The Federal Labour Court (Bundesarbeitsgericht, BAG) ruled on 26 October 2016 (docket number: 7 AZR 140/15) that a collective bargaining agreement (Tarifvertrag) which allows the extension of fixed-term employment without cause (sachgrundlose Befristung) for a maximum period of five years is effective.

In this case the plaintiff was employed by the defendant, a company in the energy industry, on the basis of a once-extended fixed-term employment without cause between 15 January 2012 and 31 March 2014, and thus for more than two years. The collective bargaining agreement applicable to the energy industry stipulates that fixed-term employment contracts can be extended to a maximum period of five years without requiring a reason for the fixed-term. In his action the plaintiff challenged the termination of the employment relationship on 31 March 2014.

The employee’s appeal before the Federal Labour Court did not succeed. The Federal Labour Court stated that the employment relationship was effectively terminated on expiry of the time limit. The power to derogate by collective bargaining agreement from the statutory provision of a maximum period of two years for fixed-term employment without cause in sec. 14 para. 2 sentence 1 of the Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG) does not, however, apply without restriction. The statutory maximum period for fixed-term employment without cause and the number of possible extensions may only be exceeded by up to a factor of three. The disputed regulation in the collective bargaining agreement operates within this permissible framework.

The Federal Labour Court approved the freedom granted to employers and unions by law. Employers can rely on collective bargaining agreements which extend the maximum period of fixed-term employment contracts according to sec. 14 para. 2 sentence 3 of the Part-Time and Fixed-Term Employment Act.