Draft legislation has been introduced in Germany to reform temporary/agency employment, as well as contracts for work and labour. A final version is unlikely to come into force before 1 January 2017.

What?

The provision of temporary personnel is strictly regulated by German Law. The principle is straightforward: the agency is the employer and supplies the temporary employees to the hirer. Although the hirer receives the manpower, an employment relationship only exists between the agency and the temporary employee. However, temporary employees have to be treated equally to comparable employees of the hirer in relation to remuneration and any other essential working conditions. Exceptions to this equal treatment principle can only be agreed by means of a collective bargaining agreement. Moreover, the agency must possess a licence to supply temporary employees. If the agency does not possess such a licence, the law deems there to be an employment relationship between the hirer and the temporary employee. The unauthorised supply of temporary employees is also punishable with an administrative fine.

So What?

Because of this strict legal framework governing temporary employees, “work contracts” have been used (and abused) by employers to get around the legal restrictions for temporary employees, for example, sham “work contracts” have been agreed whereby an employer enters into a contract with the contractor for the completion of specific work, however, in fact these “contractors” provide services and, therefore, are actually employees. Against this background, the German trade unions have urged the government to legislate.

In response, draft legislation has been introduced to reform temporary/agency employment, as well as contracts for work and labour. Although amendments to this draft are likely and a final version will not come into force before 1 January 2017, the key changes are summarised below:

  • A maximum hiring period: The hirer of temporary employees will be required to terminate the deployment of the temporary employee after 18 months. Exemptions are only possible through an applicable collective bargaining agreement. This means that companies not bound by collective bargaining agreements do not have the option of greater flexibility.
  • Equal treatment after nine months: according to the draft legislation, temporary employees would be treated equally to comparable employees of the hirer in relation to essential working conditions including remuneration after nine months. Exceptions to this equal treatment principle would only be possible through a collective bargaining agreement within the first nine months.
  • Reducing the abuse of contracts for work and services: the draft legislation seeks to tackle the improper use of work contracts. Up to now, it has been possible to have a “precautionary” licence to supply temporary employees, making it possible to use a sham work contract even if, in fact, the supply of a temporary employee occurs.
  • Definition of legal terms: the draft legislation sets out key criteria identifying temporary employees, for example, being unable to decide on working time; using third party resources when providing services; working exclusively for a party; not guaranteeing the result of his/her work, etc.

Even though the draft legislation will not come into force before 1 January 2017 employers are advised to plan for the expected changes. Employers are well advised to review in which positions temporary employees will be required going forward. Further, existing agreements and business relationships for temporary employees should be reviewed with the planned amendments in mind.