The BMAS [German Federal Ministry of Labour and Social Affairs] published a first Bill for the Regulation of Temporary Employment in November 2015. It was reportedly prepared without consultation and was in any case the target of severe criticism from all sides (regardless of political persuasion). On February 17, 2016 a revised version of the bill was presented. Now, however, the Christian Union party (CDU and CSU) is blocking this revised bill. The CSU has clearly stated that it will not be able to agree to the second version of the bill either. The consequence: the consultation process among government departments (the process for reaching agreement on a bill within the German government) cannot be initiated. Ms Nahles [German Secretary of Labor] has announced that “not so much as a comma is to be changed” in the bill. It remains to be seen how this political dispute will develop.

The changes can be summarised as shown below:

  • A deviation from the maximum employee assignment period of 18 months provided in the Act is now possible on the basis of a works agreement concluded with a company that is not bound by collective bargaining agreements (CBA) (a non-bound company); such deviations were previously permitted only by appropriate provisions of a CBA that was “genuinely” binding in the industry of the customer company engaging the temporary workers (bound company).
  • The mandatory application of the equal pay principle can now be waived for a period greater than nine months if an industry CBA for pay allowances provides for payment of equivalent comparable remuneration to the temporary workers after no more than 15 months (previously: after twelve months).
  • The bill no longer contains a list of criteria or presumption of validity for determining the capacity as an employee; all that remains is a general definition of “employee” that is based on the precedents of the BAG [German Federal Labour Court].

In detail:

I. Maximum assignment period

The bill provides – there is little surprise here – the same basic maximum assignment period of 18 months (Section 1 (1b), first sentence AÜG-E [German Temporary Employment Act – Bill]). Originally, it was planned that any deviations from this maximum period (whether increasing or decreasing its length) would be possible solely pursuant to a CBA applicable to the industry in which the temporary workers are engaged or pursuant to a works/service agreement concluded on the basis of such a CBA. The intent was to ensure that only bound companies would be able to benefit from an (extended) maximum assignment period.

The revised bill now contains provisions which within the area of application of such a CBA permit non-bound customer companies to conclude a works/service agreement containing provisions for a deviating maximum assignment period equivalent to the provisions of the CBA. If a CBA of the industry in which the temporary workers are engaged contains an opening clause permitting the conclusion of a works/service agreement, the parties to such an agreement can themselves determine a maximum assignment period. Non-bound customer companies can also take advantage of this opening clause; in this case, however, the maximum assignment period is limited to 24 months.

The positive aspect of this is that now non-bound customer companies have the opportunity to deviate from the statutory maximum assignment period of 18 months. The original “mandatory CBA application”, which was subject to critical scrutiny in view of basic constitutional rights, has at least been diluted. Despite the amendment of the bill, however, there are still major concerns which speak against the chosen regulatory mechanism. Firstly, the maximum assignment period shall be determined by the parties to the CBA in the industry of the hiring company and specifically not by the CBA parties in the temporary employment sector. This takes away from the latter a competence for contractual stipulation related to the fundamental principles of the activities of the temporary employment agencies organised in the relevant associations, and transfers this competence to the customers or the CBA parties responsible for them. Furthermore, the bill, just as its predecessor, denies companies the opportunity to take advantage of an extended maximum assignment period if the customer company does not have an elected works council.

II. Principle of equal treatment (“equal pay”)

The fundamentally mandatory application of the principle of equal treatment is, as previously the case, to be found in Section 8 (1) AÜG-E. The wording of this subsection states:

“The temporary employment agency is obligated to ensure for the temporary employee the basic working conditions in the hiring company, including remuneration, applicable to the position of a comparable employee of the hiring company for the period of the assignment to the hiring company (principle of equal treatment).”

The provision has been supplemented by the following passage in the revised bill:

“If the temporary employee receives the remuneration of a comparable employee of the hiring company owed in the hiring business unit pursuant to a CBA or, in the absence thereof, remuneration for comparable employees pursuant to a CBA applicable in the industry of the hiring company, it is presumed that the temporary employee is being treated equally within the sense of the first sentence with regard to the remuneration.”

Even after addition of the supplementary provision above, the fulfilment of the equal pay requirement imposed by law remains subject to significant problems. It is still not clear how the relevant “remuneration owed pursuant to a CBA” is defined and, especially, what “wage components” must be given concrete consideration. It would be desirable for lawmakers to set forth a clear definition of what is meant by “remuneration” within the sense of the above provision. Among other possibilities, it would be conceivable to base it on the basic (CBA) remuneration plus any applicable pay allowances. This value would be easy to determine, legal certainty would be achieved and the substantial time and effort for organisation and documentation required by the above provision could at least be reduced.

The bill modifies the already previously existing possibility to include provisions in a CBA (or to refer to such provisions) that result in a deviation from the equal pay principle. Section 8 (4) AÜG-E now states:

“A CBA [...] may, with respect to remuneration, deviate from the principle of equal treatment for the first nine months of an assignment to a hiring company. A CBA may permissibly provide for a longer deviation if:

  1. after no more than 15 months of an assignment to a hiring company a level of remuneration has been reached that, as a minimum, is defined in the CBA as equivalent to the remuneration of comparable employees in the industry of the hiring company pursuant to a CBA; and
  2. an approaching of this remuneration occurs by stages after a training period of no more than six weeks.”

