Temporary work: reform of the German Temporary Employee Act enters into force as of 1 April 2017

After lengthy discussions, the reform of the German Temporary Employee Act (AUG) was passed in October by the Lower House of German Parliament (Bundestag) and last Friday by the Upper House of the German Parliament (Bundesrat). Companies must prepare themselves now for the changes which will be entering into force as of 1 April 2017. There is quite a lot to do for hiring agencies and also for companies hiring employees from those agencies, in order to prevent expensive "surprises'.

These are the most important reforms:

1.  Maximum duration of transfer

The reform introduces a maximum term during which temporary employees can be hired out. In principle, it is 18 months. The same temporary worker may not work for longer than 18 successive months at the same company hiring that temporary employee from a hiring agency. If there are interruptions of up to three months, the deployment periods are added together. Periods of transfer before 1 April 2017 are not taken into account.

By means of collective bargaining agreement in the deployment sector (not the temporary employment sector!), the 18-month period can be deviated from by exceeding it or falling below it. The deviation options can also be used by companies which are not bound by collective bargaining agreements - albeit only in a restricted manner.

Exceeding the maximum transfer duration leads to the creation of an employment relationship between the temporary worker and the company hiring the temporary worker from the hiring agency. Moreover, it can be punished through the imposition of a fine of up to EUR 30,000 and result in the refusal of the transfer permit.

2.  Strengthening of the German equal treatment principle (equal pay and equal treatment)

The equal treatment principle is already anchored in legislation now. In future, it will continue to be possible to deviate from the equal treatment principle through collective bargaining agreement. What is new now, however, is after a deployment period of nine months (in particular cases, after no more than fifteen months) the equal-pay principle applies with regard to remuneration, without any deviation option.

The practical difficulties which frequently arise in association with the fulfilment of equal-pay claims are to be limited by virtue of the fact that in Future when a corresponding collective bargaining agreement wage in the deployment sector is paid to the temporary worker, the fulfilment of the claim is (reputably) presumed

Breaches of the equal treatment principle can be punished as an administrative offence not only through the imposition of a fine of up to EUR 500,000, but rather can also lead to a refusal of the transfer permit.

3.  Disclosure obligation and end of the “reserves permit"

Other than so far, the transfer of temporary works must clearly be designated as such in future. The hiring agencies and the companies hiring the temporary workers have to designate the transfer of temporary workers in their contract expressly as personnel leasing before they transfer the temporary worker or allow him or her to start work. Before any transfer, they have to specify precisely who the temporary worker transferred is, with reference to the contract.

A breach of the disclosure obligation leads to an employment relationship coming into existence between the temporary worker and the company hiring the temporary worker from the hiring agency, even if the hiring agency holds a valid permit to hire out temporary workers. In addition, a breach can be punished through the imposition of a fine of up to EUR 30,000.

The instrument of a "reserves permit" which has been common practice so Far will become useless as a consequence of the disclosure obligation. Using a reserves permit has so Far enabled companies to cover themselves if a deployment of workers is retrospectively classified as a transfer of temporary workers due to a works contract or a service contract. Because this option will no longer exist, works and service contracts will become significantly more risky For companies in Future at the interface to temporary work.

Because with regard to the disclosure obligation no privileging provisions for already-existing contractual relationships are intended, it must be assumed that the disclosure obligation will apply to everyone from 1 April 2017 onwards, i.e. also to contracts which are already in Force. For this reason, we recommend adjust all contracts to the new legal situation before 1 April 2017.

4.  Adherence declaration

A so-called adherence declaration is being introduced as a completely new instrument. By means of this declaration, employees whose employment relationship is transferred to the company hiring the temporary workers from the hiring agency (i.e. in the cases of transfer without permission, exceeding the maximum transfer term or the lack of disclosure of the personnel leasing) can object to this "transfer" by declaring that they want to keep the employment relationship with the hiring agency.

In order to prevent misuse through a supply of pre-prepared adherence declarations, the Act sets out a complicated procedure For the creation of an adherence declaration. For example, the Employment Office must also be involved.

We recommend:

The AUG reform will mean a need For action both For hiring agencies and also For companies which hire temporary workers from hiring agencies, even before 1 April 2017. Above all, the contractual bases should be adjusted in line with the new legal situation before the reform comes into Force. In addition, it should be ensured in a timely manner that the maximum transfer term is always complied with and that also the changed framework conditions regarding the equal-pay principle are implemented in a timely manner. Not least due to the clearly intensified sanctions, the AUG reform is quite something.

PPR & PARTNER would be pleased to assist you with any questions you might have in connection with the AUG reform. We can advise you regarding the introduction of measures to comply with the new legal situation. We can review your contracts and update these as necessary. Moreover, we will be offering seminars regarding the implementation of the new statutory provisions in business practice. Mr Dieter Pape, attorney-at-law, special counsel For employment law, would be pleased to assist you as your contact partner in this respect.

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