Further restrictions on fixed-term employment

Previous case law of labour courts up to the Federal Labour Court (Bundesarbeitsgericht – BAG) states that prior employment with the same employer only needs to be considered if it was in place within the last three years prior to the agreement on the fixed-term employment without justification.

In opposition of this stance, the Federal Constitutional Court (Bundesverfassungsgericht - BVerfG) has now ruled, that repeated fixed-term employment contracts not justified by an objective reason as stipulated in the Act is, in principle, unconstitutional. The BVerfG stated that it is the state’s duty to protect employees as they are the weaker party in an employment relationship and that the protection of employees can be strengthened by avoiding successive fixed-term contracts and by having permanent employment as the regular form of employment. Accordingly, the case law referred to above, violates the constitution and thus is prohibited. Nevertheless, the BVerfG agreed that it is possible to agree on a period of fixed-term employment without justification even if the parties had an employment relationship in the past, but whether this is legally allowed has to be checked on a case by case basis and employers should not rely on the three-year waiting period arbitrarily referenced by the BAG.

Facts of the case

The decision of the BVerfG is based on two labour law actions seeking the conversion of a fixed-term employment contract into a permanent contract. In both cases, the employees claimed that the most recent fixed-term contract was invalid because of a fixed-term contract that was previously carried out with the same employer.

During one of the proceedings, the labour court referred the case to the BVerfG and asked whether sec. 14 par. 2 sentence 2 of the Act (TzBfG) is compatible with the fundamental rights under Art. 12 sec. 1, Art. 2 sec. 1, Art. 3 sec. 1 Basic Law (Grundgesetz - GG). In the second proceedings, an employee claimed that the waiting period of three years according to the case law of the BAG violates his rights under Art. 2 sec. 1 (in conjunction with Art. 20 sec. 3 GG), as this case law exceeds the boundaries of judicial development of the law.

Key considerations

According to the BVerfG, the provision of sec. 14 par. 2 sentence 2 of the Act (TzBfG) neither violates the freedom of occupation on the part of employees nor the freedom of occupational and economic activity on the part of the employers. The protection of employees is a principle of the social state and it clearly overweighs the employers’ interest for more flexible conditions. However, in specific cases, it may be unreasonable to prohibit a new period of fixed-term employment that is not justified by an objective reason. This applies where employees are not structurally in a weaker position.

The assumption of the BAG that the same employer is always allowed to engage in new periods of fixed-term contracts that are not justified by any objective reasoning after a waiting period of three years, overrides a recognisable legislative intent and thus exceeds the limits of the judiciary.

In Practice

Employers should carefully consider whether to agree to fixed-term employment without justification if the employee worked with them previously. Fixed-term contracts not justified by objective reasoning are principally limited to the first establishment of the employment relationship. Only in a limited number of cases is it permitted to agree to repeated fixed-term contracts not justified on objective reason, e.g. a previous employment relationship dates back a very long time or was of a completely different nature. This might include certain minor part-time jobs undertaken whilst at school or university, student trainees or employment during family-related leave periods.