of taxes for these services (Public Health retirement pensions, unemployement) but probably these services costs us less than paying individual private insurances (which in most cases refuse to assure you when you're not "economically profitable" for them).

[adan]

Hi, ArtZ. Just to clarify, I was not questioning or criticizing the wisdom of Germany's policies (or any other country's).

 

I just wanted to a) make sure those descriptions I linked to were accurate, and raise awareness that, as you say, Europe has a different model than the US.

 

It seemed a lot of people were criticizing Leica's handling of, for example, M9 supply, and asking why Leica didn't just hire more workers. I wanted to make the point that German/European policy tends to favor stability over flexibility - and did not take a position as to whether that was good or bad, just that it was - different. And one should not make assumptions based on what a US company might have done.

[wizard]

Yes in Germany it is close to impossible to fire somebody.

 

Used to be true, but no longer is. You may set people off if your business is going down, albeit at a cost (one half month's salary for every year an employee was with your company).

 

NO company in Germany hire people with a "open-ended contract"

 

Now, this is nonsense. While there may be more fixed term employment contracts nowadays, the majority of employees in Germany still has unlimited employment contracts.

 

Andy

[Guest BigSplash]

Laying off employees in Germany is possible but it requires:

1. Building an economic case to present to the labour inspector and works council.
   
2. Paying indemnities to employees that are laid off dependent on years served...this is likely to be of order one to two months salary per year worked (tax free) plus notice period and a further 3 months ....dependent on what the works council agrees. If the works council plays hard ball then it goes to a labour tribunal which will agree a lower indemnity, but the employer has defacto a delay of about two weeks to have the case heard. This is likely to be followed by a further months delay if the union appeals, which they will probably lose....but the employer still has to pay the employees during this disruptive period so normally both sides settle something early on.
   
3. Agreement on who goes and who stays ..which starts to get into a debate about skills that employee XXX has vis a vis the needs that the company has.
   

The above is also true for France and Italy. In the USA there is no rigorous govt. driven employment legislation setting out the indemnity amounts. That at first sight seems from an employer's point of view as great news until the reality hits home that each employee can and usually does go for platinum and with a good lawyer achieves gold. ...at least that is my impression having seen some settlement deals that hit my P&L.

 

he real issue in my view at Leica however is none of the above. I understand that it takes years to train a dentist, engineer, scientist, lawyer etc . However a line worker doing a repetitive job takes much less time to train. The skilled technicians so often referred to here are essentially trained "fitters" of components and their task should be to assemble several components before passing to the next operator.

 

If Leica has decided to give each operator the task of assembling the complete camera from a set of parts maybe that is a different matter of course but then does that make sense at a time they need extra pairs of hands to clear the backlog?

[stunsworth]

Paying indemnities to employees that are laid off dependent on years served...this is likely to be of order one to two months salary per year worked

 

Frank, this is at odds with what Andy has said in the message previous to yours.

[Guest BigSplash]

Frank, this is at odds with what Andy has said in the message previous to yours.

 

Steve, actually I believe that Andy and I are in agreement. If you are referring to 2 weeks per year worked as an indemnity (compared to my one to two months) then Andy is probably referring to:

1. Different Industry type to high tech that I have been used to....each industry type will have different agreements with the unions.
   
2. The legal govt. minimum as dictated by employment law and confirmed by the recognised labour union.
   

I am referring to what I have seen hit my P&L as an employer in Germany within a high tech industry when I have had to regretably cut back on staffing levels. It is in my case the reality after negotiation. I might add that 1.5 months per year worked is I think the maximum I have seen personally, but two months also does happen I have been told by lawyers.

 

I also agree with Andy about open ended contracts being the norm.

[wizard]

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Different Industry type to high tech that I have been used to....each industry type will have different agreements with the unions.

 

The legal govt. minimum as dictated by employment law and confirmed by the recognised labour union.

 

To the best of my knowledge, our employment law does not specify any minimum payments for laying off employees. I was refering to long established case law (up to the Supreme Court level) that has fixed said 1/2 month salary per year of employment (with the employer now terminating the employment) regardless of the industry concerned. If an employer offers less than that, an employee may go to court and will most likely be awarded the 1/2 month salary per year of employment. Sometimes, employers offer more in an attempt to avoid a legal battle, but that is certainly not the norm, as there is a considerable risk for the employee that would have to sue the employer and would have to make a good case as to why more than 1/2 month salary per year of employment is appropriate in a given case.

