This post was also contributed by Nikola Pamler, Trainee, Norton Rose Fulbright LLP (Munich)

Temporary employment is an important tool for many German companies, as hiring a temporary workforce allows companies to adjust easily and quickly to workload fluctuations without being constrained by restrictive German employment laws.  

That is why the “temporary industry” is constantly growing. There were 822,000 temporary employees in Germany in 2012, meaning that the rate of temporary employment in Germany is now eight times higher than it was 20 years ago. 

This temporary provision of labour is based on an employee hiring agreement between an employee hiring agency (Verleiher) and the hiring company (Entleiher). The employee hiring agency is the employer of the temporary worker. Nevertheless, the employee hiring agreement allows the hiring company to give instructions directly to the temporary worker, to provide the necessary equipment and to integrate the temporary worker into the company’s organisation just as they would for an employee. The applicable Law on Temporary Employment “AÜG” requires temporary employment agencies to obtain special authorisation in order to provide a temporary workforce (§ 1 Abs.1 S. 2 AÜG). If an employee is hired by an employment agency which does not have the necessary authorisation, an employment contract between the temporary worker and the hiring company is created by law (§ 10 Abs.1 S.1 AÜG). In any event this law states that the temporary workers are entitled to the same remuneration as comparable employees of the hiring company unless a diverging tariff agreement applies to the temporary workers. 

In order to avoid these “equal pay” regulations, the parties sometimes choose to enter into a service contract instead. In such a contract, a company instructs a service provider to carry out a specific task or project only. In order to fulfil this instruction, the service provider sends one or more of its employees on the premises of the company to perform the task or execute the project. As only the service provider can give instructions to the employees in relation to the work to be performed for the client, there is no special authorisation requirement. In practice, it is difficult to determine which of these contractual relationships actually exists and therefore, whether the employee hiring regulation applies. When determining this, courts look at the actual daily procedure, rather than just the written agreements in place. 

Recently, two Higher German Labour Courts (Landesarbeitsgericht Hamm and Landesarbeitsgericht Baden-Württemberg) had to decide this question in the following cases: 

In the first case, the claimant was employed by a cleaning company. This company entered into a framework agreement with the defendant for the provision of cleaning services, but the scope of the services was only set out in writing after two years. In practice, however, the claimant worked as a facility manager for the defendant during this period. 

The claimant then argued that he had become an employee of the defendant. He based his claim on the argument that the cleaning company hired him to the defendant as a temporary worker without having the authorisation required to provide temporary workers. 

He stated that he was integrated into the defendant’s company organisation because he had been subject to the defendant’s orders and provided with an office as well as a computer connected to the defendants’ internal network. Further, the claimant used a defendant’s car for his daily work, even though the cleaning company had their own cars on the defendant’s site. In addition, the defendant provided the claimant with the same safety-boots and jacket as his own employees. In this case, the Higher Labour Court Hamm decided on July 24, 2013 that there was an employment relationship between the parties due to the level of integration of the claimant into the defendant’s organisation and the defendant’s inability to prove the contractual arrangements with the cleaning company or to rebut the integration of the claimant into its organisation. 

This decision highlights the importance of clear contractual agreements regarding any temporary staff working on site. 

In the second case, the claimants worked as freelancers for a subcontractor of the defendant company’s independent IT service provider. The claimants had been working for more than ten years in the defendant’s IT department under a service agreement. According to that contract, the claimants should receive instructions from the subcontractor according to a ticketing system. However, in practice, the claimants had often been directly contacted by the other employees of the defendant as they were not only integrated into the organisational structure but were also integrated socially at the defendant’s company. 

The Higher Labour Court of Stuttgart decided on August 1, 2013 that an employment relationship existed between the parties. It stated that the supply of external staff could not be described as a service contract, given that the claimants had been integrated into the defendant’s company organisation and that they had received their instructions directly from the company’s employees. As the subcontractor did not have the necessary authorisation to provide temporary workforce (§ 1 Abs.1 S. 2 AÜG), a permanent employment contract between the claimants and the hiring company had been created by law. 

This second decision shows the danger that even if the parties arrange a proper service agreement on paper, external staff might be found to be integrated into the company’s organisation (especially where other employees neglect to distinguish between external and internal staff). Therefore, in order to avoid the consequences of the Law on Temporary Employment, any contractual relationship involving temporary staff working on site should be closely monitored and all employees who might have contact with the temporary staff should be properly instructed.

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