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Ground-breaking judgment on temporary contracts

Section 14(2) of the Part-time and Temporary Employment Act (Teilzeit- und Befristungsgesetz (TzBfG)) regulates temporary employment contracts, which have no objective reason for the fixed term. According to this provision, such temporary contracts may have a maximum term of two years. Within this period, the contract may be extended no more than three times. The second sentence of section 14(2) of the TzBfG establishes a further restriction:

“Such a fixed term, in accordance with the first sentence, is not permitted when there has been a previous temporary or permanent employment relationship between the same employer and the same employee.”

Since the revision of the TzBfG entered into force on 1 January 2001, this “previous employment relationship” element has been understood – also by the Federal Labour Court (Bundesarbeitsgericht – BAG) - as not allowing employment contracts to be temporary without an objective reason for the fixed term, if there has ever been an employment relationship between the parties to the employment contract. A temporary employment contract with a 60-year-old employee would therefore be inadmissible if this employee had been employed by the same company 45 years previously for a three week Summer internship. Somewhat surprisingly, the Federal Labour Court took a different approach in a 2011 judgment, holding that may an employee may conclude a temporary employment contract with a company more than once in their lifetime, without the need for an objective reason for the fixed term. More recently, in its decision of 6 June 2018, the Federal Constitutional Court (Bundesverfassungsgericht (BVerfG)) showed its lack of understanding for the interpretation of the Federal Labour Court. Temporary employment contracts without objective grounds for their temporary nature remain a topic of discussion, with the Coalition Treaty from Spring 2018 between the parties currently in power, the CDU, CSU and the SPD, establishing plans to change the rules in this area (cf. our article "Changes in German law on temporary employment contracts").

The judgment of the Federal Labour Court of 6 April 2011

The case concerned the temporary employment relationship of a teacher. During her studies six years before, she had worked a total of 50 hours as a student assistant, correcting texts and making photocopies. The Federal Labour Court decided that a previous employment relationship between the same contractual parties would not preclude the parties from concluding a temporary contract without objective reasons for the fixed term when that previous employment was more than three years prior. The judgment of the Federal Labour Court was welcomed in practice – especially by employers. In contrast, the legal literature contained some harsh criticism. According to the critics, the Court incorrectly interpreted the relative provisions, as the wording was clear. In so doing, the Federal Labour Court exceeded the limits of it’s power to further develop the law, while the solution - the three year time limit - was not consistent with the statute of limitations. Since 2011, fewer and fewer labour courts and regional labour courts have followed the Federal Labour Court ruling.

The judgment of the Federal Constitutional Court of 6 June 2018

The Federal Constitutional Court had received requests for judicial review in relation to this issue, including one from the Labour Court of Braunschweig (Arbeitsgericht - ArbG). The case in question involved a claim from an employee for his employment contract to be made permanent. He claimed that the latest temporary employment contract without an objective ground for the fixed term was invalid because he had had a “previous employment relationship” with the same employer. More than three years had passed between the end of the first temporary employment contract (without objective grounds for the fixed term) and the second employment relationship. The Labour Court of Braunschweig asked the Federal Constitutional Court whether the second sentence of section 14 (2) of the TzBfG was constitutional.

The Federal Constitutional Court came to the conclusion that the provision was constitutional, providing that the use of fixed term employment contracts without objective reasons is limited to the first employment relationship between the same contractual parties and every subsequent temporary employment contract between the same parties, without an objective ground for the limited term, is prohibited. In exceptional cases, where there is clearly no danger of repeated fixed-term employment, a temporary employment contract, without objective grounds for the fixed term, will be permissible. An example of this is when the previous employment was a very long time ago, of a different type or only of short duration (such as in the case of a part-time side job while at school, studying or during parental leave, or in the case of student interns and assistants working as part of their vocational training).

Practical consequences

In each case you must now assess, whether, based on the facts, there is a danger that repeated fixed-term employment contracts will exploit the inferior position of the employee. It must also be examined whether the second sentence of s 14 (2) of the TzBfG can be interpreted in line with constitutional law and the prohibition against a previous employment relationship can be restricted so that no permanent employment relationship exists. Although the Federal Constitutional Court did not rule out the possibility, such special matters are not likely to exist in the case of temporary employment contracts (without objective grounds for the temporary nature) concluded repeatedly over the last few years. Employers should therefore not expect to rely on the effectiveness of the fixed term if there are no objective grounds for this fixed term. This will then raise the question, whether there is an objective reason to justify an effective fixed term. Objective grounds could exists, for example, when the operational need for workers was only temporary, where the temporary employment follows a period of study or training in order to make it easier for the employee to transition to follow-on employment, or where the employee was employed to cover from another employee.

If there is no objective reason, the path to termination is the only option open to employers should they wish to end the employment relationship, in which case the strict requirements of the Dismissal Protection Act (Kündigungsschutzgesetz) will apply. This includes, in particular, the hurdles of works council hearings and special dismissal protection.

Temporary employment contracts and future amendments to the law

As mentioned above, the Coalition Treaty foresees the adoption of significant restrictions to temporary employment relationships. A new legal provision is planned, which would limit the relevant period for previous employment relationships – as in the judgment of the Federal Labour Court of 6 April 2011 – to that occurring within three years of the new employment contract. This will (provisionally) end the fuss concerning the shift between permanent and temporary previous employment relationships with the same company.

If you have any questions related to this topic, please feel free to contact Markus Künzel (Lawyer, Licensed Specialist for Labour Law) and Dr Erik Schmid (Lawyer, Licensed Specialist for Labour Law).

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Arbeitsrecht

Contact us

Markus Künzel T   +49 89 35065-1131 E   Markus.Kuenzel@bblaw.com
Dr Erik Schmid T   +49 89 35065-1127 E   Erik.Schmid@bblaw.com