Employment Law

Fixed term agreements – again

In New Zealand (and in Australia) employers can keep staff on successive fixed term agreements as long as they have a genuine business reason to do so.

This is different to German law. There, section 14 of the German Part-time employment and Fixed-Term Employment Contracts Act 2000 (“Gesetz über Teilzeitarbeit und befristete Arbeitsverträge”) simply stipulates that a fixed term agreement may be entered into “if there are objective grounds for doing so”. The Courts have in the past consistently held that those objective grounds must be a of a temporary nature.  Entering into a  fixed term agreement to solve a permanent staffing problem therefore renders the agreement void and the employee is then considered permanent (so section 16 of the Act).

Well,  not anymore.  On 26 January the European Court of Justice ruled that the renewal of fixed-term employment contracts may be justified by replacement needs, even where that need is recurring or even permanent (!).

The case in question was brought by a Ms Kücük, a court clerk at the District Court in Cologne, who was employed under a total of 13 fixed-term employment contracts between 1996 and 2007. The contracts were rolled over year by year mainly to cover for absences of permanent employees who went on parental leave and special leave.  Ms K’s argued that a total of 13 successive fixed-term employment contracts over a period of 11 years could not be considered a justifiable response to a temporary need for replacing staff. Her claim was unsuccessful in all instances. The Federal Employment Court then referred the matter to the European Court of Justice for a ruling on how to interpret the respective European Directive in the light of the German Act.

The ECJ held (at para 56):

The mere fact that an employer may have to employ temporary replacements on a recurring, or even permanent, basis and that those replacements may also be covered by the hiring of employees under employment contracts of indefinite duration does not mean that there is no objective reason under clause 5(1)(a) of the FTW Framework Agreement or that there is abuse within the meaning of that clause. However, in the assessment of the issue whether the renewal of fixed-term employment contracts or relationships is justified by such an objective reason, the authorities of the Member States must, for matters falling within their sphere of competence, take account of all the circumstances of the case, including the number and cumulative duration of the fixed-term employment contracts or relationships concluded in the past with the same employer.

The decision will not make it easier for employers to hire employees on fixed term agreements. Rather, the Court  confirmed the interpretation of the German Act. An employer must have genuine, business reasons for entering into subsequent fixed term agreements. Those may very well be continuous,  hence requiring the employer to hire an employee on many successive agreements.  Given the strong statutory dismissal protection provisions for permanent employees in Germany, that is very good news for German employers. 


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