Fixed-Term Employment Despite Incapacity to Work: What does the Federal Labour Court Say?

Fixed-term employment contracts for replacing other employees are generally permissible under Section 14 (1) sentence 1, 2 No. 3 of the Part-Time and Fixed-Term Employment Act (TzBfG). But how does the employee's existing incapacity to work affect the validity of such a contract? This issue was addressed by the Federal Labour Court (BAG) in June 2024 (Judgement of June 12, 2024 – 7 AZR 188/23).

What did the Federal Labour Court have to decide?

The affected employee was employed by the employer based on a series of fixed-term employment contracts. Before signing another fixed-term contract for the purpose of "replacing the employee during their temporary absence", the employee became ill.

The employee notified the employer of his incapacity to work and submitted a certificate of incapacity. However, the certificate indicated a period of incapacity that was shorter than the replacement period specified in the disputed contract.

In the end, the employee's incapacity overlapped the entire replacement period after additional certificates were submitted.

Legal Evaluation by the Federal Labour Court 

Invalid Fixed-Term Employment Due to Lack of Causal Connection

The Federal Labour Court ruled that the validity of the fixed-term employment contract could be affected if the employee is unable to work for the entire duration of the contract, and if the employer is aware of this incapacity at the time the contract is concluded.

As a general principle, there must be a causal connection between the absence of the employee to be replaced and the hiring of the replacement employee. 

However, this connection may be lacking if, at the time the contract is signed, it is clear that the employee will be unable to perform the required work for the entire period. The key factor is the employer's knowledge at the time of the contract's conclusion.

Trust in the Certificate of Incapacity for Work

The extent of the employer’s knowledge is primarily determined by the certificate of incapacity for work. According to the Federal Labour Court, only the certificate of incapacity available at the time of the contract conclusion is decisive. In this case, the certificate indicated a duration of incapacity that was approximately a quarter of the total replacement period. The inclusion of an "expected" duration of incapacity in the certificate was not relevant to the legal assessment, as this is a standard practice required by law.

The employer was entitled to rely on the duration stated in the certificate of incapacity, even if the employee subsequently provided additional information about his incapacity, which led to uncertainty about the employee's ability to work.

Outcome

After reviewing the case, the Federal Labour Court concluded that the fixed-term employment contract was legally valid. The fact that the employee would be unable to work until the end of the contract only became apparent after the contract was signed. Therefore, the required causal connection was established at the relevant time.

Practical Advice

If an employer intends to enter into a fixed-term contract to replace another employee, the employer should consider whether the replacement is feasible under the given circumstances before finalising the contract. The key factor for the validity of the contract is the employer’s knowledge at the time of contract conclusion.

The certificate of incapacity is a critical point of reference for this evaluation. The employer can rely on the duration specified in the certificate, which should be carefully reviewed. The longer the indicated duration of incapacity, the more cautious the employer should be.