The German government’s plan to strengthen the rights of temporary workers could have far-reaching implications for companies that have any workers based in the country. The Federal Ministry for Labour and Social Affairs (the Ministry) has promulgated a bill, dated 16 November 2015 (the Bill), which creates significant potential strains and limitations on companies – both those that supply workers (Lessors) and those that receive and use them (Lessees).
The Ministry has forwarded the Bill, which will amend the Temporary Employment Act and other laws, to the interdepartmental coordination of the ministries. The Bill is expected to become law and be effective in January 2017.
The key aspects of the Bill are: the introduction of a maximum supply period of 18 months; the right of temporary workers to claim equal pay after nine months of work; and new differentiation criteria between work and service contracts, on the one hand, and employment contracts on the other hand. Below we provide an overview of these and other provisions in the Bill.
Maximum 18-Month Supply Period
- A company can employ a temporary worker for a maximum of 18 months. Interruptions of up to six months will be included in the 18-month period. After six months of interruption, the supply period will start counting anew. The 18-month period may be extended if companies become parties to sectorial collective agreements.
- If the maximum supply period of 18 months is exceeded, an employment relationship between the temporary worker and the Lessee will be created, unless the temporary worker disagrees and states this disagreement in writing within a specific period.
Right to Claim Equal Pay
- After nine months, at the longest, temporary workers shall be paid equal to permanent employees of the Lessee. Within the previous nine-month period, deviations from equal pay can still be made through collective contracts or based on collective regulations. Any such deviations are limited, however, in that a special sectorial collective agreement must apply to the employment, and this collective agreement must foresee the gradual introduction of equal pay, with the entitlement to equal pay arising after a hiring period of 12 months. Considering the material employment terms, deviations can be made without any time limitation.
- All agreements between a Lessor and Lessee must explicitly be titled as personnel leasing and must specify the temporary worker. If these steps are not taken, an employment relationship between the Lessee and temporary worker will be created, unless the temporary worker disagrees and states this disagreement in writing within a specific period.
- In case of hidden personnel leasing – e.g., a failed use of a work contract – an employment relationship will be created between the Lessee and temporary worker at the Lessee’s expense, unless the temporary worker disagrees and states this disagreement in writing within a specific period.
- Each time the Lessor leases a temporary worker, it must inform the worker that he or she is acting as a temporary worker.
- A Lessee is not allowed to hire a temporary worker during any period in which the Lessee is directly affected by a labour dispute.
- The catalogue of misdemeanours will be amended according to the new obligations set forth in the Bill, including that a violation may entail financial penalties.
- The Bill is intended to make clear that for all regulations mentioning “employee” for thresholds applying to company co-determination (German Works Constitution Act – BetrVG) and corporate co-determination, temporary workers are counted as normal employees, provided that this equalization complies with the purpose of the respective rule.
- The works council shall now have an explicit information right with respect to hired personnel who are not employed by the employer according to section 80 subpar. 2 and section 92 subpar. 1 s. 1 BetrVG.
- To prevent abuses in drafting work contracts and service agreements, and to simultaneously simplify authorities’ inspection activities, the Bill shall lay down all criteria developed by the jurisdiction to determine whether a contract is in fact an employment, a work, or a service contract. Moreover, it shall be clarified that a contract must be seen as an employment contract regardless of the designation if the performance of the contract meets the determination criteria of an employment contract.
Consequences for Lessors and Lessees The legislative revisions set forth in the Bill will mean substantial new limitations on the use of temporary workers. All Lessors and Lessees must take the 18-month supply limitation into account when making personnel plans; in doing so, companies may be able to use the six-month vacancy period strategically. The current “protection shield” of a precautionary personnel leasing approval falls away in the event that the parties formally agree on a works contract, which actually must be seen as a (hidden) personnel leasing contract by the law. The result is that an employment relationship is created between a temporary worker and a Lessee, unless the temporary worker disagrees and states this disagreement in writing within a specific period.
If a work contract construction is chosen, it will be critical that the parties draft the contract perfectly to comply with the Bill’s new provisions. Otherwise, an employment relationship will be created between the temporary worker and the Lessee. The rights of the works councils are strengthened. The typical long-lasting leasing of employee models (“AÜG-Modelle”) especially implemented in corporate groups are no longer possible. The legislative intention is clear: the temporary work and work contract constructions shall be limited, and permanent employment relationships will be favoured as the norm.
It remains to be seen if the Ministry’s Bill will really influence the final statutory regulation; however, companies are well-advised to prepare intensively for the changes in the Bill in order to be ready at the start of 2017.
Our German Labour Law Practice Group will offer a client workshop on this topic at our Munich and Frankfurt offices soon. If you have not been added to the invitation list yet, you can register for our workshop by emailing email@example.com.
We will keep you up to date. If you have any questions to this topic, please do not hesitate to contact us.
Client Alert 2015-322