The new German Temporary Employment Act [AÜG] came into force on 01.04.2017.

By Horst Klesen, Lawyer, KLESEN & KAMP RECHTSANWÄLTE, Heusweiler. 

 

The Act covers two sets of rules closely linked in substance: on the one hand, stronger control of temporary work and, on the other, the containment of deployment of external human resources on the basis of service or work contracts.

In the case of temporary work, which was strongly deregulated in the course of the Harz reforms, the regulations have been tightened even more. In particular, a maximum service period of 18 months has been introduced as well as establishing the principle of equal treatment of temporary workers and permanent employees.

In future, after maximum 9 months, temporary workers must receive the same pay as comparable permanent employees. The abuse of work or service contracts identified by the German Federal Government should be curbed as the definition of a work or service contract in § 611 a BGB [German Civil Code] now clearly establishes what constitutes an employee. III.

 

1. Summary of the general provisions of the new German Temporary Employment Act

  • First definition of a temporary worker (§ 1 Subsection 1 Sentence 2 AÜG)
  • Express prohibition of chain assignment (§ 1 Subsection 1 Sentence 3 AÜG)
  • Specification of the revolving-door clause, when the temporary worker was previously an employee of the hiring company or a company affiliated to the same group (§ 8 Subsection 3 AÜG)
  • Limitation of the maximum service duration to 18 months with collective agreement opening (§ 1     Subsection 1 b AÜG)
  • Specification of a stronger understanding of the principle of equal treatment (equal treatment § 8 AÜG)
  • Only a limited collective agreement opening within the extent of the equal-pay principle for 9-15 months and a broadly defined collective agreement opening for other working conditions
  • Interruption periods of 3 months for both maximum service duration (§ 1 Subsection 1 b AÜG) and the application of the principle of equal treatment under a collective agreement (§ 8 Subsection 4 Sentence 4 AÜG)
  • Extensive identification requirements and, in this connection, the ineffectiveness of a so-called precautionary licence (§ 1 Subsection 1 Sentence 5, 6 AÜG)
  • Strong governmentalisation of the maintenance declaration of the temporary worker implied in an employment relationship with the hiring company (§ 9 AÜG)
  • Severe sanctions for even minor violations
  • Prohibition of deployment of temporary workers as strike breakers (§ 11 Subsection 5 AÜG)
  • Limited extension of works council rights to information (§§ 80, 92 BetrVG [German Works Constitution Act])
  • Due consideration of temporary workers in the case of thresholds after working for the hiring company for minimum 6 months (§ 14 Subsection 2 AÜG)

 

2. Definition of a temporary worker (§ 1 Subsection 1 Sentence 2 AÜG)

‘Workers are deemed to be temporarily employed if they are incorporated into the work organisation of the hiring company and are subject to the instructions of the hiring company.’ (§ 12 Subsection 1 Sentence 2 AÜG)

‘If the contract and its actual performance are in contradiction to each other, the actual performance shall be determinative of the legal classification of the contract.’

NB:

The hiring company must take the decisions typical of an employment relationship on the assignment of the worker in respect of time and place, i.e. the hiring company must assume the personal sovereignty of this person.

1 Subsection 1 Sentence 2 AÜG focuses solely on general integration into the work organisation of the hiring company and not on what is understood to be closer integration into its business!

 

3. Principle of equal treatment

Second pay concept

  • § 8 Subsection 1 AÜG principle of equal treatment

‘The temporary employment agency shall guarantee the temporary worker, for the duration of the assignment to the hiring company, the essential working conditions applicable to a comparable employee of the hiring company, including pay (principle of equal treatment). If the temporary worker receives remuneration owed under a collective agreement in the hiring company for a comparable employee of the hiring company or, in the absence of such, remuneration under a collective agreement applicable to comparable employees in the deployment sector, it shall be assumed that the temporary worker has received equal treatment in respect of pay in the meaning of Sentence 1. If the hiring company provides fringe benefits, their value may be paid in Euros.’

Key changes in the new AÜG include the emphasis on the principal of equal treatment in temporary employment relationships, which essentially takes effect from the first working day.

Even in the case of a diverging collective agreement provision, after 9 months of an assignment, the working conditions applicable to a comparable employee of the hiring company, including pay (statutory equal pay) must be guaranteed.

