Compensation for Employers under the German Protection Against Infection Act?

Already today the coronavirus pandemic pushes many large and small companies to the brink of their economic capacities. In their distress, companies clutch at any straw. This is all the more understandable as sometimes the false impression in conveyed that legal provisions ‑ for example the Protection Against Infection Act (IfSG) ‑ promise compensation payments in enormous amounts in the current situation.

Due to its systematics, however, the Protection Against Infection Act ‑ rather unknown until today ‑ is not a legal basis for compensation claims for legal entities. Even though very few of us have probably come across the Act regularly until now, the purpose of the compensation provisions contained in the Act become clear very quickly: They regulate compensation for actions by public authorities towards natural persons. At present, this mainly concerns quarantine orders or the imposition of a ban on activity against a specifically designated person (especially employees). In these cases, the Act provides for compensation payments to the person concerned. It is a two-step procedure: First, the employer makes an advance payment and continues to pay salary for a period of up to six weeks. In a second step, Section 56 (5) of the Protection Against Infection Act regulates a claim for reimbursement by the employer against the authority in the amount of the continued salary payment to the employee (the dispute about the application of Section 616 of the German Civil Code (BGB) in these cases will not be discussed here).

A distinction must be made between this and the case where an entire business has to close down as an officially ordered shutdown. In contrast to an individualised quarantine order, the relevant official general order is ultimately directed against all companies in certain sectors of the economy and only indirectly affects the employees working in these sectors. In this case, employers find themselves in the difficult situation that although they are not allowed to open their businesses, remuneration of the employees must continue to be paid almost without exception due to the business risk theory of the Federal Labour Court.

However, this is exactly what the Protection Against Infection Act does not provide compensation for. Compensation is intended for natural persons who are directly affected by actions by public authorities, and not for legal persons where the employer's operational risk is realised.

This can also be justified systematically: Why should employers, in order to avert the aforementioned operational risk, introduce short-time work for their employees, where the employees receive - without top-up payments - only 60 or 67% of the net salary difference, when employers could instead continue to pay the full salary and receive 100% compensation from the public authority. That would render short-time work useless.

In the current crisis, companies already have various instruments to avert or alleviate the financial burden: The introduction of short-time work, loans from the German government-owned development bank KfW, tax deferrals and the emergency aid announced by the federal or state governments. The legislator is debating even more instruments and will make additional financial resources available. However, legal entities cannot expect compensation for loss of turnover or running costs on the basis of the Protection Against Infection Act.

Our expert Martin Biebl will be pleased to answer your questions on this topic.

^{Note: This contribution was published in a similar form in the legal database Beck online on 24 March 2020.}