The AÜG-reform - A restriction of temporary work and more restrictive distinction between service contracts and contracts for work - APSCo
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The AÜG-reform – A restriction of temporary work and more restrictive distinction between service contracts and contracts for work November, 16th in 2015 the Federal Ministry of Labor and Social u Hire-company-rotary – borrower rotary Affairs presented the long time before announced draft bill to While the legislator ruled out a hire-company-rotary being reform the “Arbeitnehmer-überlassungsgesetz” (AÜG) – the used for avoidance of the 18 months limitation, a borro- German Temporary Employment Act – including ancillary laws. wer-rotary has not been taken into consideration. In dif- The reform had been announced in the coalition agreement of ference to the so called “revolving door clause” (§ 8para the present federal government and has been awaited full of 3 AÜG-E), a recognition of lease periods of the respective suspense ever since. This suspense changed into dismay for temporary worker in affiliated companies has not been understandable reasons: designated. Hence, a temporary worker can switch bet- ween allied companies and the 18 months-time limit starts Main thrust: Reform of the AÜG all over again each time. As a matter of priority the Federal Ministry of Labor aims at a u Customer’s collective bargaining agreement opening more restrictive embodiment of the laws for temporary work. clause That means a step backwards for substantial parts of the laws, even behind the Hartz-reforms which had been trans- According to its grounds, the legislator will not intervene posed under the chancellorship of Gerhard Schröder. in existing collective bargaining agreements that regulate the maximum lease period. The draft bill includes the ruling that a collective agreement which is binding for a customer (Re-)Introduction of a maximum lease period can impose a longer or shorter maximum lease period. As The current version of the AÜG designates only a tempo- far as a customer’s collective bargaining agreement pro- rary form of hiring out employees. The legal meaning and vides for a works agreement, the maximum lease period embodiment of this principle introduced by the legislator as can be modified by such an agreement. This possibility only a pure proposal has lately been subject to numerous contro- applies to customers being bound by collective bargaining versies. These shall be solved by the prospective maximum agreements, meaning customers that are members of the lease period of 18 months (§ 1para 1b AÜG-E), with an explicit respective employer’s association. If the customer does not reference to the (allegedly) created certainty of justice. The apply a collective bargaining agreement, according to the maximum lease period is being calculated with regard to the draft bill he shall not be able to refer to collectively agreed employee, not the workplace. Hence, the employer can hire on extensions of the maximum lease period for temporary the same employee only for 18 months. But as soon as the 18 workers. This is tantamount to coalition pressure and ext- months are expired he can replace the employee with another remely questionable under constitutional law (Art. 9para 3 temporary employee. GG). u Recognition of preceding lease periods – revaluation after u Employment with customer and pending withdrawal of 6 months of interruption temporary employment permission In order to calculate the 18 months maximum lease period, In terms of legal consequences the maximum lease period all former lease periods with the respective customer have is safeguarded twice. In the future, the exceeding of the to be taken into account. It is trivial whether the employee time limit will be punished with a fine up to 30,000 € in had been hired out to the customer by the same employer each individual case as an infringement of § 16para 1 No. 1d or another staffing firm. As soon as the employee has not AÜG by the staffing company. Furthermore, the owner of a been hired out to the customer for more than 6 months, temporary employment permission will be tested on his reli- this principle is no longer valid. Therefore, staffing firms and ability explicitly on the basis of obeying the 18 months-time customers will place a higher value on written documenta- limit (§ 3para 1 No. 1 AÜG-E). As a consequence, the staf- tion of the end of operating periods in the future in order to fing company is threatened with the withdrawal or refusal bar the recognition of preceding periods in a legally secure to extend the fixed-term temporary employment permis- manner. sion.
