A fixed-term employment contract is a contract between an employee and an employer that lasts for a set amount of time. Are they allowed in Germany?
You are looking for a job and find many interesting offers. Some positions are already advertised as temporary positions, for example as parental leave replacement. With others, the HR manager will only explain to you in person that he is offering a fixed-term employment contract – and then you will see. It’s not unusual.
The Federal Ministry of Labor has introduced a law to restrict non-objective time limits with effect from January 1, 2022. More on this below.
- How are fixed-term employment contracts regulated in the law?
- What are the material reasons for the time limit?
- Are chain time limits allowed?
- Are time limits permitted without a reason?
- What form must be observed in the case of fixed-term employment contracts?
- Can a fixed-term employment contract be terminated?
- Who checks whether the time limit is permissible?
How are fixed-term employment contracts regulated in the law?
The number of fixed-term contracts has risen steadily in recent years, because fixed-term contracts have the advantage for employers that they can part with employees without having to quit. In 2019, 37 percent of new hires were only temporary. In the corona pandemic, there were significantly fewer new hires and therefore fewer fixed-term contracts. Contrary to the long-term trend, the number of fixed-term contracts fell to 2.4 million contracts in 2020. This corresponds to around 6.3 percent of the workforce.
The Part-Time and Temporary Employment Act (TzBfG) applies to fixed-term employment contracts. It regulates when and how employers can hire their employees for a certain period of time, for example for 18 months. Or there is a specific purpose that an employer wants to achieve with the temporary hiring, for example, to represent an employee during parental leave (fixed-term).
The fixed-term employment contract ends after the specified period has expired. The fixed-term employment contract ends as soon as the purpose has been fulfilled, for example when the sick colleague returns for whom the new employee came.
Not every time limit is permitted. Errors in the time limit can quickly lead to the creation of an open-ended employment relationship (Section 16 sentence 1 TzBfG).
- What are the particulars of your employment contract terms in Germany?
- How to understand your German employment contract
- Severance payment in Germany: Where do you get the most money?
What are the material reasons for the time limit?
Fixed-term employment contracts are permitted if the employer has a factual reason for the temporary employment contract (Section 14 (1) TzBfG). There are eight typical factual reasons in the law. These are the most important:
1. Temporary only
If work only occurs in a certain season of the year, the employer can therefore hire temporary workers, for example for the Christmas business, the asparagus harvest or a necessary inventory (Section 14 (1) No. 1 TzBfG). Even if the employer needs additional people to cope with a special project or to put a technical system into operation, there is good reason for him to hire for a limited period. But then the employer must expect that there will be no more projects in which he could deploy the employee.
If a company needs additional staff to cope with processing backlogs, a time limit may not be permitted. If the backlog has accumulated because the department was understaffed, the employer needs more staff permanently and not only temporarily (BAG, judgment of March 17, 2010, Az. 7 AZR 640/08).
2. After training or studies
After completing an apprenticeship or degree, employers can limit the first employment contract with a new employee, but not forever. The law does not provide for a maximum limit, but time limits that last longer than two years no longer correspond to the intention of the legislature (Section 14 (1) No. 2 TzBfG).
If the employee has already worked elsewhere after completing his studies or training, the new employer may no longer limit the time limit due to this factual reason (BAG, judgment of August 24, 2011, Az. 7 AZR 368/10). In addition, the law only permits the conclusion of a fixed-term employment contract once. An extension is excluded (BAG, judgment of October 10, 2007, Az. 7 AZR 795/06).
3. To represent another employee
That is the most important factual reason in practice. If an employee is absent, for example due to parental leave, illness or sabbatical year, the employer can hire a new employee for a limited period as a replacement (Section 14 (1) No. 3 TzBfG). The special regulation on time limits during maternity leave or parental leave can be found in the Federal Parental Allowance and Parental Leave Act (Section 21 (1) BEEG).
