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Hurdles at the temporal limits of work contracts – When is a fixed-term contract valid?

In practice, fixed-term contracts lead to practical problems in a large number of cases. On the one hand, this is because they demand a variety of formalities (see our article from July 24 ). On the other hand, however, it is even more difficult to determine whether it is possible to limit the work contract temporarily at all. Both a limitation with and without reason are acknowledged. Both are apparent from the directive 1999/70/EC concerning the framework agreement on fixed-term work. This includes the following rules:

“To prevent abuse arising from the use of successive fixed-term employment contracts or relationships, Member States, […] shall, […], introduce […], one or more of the following measures:
(a) objective reasons justifying the renewal of such contracts or relationships;
(b) the maximum total duration of successive fixed-term employment contracts or relationships;
(c) the number of renewals of such contracts or relationships.”

This regulation thus enables the use of fixed-term contracts with objective reasons (a) and without objective reasons but with other regulations (b and c). German law has implemented these requirements in The Act on Part-Time Work and Fixed-Term Employment (“Teilzeit- und Befristungsgesetz – TzBfG”). Even according to this law the use of fixed-term contracts is possible both with (sec. 14 (1) TzBfG) and without (sec. 14 (2) TzBfG) objective reason.
The law emphasizes, however, that a fixed-term contract without objective reason is not permissible, if the employee has previously been employed by the employer. The German law uses the term “bereits zuvor“, which can be translated with “already before”. But what this means is controversial.

In 2011 the Federal Labour Court of Germany decided that the employee is not employed “already before”, if the employment relationship was more than three years in the past (docket number 7 AZR 716/09). In this case, a fixed-term contract without objective reasons should still be possible. The Federal Labor Court thus ignores the clear wording of the rules in sec 14 (2) TzBfG. For this reason, the judgment was strongly criticized and rejected both in the literature and the jurisprudence. The 18 regional labor courts, too, followed the judgment in part only, and further argued that a previous period of employment always prohibits a fixed-term contract without objective reason. Lastly, this view was shared by the regional Labour Court of Lower Saxony (Landesarbeitsgericht Niedersachsen) in July (docket number 6 Sa 1125/16).

The legal situation is obviously not clear. The employer cannot be confident that fixed-term contracts without objective reason are permissible, in the case of an employment more than three years in the past. As can be seen from the regional Labour Court of Lower Saxony, he cannot rely on the correctness of the case law of the Federal Labour Court, as this is massively criticized.

If an employer wants to act in the right way, a fixed-term contract without objective reason should only be concluded if there was no previous employment relationship with the employer at all. Otherwise, the risk is very high that there is a contract without a fixed term. However, the Federal Labor Court will again decide this issue in the near future. Here it is possible that the criticism is taken into account and the jurisprudence changed. For employers this would be desirable in any case. The law and jurisdiction should be so clear that every employer knows what rights and duties he has. This would also simplify the application of the rules for fixed-term contracts and minimize the practical problems.