German companies rely heavily on temporary workers. Due to fundamental legislative reforms in the mid-2000s, it is possible to pay temporary workers a salary which is below the salary of comparable permanent staff. Therefore, the use of temporary workers provided by HR service providers is a cost effective way for German companies to flexibly adjust their workforce to the current demand of labor. However, in recent years, several High Court decisions have strengthened the rights of temporary workers. In the last months the Federal Labor Court (Bundesarbeitsgericht “BAG”) has issued several important decisions which aim to further improve the rights of temporary workers and also affect companies using the services provided by temporary workers. German companies who employ temporary workers should be aware of these important new developments.
I. Temporary Workers and Protection Against Unfair Dismissal
A recent decision of the BAG related to temporary workers has considerably modified the principles which regulate the scope of protection against dismissal (BAG, January 24, 2013 – 2 AZR 140/12). In Germany, according to the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz “KSchG”) employees are only protected against dismissal if the company employs more than 10 employees. In the past, temporary workers were not considered as “employees” in terms of the 10-employees-threshold. The Federal Labor Court has now modified this doctrine. According to the new BAG-decision, temporary workers will also have to be counted as “employees” if they are employed due to a continuously existing need of personnel. This will extend the applicability of the KSchG and can provide employees working in smaller companies with a strong protection against dismissal if the employer regularly employs temporary workers.
II. Temporary Workers and the Number of Works Council Members
Another recent court ruling issued by the BAG has strengthened the position of temporary employees as far as works councils are concerned (BAG, March 13, 2013 – 7 ABR 69/11). According to the Works Constitution Act (Betriebsverfassungsgesetz “BetrVG”), the number of members of the works council who will be elected is determined by the number of employees a company has. In the past, temporary workers did not count as employees in this regard. Similar to the above mentioned decision of the Federal Labor Court, the BAG has now decided that regularly employed temporary workers have to be counted. The decision can have relevant side effects for German companies as a high number of temporary workers can lead to an undesired higher number of works council members.
III. The Definition of “Temporary Engagement”
Pursuant to German law, temporary workers may only be employed at the borrower’s company “temporarily”. The definition of this expression and the consequences of a breach, however, have not been finally determined yet. Some courts of lower instance even decided that in case a temporary worker is employed for a period longer than “temporarily”, this constitutes an employment contract between the borrower and the temporary worker. Due to the concerns raised by these court rulings, a final decision of the Federal Court of Labor is eagerly awaited.
IV. Temporary Workers and Equal Pay
In general, temporary workers have to be paid equally to the borrower’s employees during their employment at the borrower’s company. However, it is possible to avoid the equal-pay-obligation. According to statutory law, the equal-pay-principle shall not apply if collective bargaining agreements apply to the temporary worker. In such case, a lower remuneration is permitted. In the past, many German HR service providers applied bargaining agreements which stipulated very low salaries for the temporary workers they leased to clients. Several bargaining agreements for temporary workers have been declared invalid by the Federal Labor Court in recent years. The Federal Labor Court recently confirmed that this may lead to payment claims of temporary workers (BAG, March 13, 2013 – 5 AZR 954/11, – 5 AZR 146/12 -, – 5 AZR 242/12 -, – 5 AZR 294/12 – and – 5 AZR 424/12 ). They may claim for the difference between the salary which they received and the higher remuneration which the borrower’s employees earned.
The employment of temporary workers remains a flexible way for companies to fulfill their staffing needs. However, the Federal Labor Court continues to strengthen the rights of temporary employees in all areas of labor and employment law. Companies who regularly employ temporary employees should be aware of the legal implications and carefully observe future developments.