Planned changes to Temporary Employment Act
The Coalition Treaty between the CDU/CSU and the SPD for the 19th legislative period establishes plans for extensive changes to the Part-time and Temporary Employment Act (Teilzeit- und Befristungsgesetz (TzBfG)). The aim of this reform is to prevent an alleged abuse through the use of temporary employment contracts. To implement this goal, general use of fixed-term employment contracts will prospectively be restricted. Three main amendments are planned and employers should prepare themselves for these changes. First, a quota will be introduced with respect to how many employees may have temporary employment contracts that have no objective grounds for the fixed-term. In addition, changes are planned to the maximum fixed-term, where there is no objective justification for the temporary nature of the contract, and to the maximum duration of temporary employment contracts in general. The plan is to implement these changes by the end of 2021; as yet, the Government has not presented a draft act.
Introduction of a quota
In the future, in companies with more than 75 employees, a maximum of 2.5% of employees will be allowed to have temporary employment contracts, without an objective reason for the temporary nature of those contracts. No “rounding rules” are mentioned in the Coalition Treaty. According to this rule, only two employees in a company with 100 employees may have a temporary employment contract without objective reasons for the fixed term of their contracts. Of particular note in this regard is the fact that this percentage restriction on the number of temporary employment contracts without objective grounds is likely to be calculated on a company-wide basis, and not a occupational unit basis. Presumably, temporary agency workers and apprentices will need to be taken into account when determining whether the threshold of 75 employees has ben reached. Proportional consideration of part-time employees is also not foreseen. Where this quota is exceeded, each additional temporary employment contract, which does not have an objective reason for the fixed term, will be considered to be concluded as a permanent contract.
Amendment to the maximum term of temporary employment contracts without objective grounds
In the future, where there is no objective ground for a contract to have a fixed term, the temporary employment contract may only be concluded for a maximum term of 18 months. At present, the maximum duration of the fixed-term where there is no objective justification is 24 months. Additionally, in the future, a temporary contract without an objective reason may only be extended once, rather than three times as is currently the case. While it is possible, at the moment, to extend a temporary contract in six-month cycles to exploit the maximum term, this will not be possible in the future. Accordingly, employers must bind themselves at least once for 12 months in order to best exploit the maximum fixed term. Deviations from these rules, based, for example, on collective agreements or legal provisions, will most likely remain admissible.
Ban on repeated fixed-term employment contracts
When there was previously a permanent or temporary employment relationship with the same employer that had a total duration of five or more years, further temporary contracts will be inadmissible in the future, regardless of whether there is an objective reason for the fixed term. This establishes a general upper limit for temporary contracts both with and without objective reasons for the temporary nature. An exception should only apply where the objective reason for the fixed term relates to the nature of the job performance. This will affect, in particular, artists and athletes. Special attention should be given to the fact that the maximum fixed term of five years includes the full amount of any temporary agency work for the same employer, whether for one or more temping agencies as part of personnel leasing. The employer and employee will only be able to conclude a new fixed term employment contract with the same employer once a period of three years (waiting period) has passed.
The planned reforms to the TzBfG will also mean more work for employers in the form of more detailed documentation to prove compliance with the fixed-term rules. In addition to greater diligence with documentation, we recommend that employees establish preventative control mechanisms. These will help ensure compliance with the rules on fixed-term contracts when concluding or extending any temporary employment contracts, and will in particular help ensure that the quota of 2.5% of temporary employment contracts without objective grounds is not exceeded. For employers, evidence of an effective fixed term agreement between the parties is immensely important because a temporary employment agreement that is not effective will continue to apply as if an indefinite employment relationship had been concluded. The employer will have the burden of proof with respect to the effectiveness of the agreement on the fixed term and can fulfil this burden with careful documentation.
It is not yet clear how the effective date will be regulated. It also remains to be seen, what effect the planned changes to the law will have on existing temporary employment contracts. In particular, it is unclear how the quota should be calculated in this respect.
Practical tip: The following construction provides the greatest level of flexibility with respect to temporary employment contracts without an objective ground for the fixed term and complies with the 18 month maximum fixed term: an initial contractual term of 12 months, with a right to extend the term for a further 6 months. This variation allows employers – in combination with a six-month probationary period at the start of the employment relationship – to maintain the option of backing out of the employment relationship each six months. This practice of half-yearly commitments also mirrors the current possibility of extending the contract three times, with a maximum contractual term of 24 months.