Sanctions imposed on recipients of unemployment benefits to enforce their cooperation obligations are in part unconstitutional

Press Release No. 74/2019 of 05 November 2019

Judgment of 5 November 2019
1 BvL 7/16

The legislature may apply the principle of subsidiarity (Nachranggrundsatz) when granting subsistence benefits designed to ensure a minimum standard of living; in accordance with this principle, such benefits are only granted if persons cannot support themselves by their own means. In addition, the legislature may impose upon those recipients of “unemployment benefits II” (Arbeitslosengeld II) who are fit to work reasonable obligations to cooperate for overcoming their own need, and may impose sanctions by temporarily withholding benefits if recipients violate such obligations. However, in imposing such sanctions, the legislature places an extraordinary burden on the recipients of such benefits; therefore, strict proportionality requirements apply and the legislature’s usually broad margin of appreciation is limited in this area. The longer the provisions have been in force and the better the legislature can thus assess their effects, the less it is permissible for the legislature to base the sanctions regime on assumptions only. Furthermore, if there is a reduction in “unemployment benefits II”, those sanctioned must be able, in a reasonable (zumutbar) manner, to fulfil the conditions for the benefit to be restored.

This is what the First Senate of the Federal Constitutional Court held in its judgment pronounced today. While it did not object to a benefit reduction of 30% in relation to the relevant basic rate based on a calculation of basic needs (Regelbedarf) when certain obligations are violated, it held sanctions to be incompatible with the Basic Law based on the available evidence where, following a recipient’s repeated failure to meet their obligations to cooperate within the previous year, benefit reductions exceed 30%, or benefits are even suspended entirely. In addition, sanctions are incompatible with the Basic Law to the extent that a reduction in the amount of benefits paid is mandatory, even in cases of extreme hardship. Sanctions are also incompatible with the Basic Law to the extent that all reductions are subject to a rigid three-month period. However, the Court declared the provisions to be applicable subject to certain requirements until new provisions have been enacted.

Facts of the case:

1. Pursuant to § 31(1) of the Second Book of the Code of Social Law (Zweites Buch Sozialgesetzbuch – SGB II), recipients of “unemployment benefits II” who are fit to work are in breach of their obligations if, despite having been informed about the legal consequences, and without a valid reason, they do not comply with their job integration agreement, refuse to take up or continue a reasonable job, traineeship, work opportunity or subsidised employment, behave in a way that prevents such an opportunity from arising or do not show up for, discontinue or prompt the discontinuation of a reasonable job integration measure. Pursuant to § 31a SGB II, the legal consequence of such breaches of recipients’ obligations is, initially, the reduction of their “unemployment benefits II” by 30% in relation to the respective basic rate of a person entitled to benefits who is fit to work. In case of a second breach within a year, benefits are reduced by 60% in relation to the basic rate. In case of any further consecutive breach, unemployment benefits are completely suspended. Pursuant to § 31b SGB II, benefits are reduced for a three-month period.

2. The plaintiff in the initial proceedings, who is a trained warehouse clerk, was proposed an employer by the competent job centre; the plaintiff told the employer that he was not interested in the proposed warehouse job, but that he would want to apply for a sales position instead. The job centre thus initially sanctioned the plaintiff with a 30% reduction of his benefits. When the plaintiff later did not use a training and placement voucher for a practical trial in a sales job, the job centre imposed a sanction reducing his benefits by 60%. After an unsuccessful objections process, the plaintiff brought an action before the Social Court (Sozialgericht). The Social Court suspended the proceedings and, by way of specific judicial review proceedings (konkrete Normenkontrolle), referred to the Federal Constitutional Court the question whether § 31a in conjunction with § 31 and § 31b SGB II were compatible with the Basic Law.

Key considerations of the Senate:

I. The essential constitutional requirements for the design of subsistence benefits (i.e. the benefits under the Unemployment Benefits II Scheme [which are to be distinguished from insurance-based “unemployment benefits I”]) follow from the fundamental rights guarantee of a minimum standard of living in accordance with human dignity (menschenwürdiges Existenzminimum) deriving from Art. 1(1) in conjunction with Art. 20(1) of the Basic Law (Grundgesetz – GG). Constitutionally, the legislature has a certain leeway in setting out the statutory framework for ensuring a minimum standard of living in accordance with human dignity.

