In Germany, there are two cases where employment relationships can be limited in time, i.e. have a fixed term. In the first case, an employment relationship can be limited in time for a specific purpose, if certain statutory grounds exist (such as temporary demand or temporary filling-in for an employee on leave). Secondly, an employment relationship can be limited in time without any such ground for a maximum period of two years provided that there has not been a previous employment relationship between the parties within the last three years.
Any time-limited employment agreement has to be signed (in handwriting) by both contracting parties on the same document before the employee starts working under the employment agreement.
If an employment relationship which is time-limited violates of any of the above requirements, the time limitation is not effective and the employment relationship is deemed to have been concluded for an indefinite period of time. The consequence would be that an employer who employs more than five employees (more than ten, if the employee has been hired after 31 December 2003) needs in most cases an objective reason for the termination of the employment relationship, as an employee who has been employed for at least six months may have his or her employment terminated only if such termination is justified by lack of capability, conduct, or by reason of redundancy.
In the above context, a Higher German Labour Court (LAG Mecklenburg-Vorpommern) recently had to decide on the following case:
The employee worked as an accountant for the employer. Initially, the parties concluded a fixed term employment contract for the period from 30 July 2010 to 29 July 2011. The parties subsequently agreed on an amendment to the fixed-term employment contract which provided for an extension of the fixed-term of employment until (and including) 30 July 2012. A statutory ground for the limitation in time of the employment relationship did not exist.
The Higher German Labour Court decided that the employment relationship between the parties was deemed to have been concluded for an indefinite period of time as the maximum period of two years for a fixed-term employment contract had been exceeded by (just) one day. The employer’s challenge against this on the grounds of mistake (in essence, that it had mistakenly specified an end date of 30 July 2012 which was one day too late) was rejected by the Court.
This decision highlights the importance to employers of ensuring that the legal requirements relating to fixed-term employment contacts are strictly complied with when entering into any such employment relationship.