Subject to stringent conditions, the period may be extended in the case of so-called supplementary collective agreements for the deployment sector; however, also in such cases, after maximum 15 months of the assignment a level of pay must be reached which the parties of the collective agreement define as equal pay.

Consequently, this remuneration must be paid until the maximum duration of the assignment by law or by collective agreement has been reached.

Pay is deemed to be ‘any remuneration which is paid as a result of the employment relationship or which must be paid due to statutory provisions on continued payment of remuneration, and also all elements of compensation customary to business operations or under agreement or even guaranteed in individual contracts, such as holiday pay, continued payment, bonuses, special payments, allowances and supplements, as well as capital-forming benefits; these also include ‘fringe benefits to remuneration’.

Deviations through collective agreement provisions

A distinction must be made between pay and other working conditions.

1) In respect of the working conditions not related to pay, a deviation for an unlimited period of time through a collective agreement is possible.

For example, there may be a difference in respect of holidays from the leave entitlement of the permanent staff for the entire period of the assignment of the temporary worker.

 

2) The provision for pay is more complex (equal pay)

a) In principle, collective agreement deviations from the equal-pay requirement are only permissible in the first 9 months and, moreover, only if

  • the minimum wage is guaranteed and
  •  there has been no evidence of a (not even inter-group) revolving-door system in place in the last 6 months.

b) Beyond the period of 9 months, there may be a deviation up to a period of maximum 15 months from the equal-pay principle if

  • after a training period of 6 weeks, equal pay is introduced in stages by these supplementary collective agreements for this sector and
  • after 15 months at the latest, pay has reached a level defined by the parties of the collective agreement as equal pay.

Notes on application

The last-mentioned point in particular is important when putting the provisions into practice.  The wording makes it clear that it is not necessary that the pay level reached after 15 months in fact corresponds entirely to the pay of a permanent employee. On the contrary, the parties of the collective agreement have considerable room for manoeuvre in this respect.

Significant for putting the provisions into practice is also the fact that, within the scope of application of a collective agreement, temporary employment agencies and temporary workers not bound by a collective agreement and a reference clause can adopt the collective agreement provisions. However, it is necessary to take up the collective agreement as a whole; limitation to individual normative provisions in the sense of cherry-picking is not possible.

From the perspective of the temporary worker it is problematic that, subsequent to the change required by law after 18 months at the latest, the worker once again loses the already acquired rights under collective agreement law in another assignment. Even in the case of the temporary workers landing again after the 3-month interruption at the entry level of the (supplementary) collective agreement, they will be starting again at 0. In contrast, the 6-month interruption period set down in § 8 Subsection 3 AÜG only applies in cases in which the temporary workers were previously employees of the hiring company or of a group-affiliated company.

 

4. Maximum service duration

a) Concept of rigid upper limit

While the law in the past provided that a temporary worker could only be assigned to a hiring company ‘temporarily’ in keeping with the EU directive on temporary agency work – allowing some leeway for interpretation, the newly introduced §1 Subsection 1 b Sentence 1 AÜG prescribes a maximum duration of 18 consecutive months service by the temporary worker at the same hiring company.

In this respect, the period of any previous assignment by the same or a different temporary employment agency to the same hiring company must be taken into account in full if no more than 3 months have elapsed in each case between assignments.

A different service duration may be specified in a collective agreement concluded between the parties of the collective agreement of the deployment sector.

The maximum service duration is designed as a twofold prohibition.

  •  The temporary employment agency may not assign the temporary worker to the same hiring company for longer than 18 consecutive months.
  • The hiring company may not deploy the temporary worker for longer than 18 consecutive months.
  •  In order to prevent bypass strategies, a statutory provision has been introduced to take earlier periods of service with the same hiring company which may not date back longer than 3 months into account. It is irrelevant to the calculation whether the previous assignment was through the same or a different temporary employment agency.
  • In principle, only actual service periods are counted towards the 18-month period; real interruptions of fewer than 3 months are regarded as not included. This is not the case for shorter interruptions due to holiday or illness in the case of a single assignment provided the assignment was not explicitly terminated by the hiring company prior to the start of the holiday or sick note. If the interruption exceeds a period of one month, the calculation fails, as there can no longer be any talk of ‘consecutive months’ in the meaning of the wording of the law.

