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Fixed-term employment contracts – Employment issues and labour disputes involving Expats in Germany

23.07.2014 | Autor: Matthias Steinchen

Recently many clients have asked us for legal advice regarding issues with their employer and fixed-term contracts. According to our experience, fairly often these disputes are accompanied by the employers’ misconception that Expats or even EU-citizens won’t get a lawyer involved as they have accepted the “hire and fire” culture as a reality being that it exists in many of their home countries.

The truth is this exploitive culture has been set up by the employers themselves. With the mostly positive rise of the Berlin startup-scene and increased migration to Germany comes along the downside of a highly competitive job market. Accordingly, employees are more likely to conform to unusual or even illegal employment structures or bear with their employer’s failures or abuses. To compound this issue the employers are not obliged to issue or translate working contracts or later annexes into other languages [cf. BAG, verdict from 19 March 2014 – 5 AZR 252/12 –]. The Expat bears the risk of not knowing which exact stipulations they have agreed upon. Therefore we always advise our clients to at least ask for translations of all official documents or even better consult a lawyer before signing any binding agreement.

Some of our clients were nervous asking for legal advice since they had been intimidated about the process, their status as a foreigner or directly from their employer. Had they known the power of their inherent rights, they would have sought council much sooner.

As a matter of fact, Non-Germans are protected by the same fair rights and need to be treated on an equal basis as a German employee.

With this series of articles, we want to give you a short introduction into the basic principles of German labour law regarding the – in our experience – most common tactics employers use. Our intention is to provide you with resources to handle these tricks. Additionally, in the last essay we’ll give you an overview over the basic procedure to receive a work permit.

 

Fixed-term contracts of employment

Quite often employment contracts are set up for a certain amount of time. Per the date listed in the contract, the employee automatically needs to leave the company. It is legally necessary that the fixed-term contract has been made in written form in order for it to be valid.

If it is of mutual interest, a limitation can be convenient for both parties. But sometimes the limitation is simply an employer’s method of putting pressure on the applicant to limit their rights as an employee.

A fixed-term employment contract must be differentiated according to the contract term and whether the limitation is based on an objective reason.

 

Fixed-term contracts shorter than two years – no reason needed

Without a justifying reason, a contract can only be limited for up to two years. If the employee works longer than this limited amount of time it leads to a waiver upon the limitation and legally sets up an unlimited contract.

A limited contract may only be extend three times succeeding each other and only if the total amount of time stays under two years. For example, it’s illegal for the employer to offer four limited contracts, each for two years long [which would equal eight total years in the end]. It is however possible to sign four 6-month-contracts sequentially [24 months = 2 years]. Note that special rules may govern companies that have just existed for four years or less.

Extensions need to be done in written form and must not change any of the regulations of the active contract. These extensions need to be done while the employment is still active.

 

Fixed-term contracts longer than two years – justifying reason needed

A term longer than two years needs a specific reason to justify this long period of contracted limitation. Basic applicable reason are outlined in Section 14 Para. 1 of the “Part-time and Limited Term Employment Act” [Teilzeit- und Befristungsgesetz – TzBfG]. According to our experience, many conditions used by employers do not fit the juridical prerequisites; it is for example, only under certain prerequisites possible to connect the term to the limitation of the length of the Expat’s work permit.

In case the fixed term is over two years and/or does not include an applicable reason, or the reason does not justify the limitation, the employee is factually in an unlimited working relationship with the employer.

The same pertains to fixed-term contracts for less than two years which include a reason nonetheless. Then the according reason may not justify the limitation, whether it is under two years or not.

 

Legal measurements

The legal mean as a response is to lodge actions against fixed-term employment contracts at court [Entfristungsklage] not later than 3 weeks after the expiration date. If the limitation is unjustified, the court rules that the employment remains unlimited and that the employer is obliged to pay the missing wage(s).

 

Conclusion

In case you doubt the validity of the limitation of a contract, get the limitation checked by a lawyer prior to signing the working contract or at minimum shortly before the end of the fixed term.

Additionally, we highly recommend to get any new contract checked before signing it: The focus a court will rule upon is the most recent agreed upon justifying reason for the limitation. In other words, signing a new contract will void any previous contracts.

WK LEGAL is a nationwide law firm founded in Berlin. We offer the out-of-court legal advice as well as representation in court proceedings. WK LEGAL advices and represents employees, works councils and employers in every facet of labour-law and employment-law.

For a first free initial assessment, please contact Matthias Steinchen at Steinchen@WKLEGAL.de or via phone:

+49 (0) 30.692 051 750.

Über den Autor

Matthias Steinchen

Rechtsanwalt Matthias Steinchen ist Ihr Ansprechpartner für die Bereiche Bank- und Kapitalmarktrecht, Gesellschaftsrecht und Immobilien-recht. Im Kapitalmarktrecht berät er Sie umfassend in Ihren Geschäftsbeziehungen mit Finanzdienstleistungsinstituten. Dabei liegt sein Fokus auf der Beratung von Kapitalanlegern.