Entering into a valid fixed-term contract can be a bit of a challenge under German law. Under the Fixed Term and Part-Time Employment Act (TzBfG), one of the reasons which may be used to justify a fixed-term contract is that there are reasons relating to the circumstances of the particular employee. A recent case decided by the Federal Labour Court shows that these reasons will be narrowly interpreted (judgment dated 18 January 2017, docket number 7 AZR 236/ 15).
Originally, the employee had had a contract that limited her employment to age 65, i.e. the former statutory pension age. When revamping its company pension scheme, the employer offered employees the options to leave their employment and draw pension benefits early once they had turned 60. The employee did not immediately accept but, later on, accepted the offer. After reconsidering the early retirement option, she consequently sued and challenged the validity of the fixed-term provision.
The Federal Labour Court found the fixed-term provision to be invalid. While the employee had signed the contract, converting her previously unlimited unemployment into a fixed-term employment relationship, the court demanded objective reasons for evidencing a genuine employee interest in the fixed-term employment relationship. The standard applied by the Federal Court was whether the employee would, if an unlimited contract had been offered, have rejected that offer and only wanted to enter into a fixed-term contract. The court found that the employee would only have had a genuine choice if the employer had offered a limited as well as an unlimited contract, both with the option to draw early pension benefits. The court also held that the mere possibility of receiving company pension benefits did not qualify as a valid reason to limit the contract duration by way of a fixed-term contract.