Employment & Pensions In addition, the employment between temporary emplo- remuneration matters to regular employees of the hiring com- yee and staffing company is invalidated under § 9 No. 1b pany, the temporary employee must be paid at least the mini- AÜG-E, which then results in an employment between mum wage of the temporary employment industry. From now temporary employee and customer under § 10para 1 AÜG- on compensation in money for benefits in kind (for example E. In this way, the customer becomes debtor of those meals in the canteen for a reduced price) granted in the cus- social security contributions which have to be paid for tomer’s business is established in law. employees being hired for more than 18 months for the u Slightly larger range under application of industry time period that exceeds the allowed 18 months-time limit surcharge collective bargaining agreements (§ 28epara 2 clause 3 SGB IV-E). The nonpayment as a criminal offense (§ 266a StGB) is the real transferred risk The last few months, the temporary employment indus- at the expense of the customer. try has set all the levers in motion in order to avoid the application of the equal-pay principle after 9 months of However, the temporary employee is given the right to employment in companies that are under the application object to his transition of employment in writing during of industry surcharge collective bargaining agreements. the first month after exceeding the 18 months-time limit. These efforts have almost been ignored in the Federal According to the justification for the law, this ruling is Ministry’s draft. The applicability of such industry surchar- to avoid a transition from a solvent hiring company to a ges is only to extend the 9 months limit to a 12 months bankrupt company. This regulation provides a possibility limit, so that an employee hired out to a company in the to exceed the otherwise absolute maximum lease period metal and electrical industry gets an industrial surcharge of by the employee waiving the transition to the customer. 50 % after 9 months and equal pay after 12 months with The specialized literature will certainly be preoccupied for regard to all remuneration aspects. The draft bill massively the next months with the question of the earliest possible intervenes in the autonomy of collective bargaining of the point in time to effectively renounce as well as the labor temporary employment associations by the fact that the courts will be in years to come. Whether the waiver of the step-by-step increasing tarification system agreed on with employment transition to the customer will have an impact the trade unions in charge is being overlaid with the laws on the infringement of law and the test of reliability is not after 12 months of temporary employment. It is going to be stated by the draft bill. examined whether this legislative imposition is valid under u Legal consequences no earlier than July 18th, 2018 constitutional law as well as with regard to the European Temporary Worker’s Directive whether the freedom to The reform package gives only one comforting aspect: provide services of foreign staffing companies is unjustly Under § 19 para 2 AÜG-E the calculation of the 18 months- restricted. time limit will only consider time periods from January 17th, 2017 onwards. This means with regard to that important u Recalculating only after 6 months of suspension aspect the consequences of the legislative reform will be The aforementioned principles for the calculation of the turned on no earlier than July 18th, 2018. In the face of the maximum lease period are applicable to the 9 and 12 massive intervention by the maximum time period, this is a months’ time limits. The equal pay time limit is being recal- small consolation for the staffing sector and its customers. culated after an employment suspension of 6 months. Periods with shorter suspensions are taken into account. Equal pay at the latest after 12 months of Hire-company-rotaries are not realizable due to the fact that even periods with a different staffing firm are taken temporary employment into account. No extension is designated to affiliated com- It has been a known fact since the coalition agreement had panies for the borrower, hence, the temporary employee been entered into, that the legislator understands the 18 can switch between affiliated companies and the equal pay months-time limit as the absolute final deadline when hir- time limit is being recalculated each time. ing out employees. Besides, it is planned to impose massive u Legal consequences already from January 17th 2017 on restrictions on longtime temporary employments already after 9 or 12 months. The envisaged means is the duty imposed on The certainly most serious interference of the draft bill is the staffing company to ensure equal pay for the temporary the missing transitional arrangement for the calculation of employee after 9 months work at the same hiring company. the equal pay time limit different to the maximum lease In this way a deviation from the principle of equality – now period. As soon as the draft bill comes into force January standardized in § 8 AÜG-E – in respect of remuneration is 1st in 2017, the equal pay principle will be valid immediately only possible for 9 months through the application of a collec- for all temporary employees that have been hired by the tive bargaining agreement. After expiration of that period the same customer for 9 or 12 months. § 19 para 2 AÜG-E temporary employee has to be placed into a position equal in states that for the calculation of the maximum lease period