There has been no change in the basic rule that a deviation from the equal pay principle provided for in the statute is possible for a period of no more than nine months. An exception is permitted only if an industry pay allowance CBA is applicable to the assignment, leading to a convergence of the remuneration paid to the temporary employee toward the remuneration paid to the regular employees in the customer business. Such CBAs concluded by the employers’ associations for temporary employment agencies with the DGB trade unions are already in force in numerous industries, e.g. in the metal and electrical industries and in the chemicals industry. The statutory provisions also mean that because of the application of the industry pay allowances in the final stage of the convergence of the CBA wage toward the legally required equal pay after 15 months (previously: 12 months) absolute parity of remuneration is not required. The parties to the CBA are entitled to define remuneration that is to be regarded as equivalent “to the remuneration of comparable employees pursuant to a CBA in the industry where the temporary employees are to be engaged.” This may, however, be an amount that – as provided in the currently applicable industry pay allowance CBAs – is less than 100% of the comparable remuneration (as a rule, a maximum of 90%).

III. Distinction of employment relationship

The list of criteria for the distinction of an employment relationship from other contractual relationships originally found in Section 611a BGB-E [German Civil Code Bill] is no longer contained in the new bill. The same is true of the originally planned (and rebuttable) presumption of an employment relationship if the DRV Bund [German Federal Pension Insurance] determined the existence of an employment relationship which is subject to social security laws. Instead, the bill now contains the following provision for the definition of an “employee”:

“An employee is any person who, pursuant to a civil law contract, is obligated to perform, subject to instructions, work determined by a third party in relation to whom the person is personally dependent. The right to give instructions can concern the content, performance, time, duration and place of the activity. An employee is any employed person who cannot essentially determine freely his/her activities and his/her working hours; the degree of personal dependency is also determined by the specific nature of the activity in each case. All of the related circumstances must be given consideration in determining whether a person is an employee within this sense. If the actual performance of the contractual relationships demonstrates that it is an employment relationship, the designation in the contract is irrelevant.”

The legislative proposal specifies three criteria as decisive for the determination of an employment relationship: being bound by instructions, third-party determination and personal dependency (Section 611a, first sentence BGB-E).

Section 611a, second sentence BGB-E, however, does not concern being bound by instructions, but rather the right to give instructions that “can be related to content, performance, time, duration and place of the activity”. Firstly, it must be noted that this provision conflicts with the right of an employer to give instructions as defined in Section 106 GewO [German Industrial Code]. The definition there is: “The employer may, at his/her discretion, determine more exactly the content, place and time of the performance of the work.” The applicable definition in Section 106 GewO therefore includes solely the performance obligation in terms of time, place and nature. It does not contain the criteria of execution and duration. There is no discernible reason for Section 611a BGB-E to go beyond this definition. Aside from this, there is absolutely no clarity as to how the “execution” is to be distinguished from “content” and “duration” from “time" of the work.

Section 611a, third sentence, second main clause BGB-E is also incomprehensible. This provision reads: “the degree of personal dependency is also determined by the specific nature of the activity in each case.” Apparently this is intended to define the characteristic of “personal dependency” mentioned in Section 611a, first sentence BGB-E. It is left completely open, however, starting from what degree of personal dependency the capacity of being an employee can be assumed.

It is surprising that the wording of the bill basically consists of the legislation’s authors “copying” – in some cases word for word – the content of arguments of the BAG (cf. BAG of 14/03/2007 – 5 AZR 499/06; BAG of 20/05/2009 – 5 AZR 31/08) and attempting to pour these arguments into a law. The decisions state:

“An employee is any person who, pursuant to a civil law contract, is obligated to perform, subject to instructions, work determined by a third party in relation to whom the person is personally dependent. The right to give instructions can concern the content, execution, time, duration and place of the activity. An employee is any employed person who cannot essentially determine freely his/her activities and his/her working hours. All of the related circumstances of the specific case must be given consideration and evaluated in their entirety. The nature of the contract is determined by the actual content of the transaction. The mandatory legal provisions for employment relationships cannot be abrogated by the parties using a different designation for their employment relationship. The objective content of the transaction is determined by the expressly concluded agreements and the practical execution of the contract. If the agreement and the actual performance conflict with each another, the latter is decisive.”

Ultimately, the BMAS has to ask itself what is actually gained by the amendment of the BGB if this step is essentially limited to repeating word for word decisions of the BAG [German Federal Employment Court]. This will not be of any help in practice because the abstract legal concepts that are applied must again be interpreted by an assessment of the specific case based on the particular circumstances, while there are no indications in the law itself that would serve as guides. In short, the provision is completely superfluous and should be deleted. In this respect, one should recall the sentiment noted by Montesquieu: “If it is not necessary to pass a law, then it is necessary not to pass a law.” There can be no more succinct comment with respect to Section 611a BGB-E.

IV. Conclusion

If the aim is to regulate the assignment of temporary employees more strictly, given the route pursued, the planned changes can be called an improvement. Nevertheless, the new elements are inadequate. With respect to the remaining points of criticism (and there are many), reference is made here to previous publications that are still just as valid for the new bill as for its predecessor.

The bill also goes beyond the stipulations in the governmental coalition agreement in many different respects. This is especially true with regard to consideration of temporary employees for the threshold values of company co-determination and the expansion of the privilege clause in Section 1 (3) AÜG-E; its effect is to exclude the application of the law in the public service and church sectors.

It is to be hoped that there will then be further modifications and that the Grand Coalition will comply with the provisions of the coalition agreement when it comes to the planned changes – and without any more extensive regulations. Ms Merkel has called herself the “Guardian of the Coalition Agreement” in this context – and this claim will be the benchmark against which she is later measured.