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The German Employee Transfer Act has entered into force - what employers need to keep in mind

20Mar

The Reform of the German Employee Transfer Act (Arbeitnehmerüberlassungsgesetz) entered into force on 1 April 2017. The objective underlying the reform act is to prevent abusive use of temporary agency labour and company agreements.

Gereon Gemeinhardt, attorney at law and partner at dhpg, describes the most important changes and provides practical recommendations for employers:

  • Limit the maximum period of temporary agency contracts to 18 months

    Companies are no longer allowed to use temporary agency workers for an indefinite period of time. Now they may only be used for a maximum of 18 months. Longer periods of assignment are only possible if a company is bound by a collective agreement. "Human resource departments should monitor the period of time agency workers are used and review this on an ongoing basis," recommends Gereon Gemeinhardt. "If the maximum period for a temporary agency worker is exceeded, an employment relationship is deemed to come about between these agency workers and the company temporarily employing them. The only exception to this is when agency workers object to this rule."

    The maximum period of temporary employment is only deemed to apply, however, when the Act enters into effect. An agency worker who has already been working at a company since the beginning of 2017 can thus be used until the end of September 2018, which means he or she can remain at the company for a total period of more than 18 months. Moreover, an agency worker is allowed to return to the same enterprise after a three-month break.
     

  • Principle of equal pay

    Agency workers have to receive the same wage as regular employees after working no more than nine months. This means that employers have to perform calculations comparing remuneration for agency employees with remuneration for regular employees. A company with a collective agreement can extend the equal pay period from nine months to 15 months, however, if it pays a sectoral surcharge on top of the collectively agreed agency working wage beginning with the sixth week of employment. If an employer does not adhere to the equal pay provisions, however, it can expect to be fined up to EUR 500,000.
     

  • Prohibition against use of temporary agency workers as strike-breakers

    Companies may no longer use agency employees as strike-breakers, even if they have agreed to perform this work. Since 1 April 2017, temporary workers may only keep working if they do not perform activities of employees on strike.
     

  • Disclosure of employee transfers (Arbeitnehmerüberlassung)

    Enterprises have to designate the agency work in the contractual agreement in a manner transparent to the temporary worker. If they fail to do so, a sham company agreement and thus concealed temporary work could deemed to be present. One indication of this, for instance, is when a principal is entitled to issue instructions to agency employees, thereby feigning an employment relationship with the principal. Companies can thus no longer at a later date declare a sham service agreement (Werkvertrag) to constitute temporary agency work, as has been possible to date by means of a so-called "precautionary work permit" (Vorratserlaubnis).
     

  • Inclusion of temporary agency workers in headcounts bearing relevance to the German Industrial Relations Act (Betriebsverfassungsgesetz) and law governing co-determination rights

    Under the German Industrial Relations Act and law governing co-determination rights, temporary agency workers are included in determining the headcount of staff at a company. While a GmbH with 1,800 employees and 300 temporary agency workers would have been deemed to have a workforce below 2,000 employees before 1 April 2017, the headcount in this example will have increased to 2,100 since the new act went into force on 1 April 2017. "Having to count all the employees can mean that a company has to form a supervisory board (for the first time)," notes Gereon Gemeinhardt.