October 07, 2019 Issue: October 2019

GERMANY - The Many Pitfalls of Fixed-Term Employment in Germany – Or: How Long Ago Is “Very Long Ago”?

In Germany, fixed-term employment is strictly regulated. As a rule, fixed-term employment requires objective grounds that justify the limited term. There are exceptions for new hires. If the same employee has not been employed (on a fixed term or open-ended contract) by the company before, a fixed term not exceeding two years is allowed with a maximum of three renewals within that period.

Less Strict Case Law Overruled by Germany’s Federal Constitutional Court

Following the exact wording of that exception, any form of previous employment at any (!) time before means that it is not possible to invoke this exception. While case law followed this strict interpretation of the law for years, in 2011 the Federal Labor Court held that previous employment at least three years before the start date of the new fixed-term contract was acceptable. One can argue that this interpretation was contrary to the wording of the law. Regardless, this case law was overturned in 2018 by Germany’s Federal Constitutional Court. The court, however, held that previous employment, which was “very long ago”, or of a totally different nature or a very short duration, would be acceptable and a new fixed-term contract could be agreed with objective grounds required.

How Long Ago is “Very Long Ago”?

The meaning of “very long ago” is unclear. While previous decisions of the Federal Labor Court earlier this year held that neither eight years nor eight years and nine months were “very long ago” – hence, no fixed-term contract without objective grounds could be concluded – a recent decision holds that 22 years is “very long ago”. Consequently, the parties were free to agree on a fixed-term without objective grounds. So the definition of “very long ago” seems to lie somewhere in between 8 and 22 years, but only time and case law will tell where to draw the line.

Impact and Recommendation

Due to the uncertainty, however, in case of doubt it is advisable that employers refrain from concluding new fixed-term contracts without objective grounds for workers formerly employed less than 22 years ago. During the recruitment process, the candidate should indicate whether there was any previous employment and, if the candidate is hired, the employer should obtain the employee’s written confirmation that there was no previous employment.

What’s on the Horizon?

Given the strict regulatory framework of fixed-term employment, employers should closely monitor both case law and statutory regulations. The 2018 coalition agreement provides for changes in fixed-term employment. Notably, the maximum 2-year term shall now be limited to 18 months including only one extension of term. Also, employers with more than 75 employees may use these types of fixed-term contracts for only 2.5 percent of their staff. A draft law is not yet available.

André Zimmermann

Orrick, Herrington & Sutcliffe LLP