The German Federal Labor Court recently made it significantly easier for employers to enter into fixed-term employment contracts.

Under the German Part-time and Fixed-term Employment Act employers can only enter into fixedterm contracts if there are “substantive” grounds for doing so, for example if they need someone to work on a particular project or to cover a maternity leave or, if no such grounds exist, provided the contract is for no longer than 2 years. According to the Act, an employer cannot enter into the second type of contract if it has had a previous employment relationship with the employee. If an employer enters into a fixed-term contract and it subsequently transpires that the employee has worked for it before, however briefly and however long ago, the fixed-term contract is converted into a permanent contract of employment.  

These requirements have created all sorts of problems for German employers. Before entering into a fixed-term contract they have been forced to make enquiries to see if they have previously employed the individual, even if it was only for a short period of time. If unable to satisfy themselves that no previous employment relationship had existed, they generally would not agree to enter into a fixed-term contract – something that was not in the interests of either employers who do not then get the person they want or would-be employees who do not then get the work.  

On 8 April 2011 the Federal Labor Court eased these restrictions on entering into fixed-term contracts to some extent. The case in question involved a teacher who had been employed from 1 August 2006 to 31 July 2008 on a fixed-term contact. She claimed that the contract should be considered as permanent because she had also worked a total of 50 hours as a student for the employer between November 1999 and January 2000. Based on previous case law she would have been entitled to be treated as a permanent employee because of her previous employment relationship. The Federal Court, however, held that the fixed-term contract was valid. It said that despite the express wording of the Act it is possible to enter into a binding fixed-term contract provided that the employee has not worked for the employer for at least 3 years before entering into the fixed-term contract.  

This decision should give employers greater flexibility to hire employees on a fixed-term basis and reduce (though not remove altogether) their need to look backwards at past hires.