Labour Court Specifies Rules for Fictitious Service Agreements

The laws governing temporary agency work (Arbeitnehmerüberlassungsrecht) have become stricter in Germany as a result of recent developments in legislation and case law. Consequently, there has been a recent trend for employers to enter into service agreements with temporary agency workers in order to avoid the stringent laws governing temporary agency work. The following decision by the Regional Labour Court Baden-Wurttemberg has provided useful guidance for those German employers who are considering such an approach.

Two computer experts worked for an IT system vendor as freelancers under specific service contracts (Werkverträge). The IT system vendor was engaged by a service provider which provided services to the leading German car manufacturer, Daimler. For a period of 11 years the two computer experts performed certain duties for Daimler which included the provision of general IT services, ensuring that all of Daimler’s computer workstations functioned properly, troubleshooting and following any instructions issued by Daimler.

The Regional Labour Court held therefore that an employment relationship had been established between Daimler and the two computer experts. Accordingly, it held that the two computer experts were to be regarded as employees who had been employed by Daimler under fictitious service agreements and as such Daimler could face substantial legal sanctions as fictitious service contracting is prohibited in Germany.

This decision is expected to have consequences for those German companies who wish to avoid the strict laws governing temporary agency work by engaging temporary agency workers under service agreements. This decision reminds employers to be careful when seeking to avoid the laws governing temporary agency work by entering into service agreements with any temporary agency workers.

Reduction of statutory limitation period

The standard limitation period in Germany, within which a party must bring a claim, or give notice of a claim to the other party is three years. Parties entering into contracts of employment often take the view that this limitation period is too long. It is therefore quite usual for parties in Germany to agree a different limitation period in a contract of employment although this agreed limitation period must not be shorter than three months (exclusionary time limit).

Until recently, it was generally agreed that an exclusionary time-limit of this kind would effectively bar any claims being brought by an employer or employee unless such claims were made in writing within the three-month period. A recent judgment handed down by the Federal Labour Court (Bundesarbeitsgericht) on 20 June 2013 has modified this general rule such that, although it will be possible to contractually agree an exclusionary time-limit which reduces the limitation period from three years to just three months, this rule will not apply to claims arising from intentional acts.

Discrimination because of a ‘world view’

If an employee in Germany suffers discrimination because of his ‘world view’ (Weltanschauung) or because of his supposed ‘world view’, he has a statutory right to claim compensation and damages from the perpetrator. In its ruling of 20 June 2013, the Federal Labour Court has now made it clear that personal preferences, sympathies or attitudes do not amount to a ‘world view’ within the meaning of the statutory provisions. It went on to say that claims for compensation and damages are not justified simply because the employee concerned is of the opinion that the employer has disadvantaged him because of an incorrect – assumption that he has a particular ‘world view’. In the case at hand the employer suspected the employee of having “sympathy for the People’s Republic of China” and “thus of supporting the Chinese Communist Party”. In that respect the Federal Labour Court noted that sympathy for a country is not the same thing as sympathy for a ruling party, and that one certainly cannot make any assumption based on general experience that if such a party has a fundamental ‘world view’ that view is shared by persons sympathising with the party.