Equal pay for agency workers: Federal Social Court extends possibilities for deviation

The German Federal Social Court has ruled that in principle “mixed operations” also are allowed to apply collective agreements governing temporary employment and can therefore deviate from the statutory requirement for equal pay if covered by the scope of the collective agreement. This has to date been an extremely contentious issue. In the opinion of the Federal Employment Agency this possibility should only apply to operations that predominantly engage in temporary agency work.

Temporary workers must, in principle, be granted the same employment conditions during their assignment, in particular the same payment as similar permanent employees of the hirer (equal pay/equal treatment requirement). This can only be deviated from on the basis of an applicable collective agreement. Employers and employees who are not bound by a collective agreement can “within the scope” of such a collective agreement agree upon the application of the provisions of a collective agreement on the basis of the individual employment agreement and therefore effectively contract out the requirement for equal pay.

It has to date been discussed in this respect whether “mixed operations” fall under the “scope” of collective agreements governing temporary employment if they do not predominantly engage in temporary agency work. Mixed operations in this sense are operations which pursue other business activities besides temporary agency work. In the opinion of the Federal Employment Agency (see its Business Guidelines for the German Temporary Agency Work Act (Arbeitnehmerüberlassungsgesetz – AÜG), Sec. 3 No. 3.1.8.5) and the prevailing opinion to date in legal literature, a mixed operation must predominantly engage in temporary agency work for collective agreements to be applicable.

The Federal Social Court has with its decision now clearly rejected this opinion (Case No. B 11 AL 6/15 R). According to the press release issued by the Court, even companies which only provide personnel services in the form of temporary agency work to a very minor extent can fall under the scope of a collective agreement governing temporary employment. Based on the intention of the parties to the collective agreement (incorporated in the relevant collective agreement), the Court held that there was no indication of any intention to exclude mixed operations whose employees were not predominantly deployed in the area of temporary agency work in terms of their working hours from the scope of collective agreements, if they are bound to such agreements.

It has to date been standard practice to organise the area of temporary agency work in a separate company or at least in independent, distinct operation departments in order to exclude the requirement for equal pay. This was and is linked to additional administrative work and costs for such companies. This workaround would now appear to have become obsolete.

Companies should nevertheless exercise caution because it remains to be seen how the case law of the labour courts and the Federal Employment Agency will react to this decision of the Federal Social Court, whether with respect to employee actions for the granting of equal pay or the granting, extension or revocation of a licence for temporary agency work. It also remains to be seen whether the parties to collective agreements or even the legislator in the context of the imminent reform of the German Temporary Agency Work Act (see our article on the regulation of temporary agency work, contracts for work and contracts for services) will close this gap which has now opened.