However, human dignity is not subject to the condition that persons must be able to independently support themselves; rather, creating the conditions for leading an independent life is part of the state’s mandate of protection following from Art. 1(1) second sentence GG. Yet the Basic Law does not preclude the legislature from tying subsistence benefits designed to ensure a minimum standard of living in accordance with human dignity to the principle of subsidiarity, according to which such benefits are only granted if persons cannot support themselves by their own means. In doing so, the legislature shapes the principle of the social state (Sozialstaatsprinzip) under Art. 20(1) GG.

The principle of subsidiarity can entail more than only an obligation to first use one’s available means from income, assets or payments from third parties before claiming benefits. The Basic Law does also not prevent the legislature from requiring that recipients of state benefits actively participate in overcoming their own need or prevent need in the first place. However, such obligations to cooperate restrict their freedom of action and must therefore be justifiable under constitutional law. Where the legislature establishes obligations to cooperate in order to pursue the legitimate aim of making persons prevent or overcome their own need, in particular through paid employment, these obligations must satisfy the requirements of proportionality; thus, they must be suitable, necessary and reasonable for achieving that aim.

When the legislature decides to set out proportionate obligations to cooperate, it may also ensure that they are enforceable. In case persons, without a valid reason, do not meet the reasonable obligation to cooperate of which they are aware, the legislature may provide for sanctions to enforce recipients’ obligation to participate in overcoming their own need. Such a legal framework takes into account the personal responsibility of the affected persons, given that they must bear the consequences of their actions as laid down in the law.

However, where the legislature decides to impose sanctions by temporarily reducing subsistence benefits, sanctioned persons lack the funds needed to cover their needs to live in accordance with human dignity. This can only be compatible with the Basic Law if the sanction indeed makes those affected by it meet their cooperation obligations, which aim to prevent or overcome existential need. Yet here, strict proportionality requirements apply. In the context of subsistence benefits, the legislature’s usually broad margin of appreciation is limited. The longer such provisions on sanctions have been in force, the more compelling the findings must be to prove that the sanctions are suitable, necessary and appropriate.

Moreover, in designing sanctions, the legislature must observe other fundamental rights where their scope of protection is affected.

II.1. The provisions on subsistence benefits referred here for review by the Social Court are compatible with the Basic Law to the extent that they require reasonable cooperation from adults who are fit to work for overcoming or preventing their need.

a) In setting out the obligations to cooperate to overcome one’s own need pursuant to § 31(1) SGB II, the legislature pursues legitimate aims given that these obligations serve to get benefit recipients back into employment. These obligations are suitable for achieving these aims under constitutional law. The legislature does not exceed its margin of appreciation with regard to the necessity of sanctions because it is not evident that less intrusive duties to cooperate or positive incentives could have the same effect.

The design of the obligations to cooperate is reasonable. Here, the legislature does not have to provide for occupational protection ensuring that affected persons would only be obliged to take a job corresponding to their training (Berufsschutz) given that social security law [SGB III], where such rules exist, and basic income protection law [“unemployment benefits II”; SGB II] are structurally different. Therefore, it is not objectionable that a job one is obliged to take is deemed reasonable even if it is different from jobs undertaken so far or if it is a job of lower value. Moreover, there is no indication that any of the obligations to cooperate set out in § 31(1) SGB II violate the constitutional prohibition of forced labour (Art. 12(2) GG). It is also not objectionable under constitutional law if the obligation to cooperate concerns employment that does not correspond to one’s chosen occupation. The legislature also took into account the fundamental rights protection of the family (Art. 6 GG) in its general provisions on reasonable work, which also apply to the obligation to cooperate. 

