Revision of the Law on Temporary Work from 1 April 2017

The German Parliament (Bundestag), with the approval of the Federal Council (Bundesrat), has passed amendments to the “Law on Temporary Work”. The new rules will enter into force on 1 April 2017 and do not only have impact on leasing personnel but also on work and service contracts.

The key changes introduced by the reform are summarized as follows:

The deployment of temporary workers to the same hirer is limited to a maximum duration of 18 consecutive months. The calculation of the period is linked to the individual temporary worker and not to the respective position. Periods of interruption of work of less than 3 months must be added to the calculation. Exemptions to the maximum duration period can be agreed by means of a collective bargaining agreement (CBA).

The new provisions legally allow to permanently fill a position with temporary workers. After the expiry of the 18 month period, the hirer may engage another temporary worker to the same position. The original temporary worker may also be engaged again after a three month period of interruption in his engagement.

The current law already entitles temporary workers to equal pay. However, the new provisions restrict the ability of the collective bargaining parties to deviate from this principle. Exemptions may only be agreed for the first 9 months. Branch surcharge wage agreements (Branchenzuschlagstarifvertr√§ge) may provide a longer derogation of up to 15 months if, at the end of this period, the temporary worker will be entitled to remuneration comparable with the standard tariff wage of comparable employees in the respective industry. The agreement must also provide a gradual increase in pay, starting no later than 6 weeks after the beginning of the temporary worker’s engagement.

The employee leasing agreement between the lender and the hirer must specify the supply of temporary workers as the subject matter. Before the supply of a temporary worker, the contractual parties must name the temporary worker with reference to the agreement. These new regulatory provisions have profound effects as they aim to tackle the improper use of (fictitious) work or service contracts. Under the current law it is possible to hold a “precautionary” license to lease temporary workers although not using it because of having agreed on a work or service contract. If it subsequently turns out that the supposed work or service contract should be classified as a temporary employment contract, the mere presence of the license retrospectively legalizes the incorrect contractual situation without any sanctions. From the perspective of the legislator, the parties agree upon the supposed work or service contracts to evade the strict legal framework of temporary work. In practice, this approach has also been adopted in situations of uncertainty about how the contract should be correctly classified.

From April, this situation will no longer be possible because of the duty to state in the contract that the agreement is for the supply of temporary workers. The new laws also introduce administrative fines for the lender and the hirer in the event of infringements. In addition, the laws provide that the employment relationship between the “lender” and the “temporary worker” is void. Instead an employment relationship will be deemed to exist between the “hirer” and the “temporary worker”. These sanctions have so far only been applied to the supply of temporary workers without possessing a license.

The legal consequence of a void employment relationship not only occurs in the event of not specifying the nature of the contract, and where there has been an unauthorized supply of temporary workers, but also in the case of exceeding the duration of 18 months. The law introduces a new provision allowing temporary workers to declare their wish to remain employed by the lender within one month. However, this option is subject to strict bureaucratic procedures.