Germany’s New Government: Important Consequences for Fixed-Term and Part-Time Employment on the Horizon ?

Note : This article is based on recent developments in the current German coalition discussions underway and may be superseded by events; the article expresses only the views of the authors, is for background information only and does not constitute advice on any particular legal regime which may come into force.

The coalition agreement is drafted. “Good things come to those who wait.” 

Whether or not this well-known proverb also applies to the coalition agreement of Germany’s 19th legislative period is for everyone to decide for themselves. The parties have long consulted, discussed and argued. Now the decision as to whether the finally negotiated coalition agreement will come into force depends on the approval of the members of the socialist party (SPD).

As an approval is quite probable, we would like to present to you the most important reforms relating to German labor law.

Fixed-term employment contracts without objective justification, recurring fixed-term employment contracts

During the negotiations, the SPD has consistently urged to abolish the legal grounds for fixed-term employment contracts in cases in which there is no objective justification for concluding such a contract rather than a permanent employment contract. 

The CDU/CSU have not agreed to a general ban on such fixed-term employment contracts. The parties have therefore reached a compromise: Employers with more than 75 employees may conclude fixed-term employment contracts without objective justification with up to 2.5 percent of their workforce. 

Therefore, an enterprise with 100 employees would be entitled to use fixed-term employment contracts without objective justification only with 2.5 of its employees. In a company with 300 employees, the employer would be entitled to use fixed-term employment contracts without objective justification only with 7.5 of its employees. 

If this percentage is exceeded, any additional fixed-term employment contract is deemed to have been concluded as a permanent contract from the beginning. For many large companies and even entire industries, the effects of such a law would be significant.

Furthermore, the duration of a fixed-term employment contract, instead of the currently existing limit of 24 months, could not exceed a period of 18 months. Within this maximum duration, an extension of the fixed-term employment shall be possible only once instead of up to three-times, as it has been in the past.

Additional provisions could prevent the conclusion of recurring fixed term employment contracts in the future: Concluding a fixed-term employment contract would be prohibited if the respective employee has previously had a permanent employment contract or one or more fixed-term employment contracts with a cumulative duration of five years or more with the same employer. 

Any period that an employee with a fixed-term employment contract has previously worked for the same employer as a previously hired out temporary worker would also count towards the aforementioned maximum duration of five years or more. 

A three-year waiting period would have to be observed before a new fixed-term employment contract with the same employer can be concluded. In the event of a breach of these provisions, the fixed-term employment relationship – irrespective of its type or kind – would be deemed to have been concluded as a permanent contract from the beginning.

An exemption from the above-mentioned amendments could apply to employment contracts for artists (within the meaning of § 14 (1) No. 4 of the German Part-Time and Limited Term Employment Act, TzBG). It appears that the rules that currently apply shall continue to do so with respect to this area. 

As we have illustrated, the Federal Labor Court (BAG) has recently expressed its opinion on the specific nature of the employment contract of a licensed soccer player in the German Bundesliga.

Amendments to the German Part-Time and Limited Term Employment Act

The parties have agreed on the introduction of a temporary part-time working arrangement. As a result, an employee could entitled to a reduction in his contractual working hours for a certain period. The employee would not require the consent of the employer. All he has to do is submit a corresponding request to the latter. The purpose of temporary part-time work is to enable employees to later return to their normal working hours.

However, employers should consider the following employer-friendly aspects: The employee will not be entitled to an increase or a reduction of the working hours stipulated in the temporary part-time agreement or to an early return to the former working hours as long as the fixed-term period is in force. 

This provides some planning security for the employer. Furthermore, the employee, when the temporary part-time work agreement has expired, may not demand another reduction of his working hours for at least one year.

The new part-time entitlement only applies to companies that usually employ a total number of more than 45 employees. The employer may refuse a temporary part-time agreement if the employee requests it for a period of less than one year or more than five years. The company’s size has also been taken into account and would determine the overall number of employees that are entitled to temporary part-time work at the same time. In case of a company that employs 45 to 200 employees, only one request for every 15 employees or part thereof must be granted.

Conclusion/Outlook:

Even if transitional provision may apply when the above-mentioned regulations are introduced, companies are advised to commence their evaluation of possible effects the new provisions might cause and how to deal with the issues related to fixed-terms employments in the future if the SPD base agrees to enter another Grand Coalition.

In this context, companies should particularly ask themselves the following questions:

– Could the new provisions lead to having to completely overthrow the company’s current human resource planning? Does the company’s business model depend on the use of temporary workers?

– How can the transition to new structures be made without incurring a significant amount of additional costs?

– Is a significant increase in part-time applications to be expected due to the company’s personnel structure?

While we do not recommend taking particular measures as of yet, a critical analysis of your German companies’ structures is highly recommended in order to be prepared.

We will monitor further developments for you and report in detail on the final regulations that will apply in the end.

As of February 20, 2018

By Markus Faust and Franziska Bülter, MELCHERS Rechtsanwälte Partnerschaftsgesellschaft mbB, Germany, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance regarding German employment law, please contact Markus Faust and Franziska Bülter at germanylabor@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.