2. The legislature’s decision to enforce such legitimate obligations by means of sanctions is not in itself objectionable under constitutional law, given that it pursues a legitimate aim. However, the statutory provisions challenged in these proceedings do not satisfy the proportionality requirements, which are particularly strict in this domain.

a) Based on current findings, a benefit reduction of 30% in relation to the relevant basic rate pursuant to § 31a(1) first sentence SGB II is not objectionable under constitutional law. The burden that this sanction entails is already extraordinary, and the strict proportionality requirements reflect this burden. Yet the legislature can base its decision on plausible assumptions; it can assume that such a benefit reduction can contribute to making sanctioned persons cooperate, also because of its deterrent effect, and that less intrusive means would not be equally effective. Nonetheless, a benefit reduction of 30% is only permissible if the sanction can be waived in cases of extreme hardship and if its three-month duration is not rigid without any possibility of lifting the sanction if the affected person cooperates.

aa) Ultimately, it cannot be found that § 31a(1) first sentence SGB II is not generally suitable for achieving its aim of overcoming need through cooperation. While the legislature’s margin of appreciation is limited because the minimum standard of living protected by fundamental rights is affected, it satisfies the constitutional requirements to assume that the sanction contributes to achieving the aims pursued, given that the legislature may consider that benefit reductions have a deterrent ex ante effect. Moreover, the legislature has set out requirements that strengthen the link between the cooperation obligation to support oneself on the one hand and the benefit reduction to enforce this obligation on the other.

The legislature’s assessment that sanctions are necessary to enforce cooperation obligations is within its margin of appreciation. The legislature’s assumption that less intrusive but equally effective means are not available is sufficient. It appears plausible that a reduction on this scale resulting in a heavy burden on sanctioned persons may prompt them to meet their obligations, and that a lower sanction or positive incentives would not be equally effective.

In an overall assessment, the provision does also not violate the stringent requirements of proportionality in its strict sense.

bb) However, for the rest, the design of the sanctions to enforce legitimate cooperation obligations does not satisfy constitutional requirements. It is unreasonable that § 31a(1) first sentence SGB II establishes a mandatory reduction of benefits in case of a breach of obligations without any further assessment. The legislature does not ensure that reductions are not mandatory in cases where they cause extreme hardship, in particular where they appear ultimately untenable. The legislature must provide for such exceptional cases, where, in principle, affected persons are in a position to comply with their obligation to cooperate, but where sanctions appear unreasonable nonetheless in the specific case with its particular circumstances.

cc) Based on the required overall balancing, it is also unreasonable that the sanctions reducing the basic rate set out in § 31a(1) first sentence SGB II are always imposed for a rigid duration of three months and cannot be lifted earlier regardless of whether they have achieved their actual aim: cooperation. The rigid duration of the benefit reduction exceeds the limits of the legislature’s leeway. Since the legislature must tie the suspension of subsistence benefits on the grounds of refusal of reasonable cooperation to the personal responsibility of those affected, reducing benefits is only reasonable, upon overall assessment, if the sanction ends as soon as the affected person cooperates. Those in need of benefits must be able to fulfil the conditions for receiving benefits again. Also, where cooperation is no longer possible, but the sanctioned person credibly and firmly declares their willingness to cooperate, benefits must be granted again within a reasonable time period. The usually broad margin of appreciation is limited here, too, given that by reducing subsistence benefits, the legislature imposes onerous burdens in the domain protected by Art. 1(1) in conjunction with Art. 20(1) GG without a corresponding change in the subsistence needs of those affected.

b) Based on current findings, the benefit reduction of 60% in relation to the relevant basic rate provided for in cases of a second consecutive breach of the obligation to cooperate, pursuant to § 31a(1) second sentence SGB II, is not compatible with the Basic Law. In its current design, the provision cannot be justified under constitutional law upon an overall balancing of the heavy burden it entails on the one hand, and of the aim of enforcing obligations to cooperate on the other, given the available evidence regarding the suitability and necessity of a reduction in benefits of this scale. Renewed sanctions are not ruled out if obligations are repeatedly breached and if this is the only way to enforce the obligation to cooperate. However, the reduction of 60% in relation to the basic rate is unreasonable given that the burden it entails seriously encroaches upon the minimum standard of living guaranteed by fundamental rights. 