It would be inadmissible if the employer hires for a limited period, although he knows that the employee who has lost the job will not come back. However, if the employee has only stated to a colleague that he will not come back after parental leave, for example, the employer may limit the time limit for a material reason (BAG, judgment of February 11, 2015, Az. 7 AZR 113/13).
4. Because of the nature of the work
People who work for radio and television and are directly involved in the design of the program are often hired on a fixed-term basis, in particular directors, moderators or editors (Section 14 (1) No. 4 TzBfG). That should be in the interest of the variety of programs and result from the freedom of broadcasting. Technical employees and anyone who does not work on a program may not be employed on a temporary basis due to the nature of the work performed.
Soloists, actors and solo dancers, who are usually employed on the stages for a limited period, usually have to look for a new job when the artistic director changes. It is different with orchestral musicians, for example, who can be permanently employed and are well organized in trade unions.
Sports clubs can also limit athletes and coaches in top-class sport with a specific reason. The assumption is that coaches can no longer adequately motivate the athletes entrusted to them after a certain period of time.
High mobility in the transfer market, above-average salaries, considerable risk with regard to the athletic development of the player and the implementation of the coaching concept – all this justifies the clubs’ legitimate interest in limiting player contracts, ruled the state labor court in Rhineland-Palatinate (judgment of February 17, 2016 , Az. 4 Sa 202/15). The BAG has confirmed the judgment; Fixed-term contracts with professional footballers are then effective (judgment of January 16, 2018, Az. 7 AZR 312/16).
Scientific staff in political groups may also be employed on a temporary basis, since otherwise an adjustment to a political change is not possible, decided the BAG (judgment of August 26, 1998, Az. 7 AZR 257/97).
5. For testing
A time limit for testing is rather unusual (Section 14 (1) No. 5 TzBfG). At the end of the probationary period, a fixed-term contract therefore expires automatically. If the employee has convinced the employer, he must conclude a new open-ended employment contract. In the usual practice with a probationary period, the employer must terminate the contract if he does not want to continue to employ the employee.
6. Reasons in the person of the employee
This means the time limit at the request of the employee. Example: The employee wants temporary employment because he or she wants to bridge the gap between studying or a stay abroad (Section 14 (1) No. 6 TzBfG).
7. Due to budgetary restriction
This is a special limitation reason for the public service (Section 14 (1) No. 7 TzBfG). It allows time limits because the budget is only approved for the corresponding duration, for example for certain research projects. However, general austerity constraints do not justify a time limit.
8. After reaching retirement age
In principle, employment contracts state that the employment relationship ends automatically when the employee reaches the age limit for the pension. If you want to continue working after that, you have to accept time limits. The European Court of Justice saw no discrimination or abuse of fixed-term employment contracts (ECJ, judgment of February 28, 2018, Az. C-46/17).
Are chain time limits allowed?
Employers may set time limits several times if there is an objective reason in each case. The employer can also refer to changing reasons.
Example: First, the employee works as a temporary replacement for parental leave, then he takes on a sick employee in another department and then he works as a substitute for someone who has taken care of his sick father – again with a fixed-term contract. But there are limits – there is no abuse of law.
As an employee, you can have the multiple time limits checked by a labor court with a time limit control application. The court then has to assess all the circumstances of the individual case, the total duration of employment and the number of consecutive fixed-term contracts (ECJ, judgment of January 26, 2012, Az. C-586/10; BAG, judgment of July 18, 2012, Az. 7 AZR 443/09).
According to the following criteria, the labor courts check whether the employer had a material reason, but abused the right to a time limit. The examination takes place in three stages:
If there is a material reason, the employer may set a time limit as long as the employment relationship does not exceed a total of six years and no more than nine contract extensions have been agreed. A total duration of up to eight years or more than twelve contract extensions is also permitted. These time limits are not yet objectionable (1st level: green).
If the total duration of the fixed-term employment relationship exceeds eight years or if more than twelve extensions have been agreed, the court will conduct an abuse control. Then all other circumstances come on the table, such as age or the family situation. The same applies if the total duration of the fixed-term employment relationship exceeds six years and more than nine contract extensions have been agreed (2nd stage: yellow).
