Reform of the German Temporary Employment Act
(Arbeitnehmerüberlassungsgesetz - AÜG)
Maximum leasing period of 18 months
German as European employment models are mostly based on indefinite employment contracts, by which employees work as part of the employers' organisation in the field of the employer's own business. Hiring out employees to third parties, by which employees – while integrated in a third party's organisation – are contractual bound to another employer, should be an exemption. Therefore, any business enterprise operating in the field of personnel leasing needs a specific permit. It was the basic intention of the legislator to permit personnel leasing only for a limited period or as the German Temporary Employment Act states "temporary". Since "temporary" was not defined or limited by e.g. a certain number of months, it often became "permanent" in practice.
"Temporary" shall now be defined by the introduction of a maximum leasing period. Generally, effective 1 April 2017, the same temporary employee may not be leased for more than 18 months. Hire times prior to 1 April 2017 shall be expressly excluded. Any interruption in the temporary employee's deployment period of 3 months or less will be ignored for the purposes of calculating the 18-month's maximum term. If the interruption is longer than 3 months, the past period of employment will not be taken into account. Breaches of the maximum hire period will lead to an employment relationship between the temporary employee and the hirer, unless the temporary employee objects in writing to the transition of his employment.
However, by way of a collective bargaining agreement, the 18-months period may still be extended with no limit. Moreover, companies not bound by collective bargaining agreements can adapt a collective bargaining agreement from their branch by way of works agreement and thereby extend the maximum leasing period up to 24 months.
No protection via "stock permissions" (Vorratserlaubnis) in relation to bogus contracts for work and service (Scheinwerk- und Dienstverträge)
Another intention of the reform is to avoid the misuse of bogus contracts for work and service. These contracts are designed as contracts for work and service, but in practice turn out to be (hidden) personnel leasing. The service provider does not work on a specific project, but rather let his employees to his customers. The customer himself takes over the employer's rights to give directions to the employee. Consequently, an employment relationship between the host business and the temporary employee arise, unless the provider also holds an official permit for the supply of temporary employees. However, due to the current legislation and case law, it had been common practice to apply for an official permit for the lease of temporary employees to avoid these consequences. To prevent such bogus contracts for work and service, as from 1 April 2017 lessor and hirer will have to declare the engagement of a temporary employee in a written contract. This prevents the subsequent declaration by the employer of a contract as temporary employment as well as the protection via "stock permissions". Further, the employee has to be informed about the fact that he will be employed as temporary worker before hiring out. The hired out employee has the right to object to the transition of the employment to the third party – however subject to strict formal requirements.
Equal pay no later than after 9 months
In principle, the same remuneration for temporary employees and the permanent workforce (equal-pay) has to be granted during the leasing period. Nevertheless, the current legislation provides for the possibility to deviate from this principle timeless, as far as a collective bargaining agreement of the temporary employment industry is applicable to the employment relationship. Effective 1 April 2017 this possibility is capped to 9 months. As with the maximum leasing period, deployment times prior to entering into force of the Act shall not be taken into account.
A difference in pay for a longer period of up to 15 months is only possible, if an existing collective bargaining agreement on branch surcharges within the temporary employment industry allows the hirer to do so. The implementation of equal pay must then start stepwise after a period of no more than 6 weeks.
New rights of the works council and integration of temporary workers into co-determination
The reform law also extends the information rights of the works council. Effective 1 April 2017 the employer has to inform the works council regarding "the term of the hire of temporary employees, their place of work and their work responsibilities". Further, the documents to be submitted to the works council shall now also include the contracts on which the hire of external temporary staff is based, for example the leasing agreement.
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