Temporary executive employee?

In its ruling of 1 June 2022 - 7 AZR 151/21, the Federal Labour Court (Bundesarbeitsgericht - BAG) dealt with the question of whether the prominent position of an employee and the resulting powers justify the limitation of the employment relationship due to the specific nature of the employment pursuant to section 14 (1) sentence 2 no. 4 of the Part-Time Working and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz - TzBfG).

No longer director of the clinic at the turn of the year

The defendant hospital is an institution under public law with legal capacity, represented by the management board. It is subdivided into the institutions Campus Kiel, Campus Lübeck and two cross-campus centers (the Radiology Centre and the Diagnostics Centre). The two cross-campus centers are managed by the Centre Management. Until 2019, this included a managing director. According to the center regulations, they are responsible for the financial result of the Centre in compliance with the requirements of the board of directors. The plaintiff was such an executive director on the basis of an employment contract limited in time from 01.07.13 to 30.06.18. By an amendment agreement dated 29.06.2015, his employment was extended until 31.12.2019. By amending the main statutes in February 2019, the cross-campus centers were placed under the control of the Centre Directorate. This comprises a scientific director, a commercial director and three other persons. The plaintiff served as commercial director from that date. However, the defendant hospital did not extend the contract beyond 31 December 2019. The plaintiff wanted to continue working. He offers his employment to the defendant and filed a lawsuit with the competent labour court on 17.01.2020. In the view of the defendant, the plaintiff's strong contractual position as a counter-body to the executive board justified the fixed term. A position comparable to that of a managing director of a limited liability company was to be assumed.

Contracts have no expiry date

Although the Labor Court dismissed the action, the plaintiff's appeal was successful, and the defendant's review was unfounded. Activities as a manager or in a leading position do not justify the limitation of the employment contract due to the specific nature of the employment.

Managers don't need to look at the calendar either

The fixed term to 31 December 2019 is invalid. Contrary to the view of the defendant, it is not justified by the objective reason of the specific nature of the employment pursuant to § 14 I 2 no. 4 TzBfG. Pursuant to § 14 I 2 no. 4 TzBfG, there is an objective reason for the fixed term if it is justified by the specific nature of the employment. It can be inferred from the legislative material that the principal reason for this is to take account of constitutional peculiarities. Although the defendant operates a hospital in which research is also carried out, the employment relationship is not determined by this. The hospital could not claim that special constitutional peculiarities apply to it as a research institution. However, the factual reason is not limited to these case groups but can also be limited in other case groups. Outside of employment relationships characterised by constitutional law, the factual reason presupposes that the employment relationship is characterised by exceptional circumstances which can justify a legitimate interest of the parties in terminating the employment relationship without notice. The fact that an employee is a senior executive does not constitute a sufficient reason to justify a fixed term. According to the TzBfG, a fixed-term employment contract with a managerial employee also requires a factual reason, the existence of which is to be assessed according to the same standards as for other employees. Accordingly, activities as a manager or in a managerial position - which are typically accompanied by a lower degree of commitment to instructions and may cause disputes with the employer due to the responsibility transferred - do not constitute a characteristic of the employment that would justify a fixed term. Accordingly, the plaintiff's position similar to that of a managing director did not constitute a reason for a fixed term.

Limited design options for large, international corporations

Large and international companies in particular regularly look for ways to limit the term of employment contracts with senior employees who do not have a position in an executive body. They want to keep a change in the top position open, because younger employees should be given opportunities for promotion. New people should implement fresh ideas in the company. Management positions are often very demanding and cannot be filled for a lifetime. Although there are many reasons for a fixed-term contract, the BAG has put a stop to this. If, when filling the position of a director, an employer uses an employment contract and not a type of contract not covered by the scope of the TzBfG, the same principles apply to managers in the Act on Fixed-Term Contracts as to any other employment relationship. The Part-Time Employment Limitation Act only permits the limitation of an employment contract if it is justified by an objective reason. The work of executives does not per se constitute a special type of work performance that justifies a fixed-term contract under section 14 I 2 no. 4 TzBfG. The practice must rely on other structuring options to achieve its goals.

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