The German Department for Labour and Social Affairs has finally released its bill on amending the German Law on Personnel Leasing. The bill provides for new regulations on temporary Employment in general, but also specifications on the delimitation between service contracts, employment contracts and temporary employment. The Ministry’s bill has to be agreed on by the Federal Chancellery. At an early stage of discussions the Federal Chancellery advised the Ministry to amend the bill and to make sure that the amendments are in compliance with the coalition agreement between the Social Party of Germany (SPD), the Christian Democratic Union (CDU) and the Christian Social Union (CSU). Accordingly, we await the first revised bill. Further amendments are likely to be made following the consultation period. Businesses should have an eye on trends and developments in order to be well prepared. The final Bill is expected to become law and be effective on January 1, 2017. Hereinafter we provide an overview on the Bill’s important provisions.
Delimitation criteria between Service Contract and Employment Contract
The bill provides for new delimitation criteria between employment and service contracts. Not the wording of the contract is decisive, but its actual execution. According to the bill employment can be assumed if the worker has been integrated into the lessee’s work-organisation and is bound by the lessee’s directions.
In order to identify those two decisive aspects the bill provides for eight criteria that must be considered.
Thus, it is a strong indication for an employment relationship if the worker
- does not have sovereignty to manage his working hours and/or workplace,
- provides his services mostly in the lessee’s workplaces,
- regularly uses the lessee’s (working)-materials during work,
- regularly works together with external employees (employed by the lessee),
- works predominately or exclusively for the lessee,
- does not operate his own work-organisation to provide his/her services,
- provides services that are not aimed at producing a specific work result,
- does not give warranties for his services.
Moreover, an employment relationship shall refutably be presumed if the German pension insurance (Deutsche Rentenversicherung Bund - DRV) states the employment to be insurable.
According to the bill these criteria are supposed to be a codification of the case law of the highest German courts. However, in our view, this is not the case, since the German Federal Labour Court (Bundesarbeitsgericht – BAG) does not apply exactly the same criteria and does not weight them equally. The bill aims to prevent a double review both by the German statutory pension insurance (Deutsche Rentenversicherung Bund – DRV) and the labour courts. The downside, though, is that the lessee has to deal with administrative courts (with regard to the decision of the DRV) as well as with civil courts (with regard to consequences of its misjudgment, such as remuneration, continued remuneration e.g. in the event of sickness and other employee protection law).
It can, however, be assumed that some of those issues mentioned above will be changed in the following consultation period.
Precautionary personnel leasing approval is no longer a protection shield; Information Duties
Each time the lessor leases a temporary worker the lessor has to inform the worker that he or she is acting as a temporary worker. If this contractual relationship is not disclosed and if the worker’s services are not based on a service contract or a work contract, his assignment is considered to be a case of hidden personnel leasing.
Until now, if hiring freelancers on the basis of a work contract failed, the consequences of hidden personnel leasing could have been avoided by having a precautionary personnel leasing approval. If this construct should have fallen apart, the lessee could still rely on the approval, i.e. no employment relationship between the lessee and the worker was created.
According to the bill, if the contractual provisions are not explicitly being titled as personnel leasing, an employment relationship between the lessee and the worker will be created. The same applies in the case of hidden personnel leasing, e.g. the fail to have used a work contract.
Participation of Works Council; Co-Determination Thresholds
The bill provides for the participation of the works council with respect to the hiring of temporary workers. Hiring external personnel the works council shall have an explicit information right especially with regard to the temporal extent, the workplace and the tasks of the temporary workers’ assignment.
Statutory Maximum Period
According to the bill a company can employ a temporary worker for a maximum of 18 months. The maximum supply period refers to the specific worker, not the workplace itself. Thus, the workplace in question can be filled with another temporary worker, once the 18 month period for his or her predecessor is reached. Interruptions of up to six months will be included in the 18 month period. After six months of interruption, the supply period will start anew.
The 18 month period can be extended by sectoral collective agreements.
If the maximum supply period for hiring out is exceeded, an employment relationship between the lessee and the temporary worker will be created, unless the temporary worker disagrees and states his disagreement within one month after the maximum supply period. However, as this legal consequence is not part of the coalition agreement, it might be changed or even left out at all.
After nine months, at the longest and only if stipulated per labour agreement, temporary workers shall be paid equally to the lessee’s permanent employees. This period can be extended for a maximum of up to 12 months by sectoral collective agreements, provided that this collective agreement foresees the gradual introduction of equal pay.
Moreover, the bill intends to clarify that temporary workers do count as employees with regard to thresholds applying to co-determination.
The Lessee is not allowed to hire a temporary worker as blackleg. The bill provides for a prohibition to hire temporary workers for businesses involved in an industrial dispute.