Previous legal situation

The current law does not determine whether temporary employees are to be taken into consideration in the host company. By means of the amendments to the regulations on supply of temporary employees, the legislator now clarifies this issue. For HR service providers who supply temporary employees, this is nothing new. In such companies, supplied temporary employees are already included under current law.

Consideration in corporate co-determination

With respect to the co-determination in the company, the legislator has in fact "merely" codified the case law of the Federal Labor Court. In connection with the determination of various thresholds in the past, the Federal Labor Court had already decided that temporary employees are to be included in the calculation of the size of the borrowing company. Nevertheless, the amendment provides for an exception: Temporary employees are not included in the calculation of the employee headcount pursuant to Section 112a of the German Works Constitution Act (BetrVG), which specifies exceptions from the enforceability of a social plan in the event of a pure layoff.

Applicability to the European Works Council Act (EBRG) and the respective ballot regulations

The temporary employment reform does not only affect the thresholds of the German Works Constitution Act (BetrVG). After the new German Temporary Employment Act (AÜG) enters into force on April 1, 2017, supplied temporary employees must also be considered with regard to the thresholds of the European Works Council Act (EBRG) and the respective election regulations.

Important: Individual review of the other conditions

Nevertheless, it is also clear that the mere inclusion of temporary employees does not mean that the other conditions of the respective standard that specifies a threshold are "automatically" met. For example, the explanatory memorandum to the statute mentions the right to vote and a limitation to "usual" employees. As in the case of regular employees, these additional conditions still need to be reviewed individually for temporary employees in order to check whether they need to be included.

Co-determination in the company: Inclusion only after a period of six months

Henceforth, temporary employees will be included in the calculation of all thresholds whose surpassing results in the applicability of the co-determination rights. The revision applies to the German Co-Determination Act (MitbestG), the German Mining Co-determination Act (Montan-MitbestG), the German Supplemental Co-determination Act (MitbEG), the German One-Third Participation Act (DrittelbG), the German Act on Co-determination of Employees in Cross-Border Mergers (MgVG), the German SE Participation Act (SEBG) and the German SCE Participation Act (SCEBG), and the election regulations issued on the basis of the respective acts.

In the explanatory memorandum, the legislator draws attention to the parallelism between works constitution law and co-determination in the company. Nevertheless, there is a significant difference: As far as the co-determination in the company is concerned, temporary employees are included in the headcount only if their work at the borrower exceeds a period of six months. However, it is not clear whether this applies only to temporary employees who are entrusted with regular jobs. The law does not shed any light on this question.

As indicated in the explanatory memorandum, the legislator has aligned the law with a recent decision of the Federal Labor Court, in which an inclusion of the temporary employees entrusted with jobs of a permanent nature in the calculation of the thresholds pursuant to Section 9 of the German Co-determination Act is assumed and the determination of whether the employment is of a permanent nature is made on the basis of a period of six months. This means that the examination is made on a personal basis, and fluctuations in the number of temporary employees can be balanced by referring to the number of usually used temporary employees.

Attention: Election of a supervisory board?!

Previously, companies whose number of permanent employees was just under the statutory thresholds used to be able to hire temporary employees in order to avoid exceeding the thresholds and thus the applicability of the respective co-determination regulations. From April 1, 2017, this will no longer be possible. As temporary employees will also be counted against the threshold, some companies may fall under the co-determination right for the first time and may need to elect a supervisory board.

Conclusion

The new regulations provide companies with legal certainty: Temporary employees at the host company are included in the calculation of the co-determination thresholds. This can have substantial consequences for companies: The works council and its co-determination rights can expand. If the respective co-determination thresholds are surpassed due to the deployment of temporary employees, it might even become necessary to elect a supervisory board. The situation for HR providers does not change: Temporary employees remain part of the supplying company and continue to be counted there even during their deployment to the borrowing company.