Personal evaluation:

The rigid upper limit is problematic as it does not give consideration to the specific forms of deployment of temporary work, the function of which is of limited duration. The weakness of the approach is manifested in particular in substitution cases.

For example, if a female temporary worker is assigned as a substitute for a permanent employee who has taken maternity leave for 24 months, it is completely contrary to the interests of the temporary worker if the latter must then stop her assignment after 18 months, inevitably losing her assured right to equal pay and, additionally, running the risk of termination by her employer if no subsequent employment is possible.

b) Limited release of maximum service duration for collective agreement provisions

1) Statutory provisions

According to § 1 Subsection 1 b Sentence 3 AÜG the service duration of 18 consecutive months may be reduced or extended through a collective agreement of the deployment sector for hiring companies bound by collective agreements. The aim of this provision is to ensure that the instrument of the temporary employment continues to be applied flexibly and in line with demand.

The law does not prescribe a rigid limit for provisions under collective agreements which deviate from § 1 Subsection 1 b Sentence 1. This is in keeping with the European directive, which similarly does not recognise a rigid upper limit and which also allows longer-term assignments. Solely the long-term, i.e. ‘final’ assignment, cannot be reconciled with the requirements of the directive.

 

2) Necessary opening for variable maximum limits for objective reasons

In addition to a collective agreement stipulation of an upper limit diverging from the law but nevertheless rigid, a provision under collective agreement should also be permitted, which attaches the maximum service duration flexibly to the existence of objective reasons and, consequently, allows flexible periods, especially in substitution cases, to meet substitution demand.

c) Possible deviations through work or service contracts

According to § 1 Subsection 1 b Sentence 3 AÜG, the parties of the collective agreement of the deployment sector may, in principle, diverge from the statutory 18-month maximum service duration for temporary employment relationships to the duration they choose.

To the same extent as the parties of the collective agreement of the deployment sector, business partners in normative businesses bound by collective agreements may, in accordance with § 1 Subsection 1b Sentence 5 AÜG, also decide on a different maximum service duration under a work or service contract, however, only if the collective agreement contains a corresponding opening clause.

Provided the collective agreement of the parties of the collective agreement of the deployment sector stipulates such an opening for work and service contracts, hiring companies not bound to the collective agreement may also exercise this right. However, the regulatory powers of the business parties in this case are limited in such a way that it is only possible to effectively agree a maximum service duration of up to 24 months.

 

5. Temporary employment in a group

The same concessions for the temporary employment in an affiliated group continue to apply after the reform. In particular, the group privilege is retained in § 1 Subsection 3 Number 2 AÜG.

This means that

  • the maximum service duration of 18 months in the case of a transfer for a limited period to another group company is not applicable,
  • project-related assignments or long-term assignments abroad remain possible if
  • the temporary worker was not engaged or employed for the purpose of the assignment.

Therefore, personnel placement companies within an affiliated group are not privileged per se but rather the transfer for a limited period to a different group company. At the same time, this means that transfer clauses under an employment contract are indirectly approved by the law provided the transfer is only temporary.

Furthermore, it should be noted that the collective agreement opening in the area of the equal-pay principle is not applicable in the case of a revolving-door strategy in the group.

Such a revolving-door strategy is to be assumed if

  • a worker leaves a group company and changes to an affiliated company,
  • this company subsequently assigns the worker again to the original group company (§ 8 Subsection 3 AÜG).

This is, in fact, not a case of group privilege; instead, the group is treated as a single legal entity.

  • § 8 Subsection 3 AÜG

‘A diverging collective agreement provision in the meaning of Subsection 2 does not apply to temporary workers who, in the last six months prior to the assignment to the hiring company, have terminated an employment relationship with the hiring company or with an employer who forms a group with the hiring company in the meaning of § 18 of the German Public Companies Act.’

 

6. Disclosure, specification and information duties

The aim of these obligations is to counteract work contracts which are made out to be hidden temporary employment.

The temporary employment agency and the hiring company must describe the assignment of temporary workers in their contract explicitly as temporary employment before they assign the temporary worker or allow such to take up the work (§ 1 Subsection 1 Sentence 5 and 6 AÜG).