Employment & Pensions only those periods started after January 1st 2017 can be Duty to name the hired out employee taken into account. Conversely, that means for the equal pay time limit even periods before that date will be taken In order to avoid abuse, the draft bill further secures the into account. That results in a serious impact for all frame- duty to name the temporary employee. It is designated for work contracts concerning temporary work because in this the employer to name the specific person of the employee respect for periods after January 1st 2017 an adaption of before (!) the respective temporary work starts. Framework hourly rates should be earmarked as long as if at all a lease agreements for personnel services may still be sealed inde- period longer than 9 or 12 months is worthy of considera- pendently of specific individuals. A personalized appropriation tion for the customer. is required before an employee is being hired. The Federal Employment Agency will explicitly check on this in their com- pany audit relevant for the temporary work permission, so Duty to name and clearly define that written documentation of the personalized appropria- For annulling so called “stock and protection permissions”, the tion becomes more important. Anyhow, the appropriation will draft bill will only accept a contract between staffing firm and probably be subject to the written form requirement of § 12 hiring company as valid if it explicitly states the temporary para 1 AÜG-E. work as such. The lack of that term invalidates the contract u Duty of information with the customer under § 9 No. 1a AÜG-E. Consequently, the customer will end up in a direct employment with the Also it should be attached value to inform the employee temporary employee (§ 10para 1 AÜG-E). This ruling aims about the fact that he will be employed as a temporary the impossibility for the contracting parties to reinterpret the employee before (!) every hiring out. A respective duty sham agreement for services or work into a contract for tem- shall be laid down by § 11para 2 AÜG-E. Infringements will porary work referring at the same time to a (precautionary) be punished with a fine up to 1,000 € in each individual issued permission for temporary work. Referring to a legal case (see § 16 para 1 No. 8,para 2 AÜG-E). This duty of permission shall only be legitimate if the contracting parties information does not only apply to service contracts and declared the contract to be intended for temporary work. contracts of work. The hiring out of highly qualified person- nel will not be possible to be carried out the same way as in This ruling is of great significance for those constellations the past where within the contractual design it had mostly where the contract did not name temporary work and does been paid attention to the employee not feeling himself as not intend to in the future, but the personnel of the staffing a temporary employee. In this respect attention has to be firm is highly integrated in the customer’s operational proce- paid to the fact that the documentation of contracts etc. dure. IT-Service providers, renowned consultancies, engineer- should be changed before the AÜG comes into force on ing companies, caterer and promotion agencies often own January 1st 2017 in order to avoid the situation of having permission simply for the possible situation of having their the duty at the beginning of 2017 to inform the employee contract reinterpreted as temporary work. The customer has about the temporary employee status in an isolated way. been protected from legal consequences by the permission so far. Due to the duty to name and clarify under § 1para 1 clause 5 AÜG-E this certainty is now omitted. Explicit prohibition of chain-leasing u Right of the employee to object Surprisingly, the draft bill contains an explicit prohibition of The hired out employee has the right to object to the tran- chain-leasing. The Federal Employment Agency has always sition of the employment to the customer in writing within been of the legal opinion that on-lending of employees was one month after the intended start date of the temporary inadmissible. Sanctions were almost impossible since a legal work. This will be of great importance where the custo- ruling against chain-leasings did not exist. Now § 1para 1 mer’s employee as a specialized consultant counsels the clause 3 AÜG-E validates the hiring out of employees for customer but is not willing to leave his actual company. A those cases where an employment is existent between the problem arising in this context is that the time limit starts lending company and the respective employee. Infringements with the employee’s start of work at the customer without against this prohibition will be punished under § 16para 1 No. the employee knowing it. In cases where the temporary 1b AÜG-E with a fine of 30,000 € in each individual case. work is undetected or stealthy, the means of time limit cal- culation have not been clarified. Ultimately, for each cont- ract that bears the risk of being categorized as temporary Prohibition of employment of strike breakers work, it will be necessary to get a waiver of the employee. Until now, the temporary employees had only been given the However, such an arrangement may lead to the verifying right to refuse to work in case of a strike in the customer’s authority’s assumption that AÜG-rulings are being intenti- company. The temporary employee should not be forced to onally circumvented. become a strike breaker although he should still be given that