aa) It is true that the legislature took measures to prevent people from losing the basis for ever finding work again because of the sanctions. However, based on current findings, there are serious concerns regarding the suitability of the sanctions. The legislature’s decision to set out sanctions reducing benefits by 60% is not based on compelling evidence; it cannot be established that the desired outcomes are actually achieved and that negative consequences are avoided. Whether such benefit reductions are effective has not yet been sufficiently studied. If there were compelling evidence that such sanctions are suitable for prompting cooperation to overcome need by way of paid employment, the legislature would, by way of exception, be entitled to provide for particularly severe sanctions. But in view of the heavy burden imposed on affected persons, the general assumption that such benefit reductions will achieve their purposes is not sufficient. Moreover, it is doubtful that repeated breaches of obligations could not be countered in a sufficiently effective manner by less intrusive means, such as a second sanction with a lower reduction rate or a longer duration.

The possibility of receiving supplementary benefits provided for in § 31a(3) first sentence SGB II does not remove the doubts as to the suitability of a benefit reduction of 60%, given that its design does not sufficiently satisfy the constitutional requirements.

bb) Furthermore, § 31a(1) second sentence SGB II raises the same doubts with regard to the mandatory sanction imposed even in cases where it is clearly unsuitable and with regard to the rigid three-month duration of the sanction without any possibility of lifting it in case of cooperation.

c) Based on current findings, the complete suspension of “unemployment benefits II”, pursuant to § 31a(1) third sentence SGB II, is not compatible with the constitutional requirements.

In such a case, payments covering basic needs are completely suspended, and benefits for additional needs and for housing and heating as well as contributions to statutory health and long-term care insurance are no longer paid. Therefore, it is already doubtful whether there even remains a basis for a willingness to cooperate. In fact, there is no compelling evidence suggesting that a complete suspension of subsistence benefits is suitable for promoting the aims of cooperation to overcome one’s own need and of benefit recipients ultimately taking up employment.

bb) There are also serious concerns with regard to the necessity of the sanction. In principle, the legislature has a margin of appreciation, which is, however, narrow here, given that the sanction involves heavy burdens in the domain of a minimum standard of living in accordance with human dignity, which is protected by fundamental rights. This margin has been exceeded because there is no evidence at all suggesting that suspending subsistence benefits is necessary for achieving the aims pursued. It is unknown whether a lesser reduction of benefits, an extension of the period of reduced benefits or even a partial transition from cash payments to benefits in kind and non-cash benefits might not be as effective, or might be even more effective, because it does not entail the negative effects of total sanctions.

cc) Upon an overall balancing, it already follows from the shortcomings in respect of suitability and the doubts in respect of the necessity of such intrusive sanctions to enforce cooperation obligations that the complete suspension of all benefits, given its scale alone, and with limited possibilities of receiving supplementary benefits, is not compatible with the strict proportionality requirements.

These considerations notwithstanding, the legislature must ensure that even if “unemployment benefits II” are suspended, those affected retain the chance of receiving subsistence benefits if they meet reasonable obligations to cooperate or, where this is not possible, they credibly and firmly declare their willingness to cooperate. The situation is only different if and as long as persons entitled to benefits can secure a minimum standard of living in accordance with human dignity themselves by taking up a reasonable job offer that actually and directly generates income. If benefit recipients refuse to take up such reasonable employment that secures a minimum standard of living without providing valid reasons, even though they had the possibility of discussing their personal situation in the process, the complete suspension of benefits can be justified.

III. Until new provisions have been enacted, the benefit reduction of 30% pursuant to § 31a(1) first sentence SGB II, which is not constitutionally objectionable as such, continues to be applicable, subject to the condition that the sanction is not mandatory if it results in extreme hardship in the individual case. The provisions regarding benefit reductions of 60% and the complete suspension of benefits (§ 31a(1) second and third sentences SGB II) continue to be applicable until new provisions have been enacted, subject to the condition that benefit reductions imposed on the grounds of repeated violations of obligations must not exceed 30% of the relevant basic rate and that the sanction is likewise not mandatory if it results in extreme hardship. The mandatory three-month duration of sanctions pursuant to § 31b(1) third sentence SGB II continues to be applicable until new provisions have been enacted subject to the condition that the job centre can provide the benefit again as soon as the obligation to cooperate is met or the benefit recipient credibly and firmly declares their willingness to meet their obligations.