I. General Problems of time limit contracts
The agreement on a time limit for the employment contract often leads to problems in practical use. Caution is, however, required, since a fixed term is only permitted under special statutory conditions. If these reasons are not available and nevertheless a – impermissible – time limit is agreed, then the employment agreement with the limited term shall be deemed to have been concluded for an indefinite period of time (sec. 16 (1) Part-Time and Limited Term Employment Act (“Teilzeit- und Befristungsgesetz – TzBfG”).
The Part-Time and Limited Term Employment Act enables the use of fixed-term contracts with objective reasons (sec 14 (1) Part-Time and Limited Term Employment Act) and without objective reasons but with other regulations (sec 14 (2) and (3) Part-Time and Limited Term Employment Act).
II. Especially time limit without reasons
A time limit without objective reasons is currently permitted for a maximum of two years. Within this time, a shorter time limit can be extended up to three times (sec. 14 (2) 1 Part-Time and Limited Term Employment Act):
The limitation of the term of an employment agreement according to the calendar to up to two years where no objective grounds exist is permissible; moreover, a term fixed according to the calendar may be extended no more than three times up to a total term of two years.
As a result, a large part of employment contracts are initially closed on a temporary basis. However, legal changes are already planned here. A time limit without material reason should now only be possible for a maximum of 18 months (instead of 24 months). In this period, the time limit shall only be extended only once. (see our article regarding the new Coalition agreement).
III. In particular: Inadmissibility of prior employment
Regardless, however, the law emphasizes, that a fixed-term contract without objective reason is not permissible, if the employee has previously been employed by the employer (sec. 14 (2) 2 Part-Time and Limited Term Employment Act):
A fixed term pursuant to sent. 1 is not permissible if a fixed or unlimited term employment relationship had previously existed with the same employer.
Since 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). This case-law, which has been widely criticized and contradicts the clear wording of the law, does no longer apply. This was stated by the German Federal Constitutional Court on 6 June 2018 (docket number – 1 BvL 7/14 and 1 BvR 1375/14). The court emphasized that the case law must comply with the clear wording of the law. For this reason, the previous case law must be abandoned. A time limit without material reason is therefore only permissible if there has not been an employment relationship with the employer before. Otherwise, only a time limit with reason (if there is a reason) is possible. This does not apply, however, when another contractual relationship with the employer (for example, training or internship) existed in the past. This is not an employment relationship and thus does not block a fixed-term contract without objective reason.
This, however, makes it clear that the possibility of a fixed-term contract without objective reason will be further restricted. Be it through the future legislative changes, be it through the now amended case law. Thus, it must be examined even more precisely than before whether an employment contract can be concluded for a limited period.