Employment & Pensions option. During the last bargaining round the trade unions car- Transition period – apparently generous ried out a tightening of the strike breaker prohibition by a col- lective bargaining agreement. Under that ruling those tempo- As aforementioned the bill designates an apparently generous rary work companies that applied the iGZ- or BAP-collective transition period. Under Art. 7 of the draft bill it shall come bargaining agreement could not hire out those employees to into force on January 1st 2017. With regard to the calcula- which the collective bargaining agreements had to be applied tion of the maximum lease period only those periods shall be during a strike at the customer’s company. As far as the tem- taken into account, that have been occurred after the entry porary employee agreed on the (temporarily) inapplicability into force. Anyhow, in the personnel service industry there is of the collective bargaining agreement but applicability of the agreement that the 9 or 12 months-time limit for equal pay equal treatment principle, the legal ruling of a simple right basically equals a maximum lease period. Most customers to refuse performance applies in favor of the employee. This will neither be willing to do the extra administrative effort to gap has especially been used – absolutely lawfully – in the determine the comparable wages, nor will they pay the clearly retail sector. The draft bill intends to anticipate this approach higher wages resulting from the equal pay principle. Caution by prohibiting the employment of an temporary employee as must be exercised not to compare the respective maximum long as (!) his company faces a labor dispute. The “as long wages of the industry surcharge collective bargaining agree- as”-element clarifies that only the affected departments are ments with equal pay as the draft bill now suggests. While meant to fall under this regulation. industry surcharges only relate to the regular remuneration, especially with regard to the capping system, and therefore For the first time the strike breaker prohibition addresses the seek conformity, the equal pay principle relates to any com- customer but no more the staffing firm. In addition, it will be ponents of remuneration, even benefits in kind. In this way irrelevant in the future whether the equal treatment princi- the customer’s payment systems as well as Christmas and ple or a collective bargaining agreement of temporary work performance bonuses and contributions for retirement pro- applies to the employee. Every future breach of the prohibi- visions might come into view although until now those have tion will result in an infringement-fine of 500,000 € in each not been taken into consideration by the industry surcharge individual case (See § 16para 1 No. 8a AÜG-E). This mere collective bargaining agreements. Hence, the equal pay prin- unpleasant threat of punishment will be sufficient to stop the ciple might lead to a major increase in price for temporary employment of strike breakers in the future. work in numerous sectors. A more restrictive distinction between service contracts Integration of agency workers into and contracts for work co-determination The consequences of the planned revisions will affect more than only the temporary employment industry. The differen- Lately, the labor jurisdiction has gradually given up the tiation between service contracts and contracts for work on principle “agency worker vote, but aren’t included” (last BAG, the one hand and temporary work employments shall become court order of November 4th 2015 – 7 ABR 42/13) valid for much easier. The identification of sham service contracts or customer’s co-determination. Now the draft bill clarifies in sham contracts of work shall be easier for the Main Customs the envisaged § 14para 2 AÜG-E whether the temporary Office. Additionally, the works council gets extended rights to employees employed by the customer have to be taken into obtain information. Every employment on the basis of service account for the calculation of thresholds within the “Betriebs- contracts or contracts of work might result in unintentional verfassungsgesetz” (BetrVG) – the German Works Council legal consequences. Constitution Act – for example needed for the calculation of the size of the works council, as well as with regard to the right of co-determination for instance for the question List of criteria for differentiation whether a supervisory board has to include employee As part of the legislator’s efforts to make the circumvention representatives. This is planned for the future no matter for of the rules for temporary employment more difficult, criteria how long the temporary employee will be employed. Thus, the for the differentiation of temporary work contracts and ser- ruling of a 3 months minimum lease period having been valid vice contracts or contracts for work shall be clearly defined. before under the BetrVG would be obsolete. This would lead The differentiation will (still) decisively depend on the fact to serious legal uncertainty alone with regard to the question whether the employee is integrated in the customer’s com- of the relevant moment in time. pany and is subject to instructions. As the current jurisdiction states, this shall be carried out in form of a rating overall eval- uation with the following criteria:
