In general, the conclusion of a fixed-term employment contract is permissible if it is justified by a material reason (section 14(1) of the German Act on Part-time and Temporary Work (Teilzeit– und Befristungsgesetz – TzBfG)). Term limitations without a material reason are only permitted for a maximum period of two years (section 14(2)1 of the TzBfG). However, the conclusion of a fixed-term employment contract without material reason is prohibited if the individual concerned had previously been employed on a fixed-term or permanent basis by the same employer (section 14(2)2 of the TzBfG).
In its prior case law (from 2011 onwards) the German Federal Labour Court (Bundesarbeitsgericht) interpreted section 14(2)2 of the TzBfG to mean that a new fixed-term contract without material reason would only be prohibited under section 14(2)2 of the TzBfG if the employee had been employed within the last three years prior to the intended fixed term.
This legal interpretation of the German Federal Labour Court has now been overruled by a decision of the German Federal Constitution Court (Bundesverfassungsgericht) on 6 June 2018 (file no. 1 BvL 17/14, 1 BvR 1375/14). In its decision, the German Federal Constitution Court stated that a grace period to allow the parties to conclude a new fixed-term contract after a certain period of time was not intended by the legislature. Therefore, German labour courts can no longer limit the prohibition in section 14(2)2 of the TzBfG to employment within the last three years prior to the intended fixed term. At the same time, the German Federal Constitution Court ruled that section 14(2)2 of the TzBfG should be interpreted in such a way that the prohibition does not unduly impede employees’ right to freedom of work. The following need to be taken into consideration when determining whether or not a new fixed-term contract can be concluded:
(i) How long ago was the prior period of employment?
(ii) Are the job duties quite different?
(iii) Was the prior period of employment of a short duration?
Following the decision of the German Federal Constitution Court, the German Federal Labour Court ruled, in its decision of 23 January 2019 (file no. 7 AZR 733/16), that a new fixed-term contract cannot be concluded without material reason if the individual concerned was employed by the employer eight years prior. In the case being considered by the court, the duration of previous employment was one and a half years and had involved similar work tasks. The Federal Labour Court decided that the prior period of employment was not long enough ago. Therefore, the prohibition under section 14(2)2 of the TzBfG was considered reasonable.
In its latest decision of 21 August 2019 (file no. 7 AZR 452/17), the German Federal Labour Court ruled that if prior employment took place 22 years ago, then this is a sufficiently long time ago. In this case, it would be unacceptable if a new fixed-term contract could not be concluded due to the prohibition under section 14(2)2 of the TzBfG. Therefore, the German Federal Labour Court decided that the conclusion of a new fixed-term contract without material reason was possible.
The two decisions of the German Federal Labour Court do not yet give employers sufficient legal guidance on when prior employment is irrelevant in determining the legality of concluding new fixed-term contracts. It therefore remains to be seen if there will be further case law. Until then, there is a risk that fixed-term contracts that have been concluded without material reason with individuals who had previously been employed by the employer will be considered unlawful. In these cases, the employees with fixed-term contracts could claim the right to permanent employment.