Regulation of temporary agency work and contracts for work I
what companies can expect under the new draft bill
One of the specific objectives in the German government’s Coalition Agreement is to “prevent abuse of contracts for work and temporary agency work”. After a long wait, an initial draft bill by German employment minister Andrea Nahles (SPD) has now been put to internal government consultation.
The new provisions contained in the bill which had already previously been subject to wide-ranging speculation are no surprise [see also Missbrauch von Werkverträgen und Leiharbeit: Gesetzentwurf für nächste Woche angekündigt]. Nevertheless, it is now possible to draw a more accurate picture of what companies may expect from 1 January 2017. We have described the most important provisions and their consequences for companies below:
1. Maximum duration of 18 months for agency work
The use of temporary agency workers by the hirer is limited to a period of 18 months. The purpose of this is to make clear that temporary agency work should only cover labour requirements over a limited period.
As already envisaged in the Coalition Agreement, the bill states that it will only be possible to deviate from the maximum assignment period by concluding a collective bargaining agreement or based on such an agreement. The employer and social partners are not bound by any upper or lower limits when determining these periods. Thus it remains to be seen whether differentiated rules will follow by this route. Such rules do not necessarily have to be time-oriented, but can also differ according to the purpose of the assignment and the area. Exceptions would be desirable especially where the deployment of highly qualified employees is concerned.
If an assignment exceeds the maximum duration, an employment relationship with the hirer will come into being. However, the agency worker is able to object to this. Thus a legal consequence for assignments of agency workers which are not only temporary in nature has at last been set down. With the introduction of a right to object on the part of employees, a new instrument is also being created in order to soften the intervention in the parties freedom to contract.
The majority of assignments involving agency workers should not be affected by the maximum assignment period anyway, as they are much shorter than 18 months on average. Moreover, the maximum period is not linked to the post held at the user company – which many stakeholders had called for – but to the specific assignment. This means that companies will be able to make continuous use of agency workers as long as they are regularly replaced before the maximum assignment period has expired. Whether the task of directing temporary agency work back “to its core function”, as specified in the Coalition Agreement, will be accomplished by this is still questionable.
2. Equal pay
An agency worker has to be paid the same wage as a comparable regular employee working at the company where the assignment takes place as early as nine months after starting. However, if a collective wage agreement provides for wage top-ups before nine the months have passed, the entitlement to equal pay will only exist after an assignment of twelve months. This will in itself result in a gradual movement towards equal pay, opening up more scope for the parties to collective bargaining agreements when structuring pay.
The system designed to adapt temporary agency workers’ rights on a step-by-step basis is certainly not new. Whether the absolute nature of the rule will achieve the desired aims or create an incentive to replace agency workers after eight months remains to be seen. Whatever the case, combined with the maximum assignment period this will entail considerable limitations for companies which also raise concerns in terms of European law.
3. Work councils’ participation rights
In future works councils will have to be informed about the “duration of the assignment, place of assignment and duties” of employees who are deployed in a business operation under a contract for work. The works council will also be allowed to inspect the underlying contracts. No other rights to participate on the part of works councils are planned. In particular, the works council will not be entitled to prevent contracts for work from being entered into.
The measures planned to provide for transparency in this context will ultimately not only result in increased strain on resources; it will also lead to an increased potential for conflict. Whether cleaning services, canteen operations or security services – who tasks are outsourced to and on what conditions is part of entrepreneurial freedom. Providing information to the works council will sow discontent rather than provide real protection to the workforce.
Spurred on by the latest example involving Porsche, it cannot be ruled out that works councils will demand even more in future and that they will insist on being given real possibilities to intervene.
4. Introduction of fixed distinguishing criteria for contracts for work
Contracts for work have always been distinguished from employment agreements based on an overall assessment. Now, the circumstantial indication and criteria developed in case law are to be set down in law. The primary intention is that this should help supervisory authorities to discover abuses more easily (such as those occurring in some sections of the meat industry).
Factors indicating that a contract for work does not exist will be if employees
1) are not free to arrange their working hours or the contractual services owed or to determine their place of work
2) predominantly perform the contractual services on another party’s premises
3) regularly use someone else’s resources in order to provide the contractual services
4) provide the contractual services in cooperation with people who are used or engaged by another party
5) exclusively or predominantly work for another party
6) do not maintain their own business organisation in order to provide the contractual services
7) provide services that are not geared to producing or accomplishing a particular work result or successful outcome
8) do not offer any guarantee for the results of their work.
This rule gives the impression that it will be easier to make the distinction or that the distinction will be clearer. In fact, the potential for incorrect assessments will become much greater. Besides this, many of the criteria will cover contractual relationships that are legitimately formulated as a contract for work: for example an IT service provider who has to work on the principal’s system on site because its work product is otherwise not useable.
Link to Part 2
Any questions? Please contact: Daniel Happ or Marijke van der Most
Practice Group: Employment & Pensions