Employment & Pensions List of criteria for differentiation > A contractor who may not choose his working hours or arrange the performance owed or choose his place of work calls for temporary employment. Because of the “or”-connection already one fulfilled negative criterion is supposed to be sufficient. The requirement of arranging the owed performance by oneself is absolutely incomprehensible. After all, every contractor owes a performance as agreed on in a contract before. Hence, the performance can never be arranged freely. This could only refer to a freedom with regards to the organizational-technical arrangement of performance. > An additional negative criterion is fulfilled where the contractor performs at the premises of the other. This will hit classical services such as security guards, cleaning businesses, caretaker services and some IT-services marrow-deep. > A contract of work or services contract does not exist where the contractor regularly uses means of the other in order to perform. Particularly industrial services will be on the test bench due to the fact that mostly the use of the customer’s facilities and tools becomes necessary in order to perform. > In accordance with the current jurisdiction a capacity as employee and consequently a temporary employment exists when performance is based on job-sharing, thus in cooperation with someone who was engaged by someone else. This includes job-sharing with the customer’s employees as well as with third persons such as other freelancers. > The 5/6-principle used for identification of an economical freelancer during the status check under the laws of social security, hence the fact that the contractor exclusively or mainly works for another person, is a prospective criterion for the distinction between service contracts/contracts for work and temporary work. But the question of the scope of performance does not relate to the qualification as a contract for work etc. in terms of content. The Federal Ministry of Labor seems to give precedence to the wish for interference in any possibilities of flight from collective bargaining agreements over a comprehensible legal systematic reform. > The fact that a contractor does not maintain his own operational organization in order to perform shall be an argument against a service contract or a contract for work. Freelancer or interim manager who as know-how-workers use quasi nothing but their experience and special knowledge will be faced mainly by this criterion. > In the future contracts for work shall – completely contrary to the system – with regard to the distinction of the (where applicable unauthorized) temporary work be given an advantage compared to service contracts. This is because a performance directed towards a production or determined work results is to speak against temporary work in the future. Naturally, this is not the case in classic service sectors, for instance guarding or certain IT-services. > The most concrete one is the last designated criterion of the draft bill, under which more likely temporary work exists when the contractor does not provide warranty for the results of his work. Merely regarding the reference to the result again shown in the wording of the draft bill follow-up questions arise concerning the customer relationship designed as a service contract for which no warranty can be given in the result. Systematically these criteria shall be included into the law by a new § 611a BGB-E with the title “Typical duties under a contract of employment”. Hence, the Federal Ministry pretends to sort out the difference between temporary employ- ment on the one hand and service contracts or contracts for work on the other hand by these requirements. In fact, it aims for a limitation of employing freelancer, self-employed people and interim managers, without meeting the approval of the official justification. The relation between the criteria to each other has not been clarified by the legislator. Thus, the criteria are assigned an equal status without a decision on how far they have to speak for one alternative in order to get to a legally binding classification. The long discussed effect of assumption, under which the fulfillment of a certain amount of criteria would have been to speak for one kind of contract, has not been included. In the end this attempt to standardize a list of criteria is no real profit. Either the criteria have been used by the jurisdiction before or they are unsuitable for the question of differentiation.
