In Germany, fixed-term employment is strictly regulated: As a rule, fixed-term requires objective grounds that justify the limited term. There are exceptions for new hires: If the same employee has not been employed (on a fixed-term or open-ended) by the company before, as a rule, a fixed-term not exceeding two years is allowed including a maximum of three renewals within that period.
Less Strict Case Law Overruled by Germany’s Federal Constitutional Court
Following the exact wording of that exception, any form of previous employment at any (!) time before means that it is not possible to invoke this exception. While case law followed this strict interpretation of the law for years, in 2011 the Federal Labor Court held that previous employment at least three years before the start date of the new fixed-term contract was acceptable. One can argue that this interpretation was, more or less clearly, contrary to the wording of the law.
This new case law was overturned in 2018 by Germany’s Federal Constitutional Court. The court, however, held that previous employment, which was “very long ago”, of a totally different nature or a very short duration, would be acceptable and a new fixed-term contract could be agreed with objective grounds required.
How Long is “Very Long”?
Ever since everyone has wondered what “very long ago” means. While previous decisions of the Federal Labor Court earlier this year held that neither eight years nor eight years and nine months were “very long ago” – hence, no fixed-term contract without objective grounds could be concluded –, a recent decision holds that 22 years are “very long ago”. Consequently, the parties were free to agree on a fixed-term without objective grounds. So the definition of “very long ago” seems to lie somewhere in between 8 and 22 years, but only time and case law will tell where to draw the line.
Impact and Recommendation
Due to the uncertainty, however, in case of doubt it is advisable that employers rather refrain from concluding new fixed-term contracts without objective grounds in the case of a pre-know employment which is not at least 22 years ago. During the recruitment process, the candidate should indicate whether there was any previous employment and, in case of hiring, the employer should obtain the employee’s written confirmation that there was no previous employment.
What’s on the Horizon?
Given the strict regulatory framework of fixed-term employment, employers should closely monitor both case law and statutory regulations. The 2018 coalition agreement provides for changes in fixed-term employment, notably, the maximum 2-year term shall now be limited to 18 months including only one extension of term. Also, employers with more than 75 employees may only use these types of fixed-term contracts for 2.5 percent of their staff. A draft law is not yet available.
How Orrick Can Help Multinationals Navigate Employment Law Issues in Germany and the EU
Orrick’s Global Employment Law team represents many of the major multinational employers of the world across a broad array of employment law and human resource counseling matters in the U.S., Europe and Asia. In Europe, we have a dedicated team of experienced specialists on the ground in the UK, France, Italy and Germany.
To help multinationals to stay on top of global employment law developments, our team provides practical guidance by online guides and our 2018 established global employment law webinar series which addresses key issues for multinationals we are seeing in major jurisdictions. Please reach out to Matthew Gerstenberg if you would like to receive an invite to our webinar series.
Earlier this year, our German Employment Law Team launched Orrick’s 101 – Employment Law in Germany – Employers’ Essentials, a pdf guide which sets out the very basics for multinationals doing business in Germany.
In addition, a series of Legal Q&A two pagers will cover specific topics (such as using fixed-term contracts or termination of employment) and the most common questions multinational employers have. The first two pager is on using fixed-term contracts which is an option many employers consider given rather strong dismissal protection in Germany. All materials are available from our website.
In mid-2018, our German China Desk and our German Employment Law Team created a bilingual English-Chinese guideline on German employment law and what Chinese investors and businesses investing or doing business in Germany need to know.
Visit our cross-border employment law website or reach out to our team directly or your usual contact at Orrick to learn more on how our Global Employment Law team can assist you in various jurisdictions.