The court assumes an abuse of law if the total duration of the employment relationship exceeds ten years or more than 15 contract extensions have been agreed or if there are more than twelve contract extensions with a total duration of more than eight years (3rd stage: red).
Are time limits permitted without a reason?
Employers may also limit employment contracts without a material reason, but only as an exception and within clear limits.
- Maximum duration of two years: If the company is hiring the employee for the first time, it may limit the employment contract to up to two years without legal grounds.
- Three extensions possible: The employer may extend three times up to a maximum of two years. Example: First, the employer offers a fixed term of twelve months without a material reason, followed by another temporary contract for six months. Finally, the boss offers a third extension of six months. This means that the maximum duration of two years is reached with two extensions. In addition, the employer may no longer set a time limit without a material reason.
Reform of fixed-term law planned
The law regulates the time limit without a material reason as an exception, but in practice this form of time limit has become the rule: more than half of all time limits are for no material reason. The Federal Ministry of Labor therefore wants to restrict unreasonable time limits more strongly. To this end, Minister Heil has launched a draft law that is to come into force on January 1, 2022. These are the three most important points:
- The duration of fixed-term employment contracts is to be reduced from the current 24 to 18 months.
- In future, it should only be possible to extend the time limits once instead of three times up to the total duration.
- Employers who have more than 75 employees may limit their employees to a maximum of 2.5 percent for no reason.
The details of the law are controversial. It is therefore rather unlikely that this law will be passed before the general election.
Extension of a fixed-term employment contract
Formally, the Federal Labor Court demands that the written agreement on the extension takes place during the term of the old contract (BAG, judgment of January 18, 2006, Az. 7 AZR 178/05). If the employment relationship is only continued after an interruption, an unlimited employment relationship is established (Section 15 (5) TzBfG).
The employer may not change the content of the contract if he wants to extend it. So, he may neither increase the salary nor change the working hours. That would be a new employment contract and not just an extension of the fixed-term one. In practice, this happens not infrequently, with the effect that an open-ended employment contract has been concluded. If available, the employer must involve the works council or staff council in the event of an extension.
Important: Employers and employees can also limit an employment relationship again beyond the two years – if there is a material reason for this.
Unfounded time limit only for new hires
Without a material reason, your employer may only set a time limit if he is hiring you. If there was already a permanent or fixed-term employment relationship before, a fixed-term contract without a material reason is not permitted (Section 14 (2) sentence 2 TzBfG).
The Federal Labor Court had previously decided differently: If there were more than three years between the employment relationships, then the employer should be able to limit the new hires without any objective reasons (BAG, judgment of April 6, 2011, Az. 7 AZR 716/09). However, according to the Federal Constitutional Court, this is unconstitutional (decision of June 6, 2018, Az. 1 BvL 7/14, 1 BvR 1375/14). For this reason, a new fixed term without any reason is no longer possible, even if the employee starts working again at his old company after eight years (BAG, judgment of January 23, 2019, Az. 7 AZR 733/16). This is called the ban on prior employment.
After approximately 22 years, however, a fixed-term fixed-term contract with the same employer should generally be permitted again (BAG, judgment of August 21, 2019, Az. 7 AZR 452/17).
However, if you have completed your vocational training or an internship with the same employer, you may then be hired for a limited period because there was no previous employment relationship. Even minor part-time jobs during school or study time do not exclude a non-objective time limit for new hires.
Special rules for no objective time limit
Collective bargaining agreement: In a collective bargaining agreement, the number of extensions or the maximum duration of the fixed term can be set differently than in the Part-Time Limitation Act. But here too there are limits. The Federal Labor Court considers a collective bargaining agreement to be effective that allows employment contracts to be limited in time for no objective reason up to a total of six years with a maximum of nine extensions (judgment of October 26, 2016, Az. 7 AZR 140/15).