Employment & Pensions Presumption of conformity of a status check Increase of the works council’s right to obtain under the laws of social security information With regard to the worker participation more extensive In contrast, the draft bill designates an effect of assumption demands of the trade unions for an enhancement of real par- in favor of the German Pension Insurance and in the end ticipation in settling for service contracts and contracts for it is highly dubious whether it falls within the constitution. work have been left out of consideration. The draft bill leaves The opinion about social security insurance matters of the it at an extension of the works council‘s sole rights to obtain German Pension Insurance whether a person qualifies as an information (§§ 80 para 2, 92 para 1 BetrVG). The person- employee paying mandatory social security contributions or nel measures planned by an employer and being subject to as self-employed is supposed to impact the classification the works council‘s right to obtain early information will also under labor law. In this way the Main Customs Office is to include persons that are not employed by the employer in the be given easier ways of testing and documentation. The future. Regarding those persons, the scheduled tasks, time- main customs office can see to it that the German Pension scale, planned work place and relevant contractual basis have Insurance carries out a status check and classifies a person to be communicated to the works council. as self-employed or as an employee. But with this information a works council still only has the This is ludicrous for several reasons. For one thing, an option to interpret contracts as direct employment or tem- institution (= the social insurance carrier) that has its own porary work in order to afterwards claim their right of co-de- interest in the result of the status check (= its own social termination under § 99 Sec. 1 BetrVG. Whether § 99 Sec. 1 insurance contributions), is rendered an independent testing BetrVG applies or not is also subject to judicial examination. instance. And for another, the separation of administration Therefore, the engagement of companies for work and ser- and jurisdiction in a question concerning labor law and vices generally remains being free of co-determination. therefore civil law is being abolished. At last, with regard to the legal quality of such status checks of the German Pension Insurance it is clarified that the issue of the employee status Conclusion would be left to chance. Since apparently it has escaped The draft bill has a serious imbalance. While established without any practical relevance, this system should vanish employments for temporary work that are covered by col- soon into the ministry’s drawer. lective bargaining agreements will be considerably restricted, contracts for work for the purpose of wage dumping will The Federal Minister of Labor’s failed its actual objective to keep being feasible. The Main Customs Office are not given curb the existence of contracts for work with low wages by any measures in order to help them revealing cases of abuse. setting up the effect of assumption in favor of the status Hence, this draft bill would involve a redirection from tempo- check under the laws of social security. Those cases will rary work to the use of (sham) contracts for work. The ques- always contain an employment for which mandatory social tion remains open whether this is intended by the legislator. security contributions have to be paid, so that the German Pension Insurance will not be able to contribute to the distinction between service contracts or contracts for work and temporary work.
Employment & Pensions The team We consult national and international companies as well as employer’s associations in all areas of labor law and the laws of social security, especially with regard to negotiations and design of collective bargaining agreements and concepts for more flexibility concerning personnel, remuneration and working hours. Our team is specialized in contractual and effective designs of the employment of flexible reserves of personnel (temporary work, interim management, freelancer, service contracts / contracts for work) and assists our clients with restructuring, the commission of external staff and the connected outsourcing of operational departments. In this range of topics we highly specialized consult staffing firms, IT/engineering companies and companies of the logistics sector as well as hospitals. Additionally, we strategically consult large enterprises with regard to cases on collective labor law and social security law. Taylor Wessing’s practice area employment consists of about 100 attorneys. In our German offices we have about 30 acknowledged specialists in employment law practicing. Your contact partners Dr. Oliver Bertram Dr. Sebastian Buder Dr. Kilian Friemel Düsseldorf Berlin München +49 (0)211 83 87 0 +49 30 885 636 0 +49 (0)89 210 38 0 firstname.lastname@example.org email@example.com firstname.lastname@example.org Dr. Robert Bauer Johannes Simon Dr. Anne Förster Frankfurt Düsseldorf Düsseldorf +49 69 97130-0 +49 (0)211 83 87 0 +49 (0)211 83 87 0 email@example.com firstname.lastname@example.org email@example.com Europe > Middle East > Asia taylorwessing.com © Taylor Wessing LLP 2015 This publication is intended for general public guidance and to highlight issues. It is not intended to apply to specific circumstances or to constitute legal advice. Taylor Wessing’s international offices offer clients integrated international solutions. Though our offices are established as distinct legal entities and registered as separate law practices, we are able to help our clients succeed by providing clear and precise solutions with high-level legal and commercial insights. For further information about our offices and the regulatory regimes that apply to them, please refer to taylorwessing.com/regulatory.html and rhtlawtaylorwessing.com. TW_000XX_0X.15
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