Introduction

Temporary employment contracts are to be regulated more strictly in Germany again. On November 16 2015 the Federal Ministry of Labour and Social Affairs presented a draft bill intended to complete the last major employment law project of the governing 'grand coalition' (ie, the Christian Democratic Union of Germany, the Christian Social Union in Bavaria and the Social Democratic Party). In future, a contract concluded between a personnel service provider and an employer will have to state explicitly that it concerns the temporary contracting out of employees.

Maximum hiring out period

The draft bill sets out a statutory maximum temporary employment length of 18 months, with a flexibility clause in favour of any relevant collective bargaining agreement or any work or services agreement entered into on the basis of a collective bargaining agreement.

The flexibility clause has arguably been drafted too narrowly, in that if no collective bargaining agreement providing for a longer temporary employment period applies to the employer, a temporary contract can be ended after 18 months.

Equal pay principle

The equal pay principle will be obligatory. However, on application of a collective bargaining agreement, the equal pay principle will not apply for the first nine months of a temporary contract. This exemption period can be extended to 12 months on application of a collective bargaining agreement that is valid for temporary employment agencies and provides for branch-specific supplementary payments.

Quite correctly, the draft gives collective bargaining agreements precedence over statutory provisions; however, this raises the question as to why the legislature should apply this principle for only the first 12 months of a contract. Further, it should be crucial under European law to add a maximum term to the equal pay requirement after nine or 12 months.

Temporary agency licence

As is the case under the present law, if an employee is contracted out from a personnel service provider without a temporary agency licence, the temporary employment contract will be deemed void; instead, an employment relationship with the employer will be deemed to exist. However, a proposed amendment to the Temporary Employment Act will provide that invalidity can be avoided if the temporary employee declares in writing within one month from the intended starting date that he or she will adhere to the personnel service provider's temporary employment contract.

No industrial action

Employers will be disallowed from taking on temporary employees if the operation to which they would be assigned is directly affected by industrial action. Ultimately, this prohibition imposes on temporary workers solidarity with the employer's own striking staff, despite the fact that any collective bargaining agreement won through industrial action will generally not apply to temporary employees. Although permanent employees may freely choose whether or not to participate in industrial action, this will not be possible for temporary employees. Whether this complies with the negative freedom of association protected by the Basic Law is highly questionable.

Temporary employee count

There is a trend in labour case law that temporary employees "should not only elect, but also count". In this context, and in accordance with the coalition agreement, the draft bill provides that temporary employees will count towards the thresholds provided for in the Works Constitution Act of 1972 and in terms of corporate co-determination issues (eg, under the Co-Determination Act of 1976).

Employment relationship

In order to distinguish employment contracts from other kinds of contractual relationships – in particular, contracts for work and services – a proposed amendment to the Civil Code defines a catalogue of criteria by which to assess whether a person is subject to instructions and integrated into a work organisation, as is typical of an employment contract. The decisive criterion will be the freedom (or lack thereof) of the person to choose their working hours, method of performing the services owed or place of work.

Fortunately, the draft bill contains no binding model prescribing that the fulfilment of a certain amount of predefined criteria will give rise to the assumption that an employment contract has been concluded. Rather, the draft bill explicitly recognises that an overall assessment must be made. It is important that the statutory catalogue is not exhaustive, but that the entirety of circumstances of an individual case will be taken into account when deciding whether a contractual relationship qualifies as an employment contract.

Nevertheless, the proposal is objectionable because the selected provisions lack practical relevance and are inflexible, especially regarding the performance of technical services.

Co-determination rights of works council

Regarding general information rights, it is proposed that the relevant works council should be notified of personnel measures relating to persons that do not have an employment relationship with the employer. The works council is to be informed of the period and place of deployment, as well as the tasks assigned. In addition, the contracts forming the basis for external staffing are to be submitted to the works council.

A positive aspect of this is that the conclusion of contracts for work and services will not be subject to co-determination in future. This means that an employer will not be obliged to obtain the works council's consent before assigning tasks to external staff. This would be highly problematic under constitutional law. Instead, the draft bill provides for a more detailed specification of the works council's rights regarding involvement and information, as developed by case law.

Outlook

The regulatory amendments are due to enter into force on January 1 2017. It is explicitly stated that temporary employment terms starting before January 1 2017 will not be subject to maximum temporary employment terms. This raises the question of why a similar interim period has not also been proposed for the compulsory application of the equal pay principle.

Criticism

It is to be hoped that before Parliament discusses the draft bill, the aims of the Federal Ministry of Labour and Social Affairs will be revised down to what had previously been announced – that is, it will return to a literal implementation of the proposals made in the coalition agreement. However, the ministerial draft bill as prepared by the department of Andrea Nahles (the minister of labour and social affairs) is miles away from hitting that mark. Ingo Kramer, president of the Confederation of German Employers' Associations, has summarised that the draft bill "lacks practical relevance, is highly bureaucratic and impossible to implement" – there is nothing more to add to that evaluation.

For further information on this topic please contact Christopher Jordan or Pauline Moritz at CMS Hasche Sigle by telephone (+49 40 376 30 305) or email (christopher.jordan@cms-hs.com or pauline.moritz@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

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