At the universities: According to the law on temporary academic contracts, universities and research institutions may employ staff in so-called academic mid-level staff for a limited period of up to twelve years (Section 2 WissZeitVG). For employees who do not hold a doctorate, it ends after six years.
For doctors in further training: A special form of time limit applies to doctors in further training (ÄArbVtrG). For example, in order to obtain certification as a specialist, the employer may limit the contract to a maximum of eight years.
What form must be observed in the case of fixed-term employment contracts?
If the employer wants to limit an employment contract, this can only be done in writing (Section 14 (4) TzBfG). To do this, the employer and employee have to sign – before the employee starts work. It is not enough for the employer to hand over a draft contract that has not been signed by him and which he only countersigns after the work has started (BAG, judgment of December 14, 2016, Az. 7 AZR 142/15).
The duration or the specific termination date of the employment relationship is part of the agreement of the fixed term. In the case of a fixed-term employment contract, the event with which the employment contract is to end must also be specified in writing. This is important because otherwise the employee will not know when the contract will end. In the case of a fixed term with a material reason, the employer does not have to write the specific reason in the contract. It is sufficient if the contract states that the employer has a fixed term for material reasons and that the employment relationship ends on a specific date.
If your employer has forgotten to write the duration or the purpose for the fixed term in the contract, your employment contract is valid for an indefinite period (§ 16 TzBfG).
Young companies are allowed to set a longer term
For newly founded companies, there are simplifications in the recruitment of employees. In the first four years after establishment, you may limit employment contracts to a term of four years, without any material reason (Section 14 (2a) TzBfG). The employer can extend the time limit as often as desired within the four years.
Older workers and fixed-term contracts
With older employees aged 52 and over, employers may conclude a fixed-term employment relationship for a period of up to five years for no objective reason. However, this is only possible if the employee was unemployed for at least four months immediately before the start of the activity (Section 14 (3) TzBfG).
Can a fixed-term employment contract be terminated?
Employers may not “properly” terminate fixed-term employment contracts early, for example for operational reasons, unless the contract states that it can also be terminated with a notice period (Section 15 (3) TzBfG). If the fixed-term contract can be properly terminated and the conditions for protection against dismissal are met (the company has more than ten employees and the employment relationship lasts longer than six months), then the termination must be socially justified. This means that the employer needs a reason for the termination.
Extraordinary termination is always possible for an important reason. Compared to other employees, mothers with temporary contracts are disadvantaged. Their employment relationship ends in any case when the fixed term expires. The special protection against dismissal, as it exists for pregnant women with open-ended employment contracts, does not apply here. Every employee should know this before signing a fixed-term contract.
Employees with a fixed-term contract, like everyone else, are entitled to parental leave. However, parental leave has no effect on the contract. The employment contract is not extended by the months of parental leave. Parents whose contract expires during parental leave must find a new job in good time.
Attention: If you have not yet secured a subsequent job three months before the end of the fixed-term employment relationship, you should definitely contact the employment agency as a precautionary measure. Otherwise, you run the risk of being blocked from unemployment benefits.
Who checks whether the time limit is permissible?
If an employer has invalidly limited the employment relationship, the employee does not have to leave the company after the period has expired. For this purpose, the employee must file an action with the labor court within three weeks of the agreed end of the fixed-term employment contract to determine that the employment relationship has not ended (Section 17 TzBfG). The lawsuit is often called an indefinite lawsuit. If successful, the employment contract will be converted into a permanent employment relationship.
If you miss the three-week period, your employment contract is deemed to be validly limited in time. You will then neither have the opportunity to sue for continuation of the employment relationship nor to obtain severance pay because you can no longer refer to the ineffectiveness of the fixed term.
Anyone who has a fixed-term employment contract should consider whether or not it makes sense to take out legal protection insurance. Because with temporary contracts there is often trouble. In addition, an employee who, for example, is suing for a permanent contract must pay the costs of his lawyer, even if he wins in the first instance.