Germany: New Restrictions For Temporary Agency Work In Germany In 2017

On October 21, 2016, the German Parliament adopted the draft law regarding the reform of the German Act on Temporary Agency Work (Arbeitnehmerüberlassungsgesetz – AÜG). The reform will come into force as planned on April 1, 2017 and will bring material changes for both, agencies and their customers, the host businesses.

What agencies and their customers need to know now:

Key Points at a Glance

• Introduction of a maximum hire term of 18 months
• Equal pay no later than after nine months
• "Precautionary" permit will no longer protect agencies and host businesses from the consequences of illegal personnel leasing in case of bogus work and service contracts.
• Striking employees of the host business may no longer be replaced by temporary agency workers
• The new law provides for further information rights of the works council at the host business.
• Temporary agency workers will have to be taken into account in the host business when determining certain thresholds for the purposes of co-determination.

The Details

• Maximum hire term of 18 months
  • In future, the same temporary agency worker may only work for the same hirer for a period no longer than 18 consecutive months.
  • Hire times prior to entering into force of the Act shall be expressly excluded. Thus, for the very first time the maximum hire term will be exceed on October 1, 2018.
  • In case of a repeated supply of the same agency worker to the same hirer, the hire periods will be added up if the interruption is no longer than three months. Thus, if the deployment is interrupted for at least three months and one day, the maximum period begins to start anew and previous hire terms will not be taken into account.
  • A deviation from the maximum hire term is only possible by collective bargaining agreements or shop agreement on the basis of such collective bargaining agreements. If the collective bargaining agreement does not stipulate the extent of permitted deviation by the parties, companies that are not bound by collective bargaining agreements may determine a maximum hire term of up to 24 months by shop agreement. There is no time limit for companies bound by collective bargaining agreements.
  • In case of exceeding the maximum term, an employment relationship between the host business and the agency worker is created, provided the agency worker does not object to this after the maximum hire term is exceeded. In this case, the employment relationship with the agency persists.

• Equal pay no later than after nine months
  • Generally, after nine months agency workers have to be put on an equal footing with comparable permanent employees of the host business.
  • As with the maximum hire term, hire times prior to entering into force of the Act shall not be taken into account. This means, if the Act enters into force as planned on April 1, 2017, mandatory equal pay will apply for the very first time as from January 1, 2018.
  • With regard to the calculation of the nine-month period for equal pay, hire periods will also be added up if the interruption is no longer than three months.
  • In case a collective bargaining agreement providing for surcharges for specific industry sectors (Branchenzuschlagstarifvertrag) applies, equal pay applies only after 15 months. However, the utilization of the longer deviation up to 15 months is only possible if the collective bargaining agreement provides for a gradual accession process to the remuneration of the permanent staff not later than after a training period of six weeks.

• Bogus Work and Service Contracts
  • The "precautionary" permit will no longer protect agencies and host businesses from the consequences of illegal personnel leasing in case of bogus work and service contracts. In particular, an employment relationship between host business and the agency worker will arise, provided the agency worker does not object.
  • Up to now, it has been possible to have a "precautionary" permit to supply temporary agency workers, making it possible to use a bogus work and service contracts even if, in fact, the supply of employees occurs. These are contracts that, according to the written contract, provide for the construction of a work or the performance of services, however, in practice turn out to be the mere supply of staff. In future, the "precautionary" obtained permit will not prevent the creation of an employment relationship in case of bogus work and service contracts.
  • Only if the supply of employees is unambiguously recognizable as such and a permit exists (i.e., the supply is "disclosed"), no employment relationship between host business and agency worker will be established by law.
  • In future, the agency has to inform the agency worker before each and every hire that he/she is going to be working as an agency worker.

• Designation of Agency Workers in Leasing Contract
  • The agency workers to be leased out in future have to be designated by name prior to every supply of employees.
  • If the agency worker is not designated at all, not designated correctly or not designated in a timely manner in the leasing contract prior to the supply of employees, there is an impending fine of up to EUR 30.000 for every violation.

• Prohibition of Use of Agency Workers as Strikebreakers
  • In future, striking employees of the host business may not be replaced by agency workers. The prohibition of the use of agency workers also applies if the agency worker carries out work of a permanent employee who on his part performs work for a striking permanent employee.
  • In case of breach, a fine of up to EUR 500.000 impends on the host business.

• New Information Rights of the Works Council
  • The new law provides for further information rights of the works council at the host business. In particular, the host business has to provide the works council with the contracts on which the hire of external staff is based.

• Consideration of Agency Workers for Thresholds of Co-determination
  • In future, agency workers will have to be taken into account in the host business when determining thresholds for the purposes of operational co-determination. Some co-determination rights of the works council are subject to certain thresholds. For example, under the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG), the works council in an operation generally having more than 20 employees must be given timely and comprehensive information about any planned operational changes which may result in material detriments to the staff and are entitled to negotiate a reconciliation of interests (Interessenausgleich) and a social plan (Sozialplan) with the employer. If, for example, a host business employs 19 permanent employees and two agency workers on a regular basis, the co-determination right will be triggered under the new law.
  • With regard to thresholds for the purposes of co-determination on company level in the supervisory board, agency workers shall only be considered if the hire term exceeds six months. In Germany, companies (e.g. GmbH or AG) with more than 500 or 2,000 permanent employees have to form a supervisory board with up to 50 % of the seats to be filled by employee representatives. Under the new law, where a company employees 450 permanent employees and 70 agency workers for more than six months, this company will have to establish a co-determined supervisory board.
  • The new law may lead to more co-determination rights for the works council and increase the number of works council members. Moreover, some companies may have to form co-determined supervisory boards for the very first time since they reach the statutory thresholds of 500 or 2,000 employees in Germany.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.