An amendment to the Temporary Employment Act took effect on 1 April 2017. As stated in an explanatory memorandum, the amendment aims to "shift [the act's] focus closer to its core function as an instrument for meeting the need for temporary labour". It also seeks to prevent the disguised deployment of temporary employees (Section 2 vgl BT-Drucksache 18/9232).

Three core requirements

The Temporary Employment Act amendment consists of the following core requirements:

  • a new disclosure and specification obligation to prevent:
  • the application of the equal pay principle following the ninth month of deployment, provided that the contract is not subject to a sector-based collective supplementary pay agreement (Sections 8(2) and 8(4)); and
  • an 18-month maximum hiring out period, which may be modified by:
    • collective agreements in the relevant sector; or
    • work agreements triggered by escape clauses in collective agreements (Section 1(1) Sentence 4, (1)b).

As no statutory transitional period was stipulated regarding the new disclosure and specification requirement, it applies to all contracts entered into as of 1 April 2017. The Federal Employment Agency has posited that it also applies to 'old' temporary employment contracts entered into before 1 April 2017. However, the amendment allows a transitional adjustment period for calculating:

  • the deployment periods for applying the equal pay principle after the ninth month of deployment; and
  • the expiry date of the 18-month hiring out period.

As the start date for these periods was 1 April 2017, even if a temporary employee had been hired out to a specific company years before this date (see Section 19(2)), the transitional period for applying the statutory equal-pay entitlement would have expired at the end of 2017.

Uncertainty

In view of the statutory transition clause set out in Section 19(2) of the Temporary Employment Act, for some deployment agencies the 18-month maximum hiring out period will end shortly – for external employees deployed as of 1 April 2017, the expiry date could have been the end of September 2018.

The current disagreement over the exact expiry date is unsurprising given the amendment's lack of clarity over the period's beginning and end. The prevailing opinion – which is arguably correct – holds that the maximum hiring out period of 18 months ended on 30 September 2018 (Sections 187(2) Sentence 1 and 188(2) of the Civil Code; see Bissels v Falter, ArbR 2017, 36); the Federal Employment Agency is likely to adopt this view (Temporary Employment Act 1.2.1 (2) Sentence 23)).

However, some legal commentators disagree, arguing that the period should be calculated according to Section 191 of the Civil Code (see Pütz, DB 2017, 425), whereby each month is deemed to have 30 days even if the actual number of calendar days is different. Therefore, February and August (for example) are both treated as having 30 days, causing a number of days to be 'lost' over the 18-month period compared to the number of days according to the system advocated by the prevailing opinion (540 days versus 548 days). Under this system, the maximum period for which employees can be hired out would have expired earlier (ie, midnight on 22 September 2018).

Personnel services providers and companies using such providers must therefore determine precisely what they consider the expiration date for the maximum hiring out period to be. There are a number of persuasive reasons for setting the expiry date as 30 September 2018. However, in the absence of case law on this topic, an element of legal uncertainty remains and the possibility of the courts adopting a different view cannot be ruled out (Section 191 of Civil Code), in which case the maximum hiring out period would expire earlier.

To avoid all possible risk of overstepping the maximum hiring out period (including a 'fictitious' employment relationship between the deploying entity and the temporary employee without the consent and even against the will of the participants), the expiry date should be assumed to have been 22 September 2018. Further, the specific risk to workers should be weighed up, taking economic considerations into account.

Possible reactions

Companies may react to an expired maximum hiring out period by terminating their contract with the personnel service provider. However, their need for personnel, which had hitherto been covered by temporary employees, would remain an issue.

Companies could employ temporary employees under a regular employment contract (eg, a fixed-term contract) without an objective reason. However, in practice this is often unfeasible due to headcount requirements.

Alternatively, the current temporary employee could be replaced by another temporary employee. Rotation is possible even where the position with the company is long term. After a period of three months and one day, the original temporary employee can be rotated back to the position concerned and assigned to it for a further 18 months. During this period the temporary employee may be assigned to a different group company of the same employer.

The Temporary Employment Act does not expressly prohibit this type of rotation arrangement. However, in practice such arrangements raise operative issues as newly assigned employees must require training. Business operations may be considerably disrupted in companies that hire large numbers of external staff. Therefore, advanced planning is necessary for rotation to begin early enough to ensure that at any one time there is a significant number of temporary employees with sufficient experience and knowledge of the company's operations.

Other systems for deploying de facto temporary employees at the same company for more than 18 months include joint employment and work or service contracts). However, these carry a number of uncertainties as they have not yet been safeguarded by case law.

For further information on this topic please contact Alexander Bissels and Kira Falter at CMS by telephone (+49 221 7716 0) or email (alexander.bissels@cms-hs.com or kira.falter@cms-hs.com). The CMS website can be accessed at www.cms.law.

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