Pursuant to s.14(2) of the German Part- Time and Fixed-Term Act
(Teilzeit- und Befristungsgesetz) (the Act) the term of an
employment contract may be fixed without a particular reason for up
to two years, provided that the other conditions for fixing the
term are met. One of those other conditions has long been
criticized for restricting employers from entering into employment
contracts with fixed terms: the Act prohibits fixing a term for
employees previously employed with the same employer, with or
without a fixed term. Until now, any period of prior employment
with the same employer prevents the employer from entering into a
fixed-term arrangement without a specific reason.
The Federal Labor Court (BAG) has now made an unexpected U-turn.
In a recent ruling, the BAG stated that prior employment with the
same employer does not rule out entering into a fixed-term contract
without a specific reason if that prior employment ended more than
three years ago.
Despite the unambiguous language of s.14(2) of the Act, the BAG
took a purposive approach to the whole provision. On the one hand,
this interpretation will permit employers to respond to
fluctuations in business and market conditions and help employees
bridge the gap to permanent employment. On the other hand, the ban
on "prior employment" is designed to prevent employing
individuals on 'chains' of fixed-term contracts, thereby
abusing the system.
The latest case law of the BAG provides that fixed-term
contracts are not normally "abusive" if more than three
years have passed between the end of the prior employment and the
commencement of the new fixed-term contract. The BAG held that this
three-year period fits into the overall understanding of statutory
principles as reflected in the standard period of limitation under
It remains unclear whether three years is the minimum period
that must have passed since the most recent period of employment in
order for the new fixed-term arrangement to be considered
legitimate. In light of the reasons stated in the BAG's
judgment, this should be assumed. This U-turn in BAG case law will
be well-received, albeit unexpected news for employers.
Works Council Information Regarding Fixed-Term Hiring
Pursuant to s. 99 of the Works Constitution Act
(Betriebsverfassungsgesetz - BetrVG), any company with more than 20
employees eligible to vote that seeks to hire employees on a
fixed-term basis is required to inform the works council of its
intentions. The works council has one week to respond. Within that
week, it may: (i) consent to the hiring; (ii) object to the hiring
for specific reasons set out in the law or (iii) remain silent. If
the works council remains silent it will be deemed to have
consented. If it objects within the required timeframe and in the
required form, the employer will have to seek the approval of a
competent labor court, which can issue an order consenting to the
recruitment in the place of the works council. In deciding whether
to make such an order, the court will consider whether the works
council has material legal reasons for withholding its consent to
the hiring. This process is referred to as a consent replacement
procedure, and generally has to take place prior to the engagement
of the employee.
As part of the consent replacement procedure, the works council
has to be informed of all details relating to the hiree, the
effects of the hiring on other employees and whether the hiring
shall be for a fixed or indefinite term. However, a recent decision
by the German Federal Labor Court (BAG) held that an employer is
not obliged to inform the works council of the reasons for fixing
the term of the contract. According to the BAG, the works
council's right of co-determination is not an instrument for
all-encompassing control over contractual substance. As a result,
the works council cannot validly base the withholding of its
consent on the alleged invalidity of the fixedterm arrangement. The
specific legal basis for the employer to fix the term does not
matter, and it does not have to be communicated to the works
council ahead of the hiring.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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