German law favours the conclusion of unlimited employment agreements. Under Section 14 of the Part-Time and Fixed-Term Employment Act, fixed-term employment agreements are, in principle, valid only if the term is justified on objective grounds. If no objective grounds exist, a term fixed according to the calendar may be extended no more than three times up to a total term of two years, unless a fixed or unlimited term employment relationship had previously existed with the same employer. In an April 2011 decision (7 AZR 716/09), the Federal Labour Court found that the possibility of concluding a fixed-term contract should remain unaffected if a previous employment has ended more than three years before the commencement of the new fixed-term employment.
In the past, the court ruled out the possibility that the variable number of fixed-term contracts might intensify the judicial review of the objective grounds.
Public employers, in particular, utilise consecutive fixed-term employment agreements. In Kücük the North Rhine-Westphalia Federal State employed a clerk in the court office of the Cologne District Court between 1996 and 2007 under a total of 13 fixed-term employment contracts. In the proceedings, the Federal Labour Court doubted whether it should stick to its previous legal practice due to the provisions of the European Framework Agreement on fixed-term work. It made reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union. Corresponding to prior rulings of the European Court of Justice (ECJ), national courts are bound to carry out a review of potentially abusive use of fixed-term employment contracts. With respect to that review, the Federal Labour Court asked the ECJ for clarification of whether and, if so, how the national courts must take account of the number and duration of the fixed-term employment contracts concluded in the past with the same employer (November 17 2010 – 7 AZR 443/09 (A).
The ECJ viewed that the national courts must take account of all circumstances, in particular, of the number of successive contracts concluded with the same person or for the purposes of performing the same work and the cumulative duration of the fixed-term employment contracts concluded in the past with the same employer, in order to ensure that fixed-term employment contracts are not abused by employers (January 26 2012, C-586/10).
The Federal Labour Court also reviewed whether signs of abuse arising from the use of successive fixed-term contracts are revealed by the circumstances of the particular case. The number of contracts and/or which duration of the fixed-term employment is abusive is currently open. In the court's opinion, Section 14 of the Part-Time and Fixed-Term Employment Act serves as a rule. Subject to Section 14(2) the limitation of the term of an employment agreement without an objective reason is permissible up to two years. Moreover, an extension is permissible up to three times within the two-year period. Thus, according to the court, consecutive fixed terms can be deemed to be abusive, if the number and/or the total duration of fixed-term contracts significantly oversteps the thresholds (July 18 2012, 7 AZR 443/09 and 7 AZR 783/10; and February 13 2013, 7 AZR 225/11).
To date, the practical consequences of these rulings have been merely unclear. Subsequent decisions of the labour courts are highly inconsistent. Signs of abuse should not be present in the following cases:
- duration of employment of seven years and nine months, based on four contracts (Federal Labour Court, July 18 2012, 7 AZR 783/10);
- duration of employment of two years and eight months, based on seven contracts (Dusseldorf Regional Labour Court, January 13 2013, 6 Sa 1238/11);
- duration of employment of two years and seven months, based on seven contracts (Berlin-Brandenburg Regional Labour Court, March 15 2013, 6 Sa 2102/12);
- duration of employment of 11 years and four months, based on three contracts (Nuremberg Regional Labour Court, July 11 2012, 4 Sa 82/12);
- duration of employment of 14 years, based on annual contracts (Hamm Regional Labour Court, August 1 2012, 5 Sa 291/12); and
- duration of employment of nearly 15 years, based on 13 contracts (Baden-Wurttemberg Regional Labour Court, August 14 2012, 14 Sa 53/12).
On the other hand, signs of abuse should not be present in labour courts held for an abusive use of those constellations as follows:
- duration of employment of 11 years, based on 13 contracts (Federal Labour Court, Kücük, July 18 2012, 7 AZR 443/09);
- duration of employment of more than five and a half years, based on 13 contracts (Federal Labour Court, February 13 2013, 7 AZR 225/11);
- duration of employment of nine years and five months, based on 17 contracts (Baden-Wurttemberg Regional Labour Court, January 11 2013, 9 Sa 366/12);
- duration of employment of five and a half years, based on nine contracts (Rhineland-Palatinate Regional Labour Court, January 24 2013, 11 Sa 344/12); and
- duration of employment of nine years, based on 13 contracts (Hamm Regional Labour Court, February 14 2013, 11 Sa 1168/12).
Besides the particular duration of employment and the number of contracts, several circumstances have played a role in the labour courts affirming or denying whether fixed terms can be deemed abusive, including:
- the duration of the particular fixed-term contract;
- the coincidence of the duration of the limited term and the estimated requirement of manpower;
- whether the employee has been performing the same services throughout the successive employment or if variation in his or her working tasks occurred;
- peculiarities of certain industries, such as sectors with seasonal work;
- an interruption of employment for a relevant length of time; and
- special statutory provisions or provisions by collective bargaining agreements, that extend the permissibility of fixing terms in comparison with Section 14 of the act.
The inconsistency of the results is mainly owing to the fact that labour courts must, besides duration and number of contracts, take into consideration the particular merits of the case. However, for the moment, the rulings of the Federal Labour Court mean stones instead of bread for the employer. The criterion of significantly exceeding the thresholds provided by Section 14(2) is highly unclear. By using consecutive fixed-term contracts the employer runs the risk that in case of invalidity of the limitation of the term due to an abusive use, the employment agreement is transformed into employment for an indefinite period of time.
Because appeals have been filed against several of the regional labour courts' judgments, presumably there will be further decisions and a more reliable Federal Labour Court case law in the future. For employers frequently utilising fixed-term contracts and operating with successive fixed terms, it is imperative to obtain up-to-date information in order to avoid difficulties.
Until then, employers should keep the length of fixed-term employment under control and minimise risks by avoiding detrimental factors becoming potentially suggestive for abuse. The term of employment should be in accordance with the duration of the manpower requirement. A well-founded forecast must be issued on the basis of sufficient facts by the employer regarding future manpower demand.
For further information on this topic please contact Andrea Bonanni, Bjoern Gaul, Bernd Roock or Benedikt Schmidt at CMS Hasche Sigle by telephone (+49 211 4934 418), fax (+49 211 4934 126) or email (email@example.com, firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.