As of April 1, the use of temporary agency workers by companies in Germany is subject to new legal restrictions due to amendments to the Act on the Transfer of Employees Arbeitnehmerüberlassungsgesetz (AÜG). Changes include a maximum duration for the assignment of a worker, restrictions on deviations from the principle of equal pay, and rules on the use of agency workers as replacements for striking employees.
However, there is a lack of clarity in the legislation, particularly around the maximum duration of an assignment and the extent to which collective bargaining can deviate from it.
The AÜG is the main legislation regulating the temporary employment industry in Germany, and failure by a client or agency to fully comply with the law can result in penalties for the agency and the client, as well as a right for the temporary worker to become an indefinite employee of the client.
The AÜG, passed in 1972 to regulate the commercial transfer of workers, introduced a system of licensing for temporary employment agencies. Temporary workers were required to be employees of the agency supplier, with all the rights and protections of other employees.
The AÜG has seen several amendments since its first enactment, notably a lifting of restrictions in 2004. Further amendments to the AÜG, which went into force on April 1, have once again introduced restrictions on the use of temporary workers:
Equal treatment. Although the right to equal treatment from day one was enacted in the original legislation in 1972, it was circumvented by collective bargaining agreements (CBA). Now, using a CBA to deviate from the principle of equal pay is limited to nine months, after which point, temporary employees should be treated equally to comparable employees of the hirer in relation to essential working conditions, including pay.
An exception to this general rule is where a sector-specific CBA provides for a gradual harmonization of working conditions within a maximum period of 15 months provided, at the end of this period, the temporary worker is entitled to remuneration comparable with the standard tariff wage of comparable employees in the respective industry. For this exception to apply, the CBA must provide for a gradual increase in pay, starting no later than six weeks after the beginning of the temporary worker’s engagement.
Assignment duration. Individual temporary workers hired on April 1 or after may only be deployed with the same hirer for a maximum duration of 18 months (any deployment with a hirer prior to April 1 is excluded). From April 1 onward, all assignments with the same hirer that are linked by less than a three-month period will be combined to calculate the total period of hire. It will be irrelevant whether the temporary worker has been assigned to different tasks by the hirer or deployed by different agencies.
There is no prohibition on the hirer deploying a new temporary worker to undertake the same role as the old temporary worker. It is likely that certain roles will be filled by a succession of temporary workers each having the duration of their individual assignment limited to 18 months.
If this maximum duration is exceeded, the temporary worker will be deemed the employee of the hirer. The temporary worker has a right to object to the transfer of his employment relationship from the staffing firm to the hirer, by sending a written declaration to the Federal Employment Agency within one month.
However — and this is where the law is both confusing and unclear — the legislation provides for deviation from this 18-month maximum for hirers that are either bound by or in-scope of a relevant CBA. It seems to be the case that:
- Companies not bound by a CBA (because they are not a member of the employers’ association that negotiated the agreement) but are within scope, either because of the geographical or functional application of the CBA, may rely on an extension within a relevant CBA but limited to 24 months.
- Companies that are bound by a relevant CBA have more options to extend the period beyond 18 months:
- The CBA can provide for a maximum term beyond 18 months, but the law is not clear as to what that maximum should be. For example, the current CBA applicable to the metal industry provides for seven years. Alternatively, the CBA may permit an employer to agree with a works council an extension beyond 18 months (an “escape clause”).
- An employer/works council agreement (where the CBA provides an escape clause) can agree a maximum extension beyond 18 months (but again, the law is not clear as to what that maximum should be).
The purpose of specifying a maximum assignment duration within the legislation is to reinforce the fact that agency work shall be of a temporary nature. Without a change in the legislation itself, which is unlikely, clarification as to the maximum length of an assignment that can be agreed to by employers’ bodies and trade unions may be the subject of litigation. If the existing metal industry CBA permits a maximum duration of seven years for an assignment beyond April 1, it does call into question the meaning of the word “temporary,” and the intention behind the reforms in the first place.
Strikes. A company cannot engage temporary workers to replace striking employees. This ban also applies to using temporary workers to replace employees of the client that have been moved by the client to cover the role of a striking employee. However, a company that is the subject of strike action is not prohibited from employing temporary workers to perform tasks not previously performed by striking permanent employees.
Statement-of-work contracts. The amendments to the AÜG seek to tackle the improper use of statement-of-work contracts. It had become common practice for many companies to hold a “precautionary” temporary agency license where there was uncertainty over the classification of a service contract. These were known as “drawer licenses” and could be relied upon if it turned out that a supposed service contract was in fact temporary employment.
Under the amended AÜG, the agreement between the staffing supplier and the hirer must stipulate that the service provided is the “temporary lease of an employee” and be concluded before the temporary worker starts work with the hirer. The assignment details must also name the temporary workers. It is therefore no longer possible to retroactively classify as temporary agency workers those individuals who were provided under a service contract, by possessing a “drawer license.”
Inclusion of temporary workers for calculation purposes. Under the amended AÜG, temporary workers who have been deployed for six months or more are to be included in calculating the thresholds at which certain legal obligations will apply under the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). The only exception to this is thresholds for social plans in relation to staff reductions.
Supply chain use of MSP models. The legislation now expressly prohibits the leasing of employees unless there is an employment relationship between the supplier and the employee. This ban on so-called chain-leasing (Verbot des Kettenverleihs) is in line with the practice of the Federal Employment Agency (Bundesagentur für Arbeit), and makes the “principal model” managed service provider contract structures commonly used in the UK and the USA illegal in Germany. However, it is possible to engage an MSP through an “agency” arrangement, where the MSP manages the supply chain as the agent of the hirer.
Administrative fines of up to €500,000 in the case of a breach of the principle of equal pay, and a right for the worker to transfer their employment to the client will ensure that staffing firms, suppliers of contractors and clients comply with the law, but it is doubtful the amendments will pose serious effects.
On average, most temporary assignments last no more than three months, so the amendments to the AÜG appear to many in the temporary work industry as unnecessary bureaucracy rather than effective legislation. Workers on short assignments will not benefit from the provisions as to equal pay where trade unions and employers have deferred the right to nine months in a CBA.
The 18-month maximum duration for a worker to be supplied to a hirer is intended to prevent temporary work from being used as a permanent arrangement in place of indefinite employment. However, while the maximum assignment length applies to a single worker, it does not apply to the role that may be filled by a succession of temporary workers. In addition, there are ways of circumventing the rule by deploying workers in a separate company for a period that exceeds the three-month break, during which repeat assignments will be classed as a single assignment.
The latest amendments to the AÜG may be unwelcome and lack clarity but the penalties are such that it cannot be ignored. The full impact of the legislation on the temporary work market in Germany may not be known for some time but it is unlikely to reduce the need for temporary workers, whatever “temporary” means.