 

Andy

[mby]

And it's not tax free...

[wizard]

And it's not tax free...

 

Correct.

[tobey bilek]

Another thread talked about warehousing and lack of supply. Stephan Daniels said he has never seen such a full order board.

 

I know they are making M9 at full capacity, full being what they want or can get parts for.

Dealers a unable to get lenses.

 

Now the question has become have they moved the lens people to making M9 because they do not want to hire more because of German labor laws or perhaps because they feel the current sales volumn can not be sustained. Another possibility is many are buying new lenses to fit the new M9 and demand has plain outstripped supply. Guess we will never know.

[imagesculpt]

I'm a little late on this reply to this thread. Sorry.

 

 

You can call this very traditional way to handle the relations between employees and "their" products as out of fashion. It seems as if the former CEO Mr. Lee did think so. If one thinks so, a hire-and-fire-system looks much more appropriate.

 

Careful, Andy. Facts are a rarity in certain parts of this Forum these days, and what you have pointed to here are definitely "inconvenient truths".

As is the case with most Steven Lee information on this forum and I have grown tired of reading it and need to say-- He was the best ALLY Leica workers, Leica photographers, Leica investors and future Leica customers could ever have had. Aside from bringing the company back from the brink of certain bankruptcy, he remains the only CEO to have made a profit for the company in decades. See 2007/2008 numbers in the Leica annual report.

 

Per this topic thread about employees– yes, it’s been mentioned that workers are hard to fire in Germany for all the reasons listed regardless if they do their jobs well or not. This is not the case for a German CEO. The majority shareholder or board can fire he/she with no legal consequence on a personal whim.

 

Mr. Lee did try to remove 3 workers. The courts nearly always favor the employees over the employer. But he ADDED something like 100+ employees. That is what matters. He brought back old Leica workers to restore the company and their skills. He was making money, so this was possible. That’s pretty good after inheriting the M8 recall.

 

If you talk to the heart of Leica, the people in production and design, they will tell you – he spent time and effort working closely and listening to them during work and then inviting people after work to dinner to talk. They know who challenged them to create the S2. It simply wouldn’t exist without him. It’s too bad, the board didn’t let him finish it as he planned. But under him, they created more new lens in an amazingly short time. He’s had practice at this. While at Best Buy, he designed the first private label products the company had ever made with a small crew. Basically he launched an entire PC business in under a year and made double the profit the big manufactures made. The PCs were designed with Porsche Designs in Germany.

 

I watched Steven Lee at Best Buy in admiration as he built an entire PC business and am an American wanting to protect a man I know as honorable. So you can take this gentle rant as just my bias and my personal connections, or ask someone who honestly knows. Ask someone who’s sat down with Mr. Lee who understands business, cameras and customers. Ask someone who's seen his vast photography collection and heard him explain the workings and background in surprising detail about every single piece. Ask Porsche Design or a non-biased photographer. If you are someone who is afraid of change or unwilling to see this German engineering giant as imperfect, you will get a different answer, I'm sure. I’ve watched this forum for a long time and thought it was time for some reality.

 

It’s unfortunate that people listen to the likes of Amateur Photographer or local newspapers spread silly amateur half truths to make it seem there was a real business reason to fire Mr. Lee. Or believe that he abused people. (Similar things are being said about Spiller and will be about many leaders charged with turn-around mandates). It’s understandable that people have such a hard time with change—even when their own existence depends upon it. And it’s understandable that someone who’s different may not be accepted. But it’s too bad that a highly skilled innovative businessman with the depth of design, photography and engineering expertise was pushed out the door.

 

I’m sure he’ll open other doors and we’ll all benefit.

 

I’m done. Now back to concentrating on making photos. Leica is still a company and the CEO is hired to make money so that people can keep their jobs and we can make lasting images with their lens & cameras.

[jaapv]

I don't think you really know what you are talking about. One only needed to talk to any employee at Leica when he was fired. There was a palpable sense of relief in the company. Mr. Lee may be an excellent CEO in the American corporate culture. His style certainly was not suited to a German small company. It is not a matter of personal capability or motivation. It is a matter of different corporate cultures that are utterly alien to one another.