In this episode, we explore the intersection of artificial intelligence and German labor law. Labor and employment lawyers Judith Becker and Elisa Saier discuss key German employment laws that must be kept in mind when using AI in the workplace; employer liability for AI-driven decisions and actions; the potential elimination of jobs in certain professions by AI and the role of German courts; and best practices for ensuring fairness and transparency when AI has been used in hiring, termination and other significant personnel actions.

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Intro: Hello and welcome to Tech Law Talks, a podcast brought to you by Reed Smith's Emerging Technologies Group. In each episode of this podcast, we will discuss cutting-edge issues on technology, data, and the law. We will provide practical observations on a wide variety of technology and data topics to give you quick and actionable tips to address the issues you are dealing with everyday.

Judith: Hello, everyone. Welcome to Tech Law Talks and to our new series on AI. Over the coming months, we'll explore the key challenges and opportunities within the rapidly evolving AI landscape. Today, we will focus on AI in the workplaces in Germany. We would like to walk you through the employment-level landscape in Germany and would also like to give you a brief outlook on what's yet to come, looking at the recently adopted EU regulation on artificial intelligence, the so-called European Union AI Act. My name is Judith Becker. I'm a counsel in the Labor and Employment Group at Reed Smith. I'm based at the Reed Smith office in Munich, and I'm here with my colleague Elisa Saier. Elisa is an associate in the Labor and Employment Law Group, and she's also based in the Reed Smith office in Munich. So, Elisa, we are both working closely with the legal and HR departments of our clients. Where do you already come across AI in employments in Germany and what kind of use can you imagine in the future?

Elisa: Thank you, Judith. I am happy to provide a brief overview of where AI is already being used in working life and in employment law practice. The use of AI in employment law practice is not only increasing worldwide, but certainly also in Germany. For example, workforce planning and recruiting can be supported by AI. Therefore, already a pretty large number of AI tools does exist for recruiting, for example, in the job description and advertisement, the actual search and screening of applicants, as well as in the interview process, the selection and hiring of the right match, and finally the onboarding process. AI-powered recruiting platforms can make the process of finding and hiring talents more efficient, objective, and data-driven. These platforms use advanced algorithms to quickly scan CVs and applications and automatically pre-select applicants based on criteria such as experience, skills, and educational background. This does not only save time, but also improves the accuracy of the match between candidates and vacancies. In the area of employee evaluation, artificial intelligence offers the opportunity to continually analyze performance data and evaluate them. This enables managers to make well-founded decisions about promotions, salary adjustments, and further training requirements. AI is also used in the field of employee compensation. By analyzing large amounts of data, AI can identify current market trends and industry-specific salary benchmarks. This enables companies to adjust their salaries to the market faster and more accurately than with traditional methods. When terminating employment relationships, AI can be used with the social selection process, the calculation of severance payments, and drafting of warnings and termination letters. Finally, AI can support compliance processes, for example, in the investigation of whistleblowing reports received via Ethic Hotline. Overall, it is fair to say that AI has arrived in practice in the German workplace. This certainly raises questions about the legal framework for the use of AI in the employment context. Judith, could you perhaps explain which legal requirements employers need to consider if they want to use AI in the context of employment?

Judith: Yes, thank you, Elisa. Sure. The German legislature has so far hardly provided any AI-specific regulations in the context of employment. AI has only been mentioned in a few isolated instances in German employment laws. However, this does not mean that employers in Germany are in a legal vacuum when they use AI. There are, of course, general and not AI-specific employment laws and employment law principles that apply in the context of using AI in the workplace. In the next few minutes, we would like to give you an overview on the most relevant of these employment laws that German-based employers should have in their mind when they use AI. Now, I would like to start with the General Equal Treatment Act, the so-called AGG. Employers in Germany should definitely have that act in mind as it applies and it can also be violated even if AI is interposed for certain actions. According to this act, discrimination against job applicants and employees during their employments on the grounds of race or ethnic origin, gender, religion or belief, disability, age or sexual orientation is generally speaking prohibited. Although AI is typically regarded as something which is being objective, AI can also have biases and as a result the use of AI can also lead to discriminatory decisions. This may occur when, for example, training data the AI is trained with itself is based on human biases, and also if the AI is programmed in a way that is discriminatory. Currently, for example, as Elisa explained in the beginning, AI is very often used to optimize the application proceedings and when a biased AI is used here, for example, for selecting or for rejecting applicants, this can lead to violations of the General Equal Treatment Act. And since AI is not a legal subject itself, this discrimination would be attributable to the employer that is using the AI. And the result would then be, in the event of a breach of the Act, that the employer is exposed to claims for damages and compensation payments. And in this context, it is important to know that under the German Equal Treatment Act, the employee only has to demonstrate that there are indications that suggest the discrimination. So if the employee is able to do so, then the burden of proof shifts to the employer and the employer must then prove that there was in fact no such discrimination. And when an employer uses AI due to the complexity and the technical complexity that is involved, that can be quite challenging. In this regard, we think that a human control of the AI system is key and should be maintained. As we heard from Elisa in the beginning, AI is not only used in the hiring process, but also in the course of the employment. One question that came up here is whether AI can function as a superior itself and whether AI can give work instructions to employees. So the initial answer here is yes. German law does not stipulate any obligations that work instructions have to be given by a human being. Therefore, just as it is possible to delegate the right to give instructions to a manager or to another superior, it is also possible to enable an AI system to give instructions to the employees. In this context, it is important to recall, however, that the instructions are, of course, again attributable to the employer. And if the AI instructs in a way that is, for example, outside of the reasonable discretion or gives instructions which are outside of the employee's contract, then this instruction would, of course, be unlawful and that would be attributable to the employer as well. One aspect that I would like to point out here is that if an AI system would lead to a decision towards the employee that has legal effects and impacts the employee in a very significant way, then such decisions may not be made exclusively by an AI. This is because of a principle that is to be found in the data protection laws, and Elisa will explain on this in greater detail. Another aspect of AI in the course of employment is whether employers can instruct their employees to use AI. Again, here the answer is yes. This is a part of the employer's right to give instructions, and this right covers not only if employees, should use AI at all or if they are prohibited to use it. It also covers what kind of AI can be used and to avoid any misunderstandings and to provide for clarity here, we advise that employees should have a clear AI policy in place so that the employees know what the expectations are. And what they are allowed to do and what they are not allowed to do. And in this context, we think it is also very important to address confidentiality issues and also IP aspects, in particular, if publicly accessible AI is used, such as chat GPT.

Elisa: Yes, that's true, Judith. I agree with everything you said. In connection with the employer's right to issue instructions, the question also arises as to the extent to which employees may use AI to perform their work. The principle here is that if the employer provides its employees with a specific AI application, they are allowed to use it accordingly. Otherwise, however, things can get more complicated. This is because under German law, employees are generally required to carry out their work personally. This means that they are generally not allowed to have other persons to do their work in their place. The key factor is likely to be whether the AI application is used to support the employee in performing a task or whether the AI application performs the task alone. The scope of the use of AI is certai