According to § 9 Subsection 1 a AÜG employment contracts between temporary employment agencies and temporary workers are invalid if this obligation has been violated.

An exception is only applicable if the temporary workers declare in writing, either to the temporary employment agency or hiring company, within one month of the point in time planned for the start of the assignment agreed between the temporary employment agency and hiring company, that they adhere to the employment contract with the temporary employment agency.

Case law had explicitly approved the practice in the past of a precautionary licence and assumed that in the case of a work contract – irrespective of the qualification of the contract – there would be no employment relationship with the hiring company provided that the external service provider had a temporary employment licence.

This is no longer possible.

Due to the newly introduced duties of disclosure and specification, companies which act in accordance with the law and which endeavour to exclude risks, are only left with the expedient in borderline cases of also declaring, as a precautionary measure, work contracts as temporary employment.

 

7. Maintenance declaration

According to § 9 AÜG, in the case of hidden temporary employment and if the maximum service duration is exceeded, the employment contract between the temporary employment agency and temporary worker is invalid with the result that the employment relationship by act of law passes over to the hiring company. However, according to § 9 AÜG, the temporary worker may object to the transfer of the employment agreement and, at the same time, declare that they will maintain the employment agreement with the temporary employment agency.

The sole aim of this so-called maintenance declaration, as a statutorily unconditional, unilateral declaration of intent, is to take into account the freedom of occupation protected by Article 12 Subsection 1 GG [German Basic Law] of the temporary worker. However, it should not be possible to use it subsequently to put illegal deployment into practice. The objection must be filed within one month of the date on which the legal employment relationship was established in accordance with § 10 AÜG.  As § 9 Subsection 3 Sentence 1 AÜG specifies, it can only be filed within the term determined of one month, and not as a precautionary measure.

According to § 9 Subsection 2 the written maintenance declaration required is only valid if the temporary worker submits it personally to the Federal Employment Agency responsible for implementing the AÜG. On receipt, the Federal Employment Agencies note on the declaration the date of submission and proof of identification of the temporary worker who must be in attendance.

So that the declaration is not submitted to the Federal Employment Agency ‘as a precautionary measure’ at the start of the assignment it is also only valid if it is received by the temporary employment agency or hiring company no later than on the 3rd day following submission to the Federal Employment Agency.

The temporary worker remains responsible for forwarding the declaration to the temporary employment agency and hiring company. Therefore, it is up to the temporary worker to meet the deadline of one month set down in § 9 Subsection 1 Number 1 b AÜG vis-à-vis the temporary employment agency and hiring company. The date noted by the Federal Employment Agency is no substitution for timely receipt thereof. If the deadlines are not met, the objection is immaterial, the employment relationship invalid and, by law, an employment relationship is established between the temporary worker and hiring company.

 

8. Sanctions imposed against even minor violations of the newly created obligations and statutory provisions

This also applies to violations against the equal-pay principle, maximum service duration (even by one day!), denomination obligation, etc.

Sanctions:

  • Revocation of the temporary employment licence
  • A fine imposed by the Federal Employment Agency of up to € 30,000.00
  • an employment relationship with the hiring company is fabricated

These sanctions also relate to the prohibition of chain assignments.

In the case of violations against the equal-pay principle, there is even a risk of a fine of up to € 500,000.00.

 

9. Extension of rights of co-determination of the works council

According to previous legislation, the works council had a right of co-determination set down in § 99 Subsection 2 BetrVG [German Industrial Relations Act] in the deployment of temporary workers.

In § 80 Subsection 2 and § 92 Subsection 1 Sentence 1 BetrVG only the content of the existing right to information of the works council on the deployment of persons who are not in an employment relationship with the employer of the company is clarified by the law.

The company is not obliged to submit contracts which the work contractor or temporary employment agency instructed by the company has concluded with its employees.

Instead, in keeping with the case law of the Supreme Court, the works council should be placed in a position to examine on its own responsibility whether it will have duties to fulfil as a result of the deployment of agency staff in the company and whether it must take action to fulfil these duties.

Therefore, it is only necessary to submit to it the contracts which are based on the deployment of staff in the company, i.e. in the case of work contractors the work contract or, in the case of temporary workers the contract on the assignment of temporary workers.