Germany: Federal Constitutional Court overturns Federal Labour Court rulings on pre-employment for unsubstantiated fixed-term contracts

Unsubstantiated fixed-term contracts, ie fixed-term contracts that are concluded without a specific reason for the time limitation, are widespread in practice. From the employer’s point of view, they are an important instrument for making work more flexible but according to the will of the legislator, they should be the absolute exception. Therefore, according to the wording of the Part-Time Working and Fixed-Term Employment Act, employers are prohibited from hiring employees again for an unsubstantiated fixed term if they were employed by this employer before – for a limited or unlimited period of time. If the employer nevertheless proceeds to do so, the employee concerned may invoke an unlimited term employment relationship.

It has long been disputed whether “before” should actually be understood in the sense of “ever before”. In two decisions in 2011, the Federal Labour Court decided to generally limit the period of pre-employment to three years. Thus, if a previous employment with the employer was more than three years ago, a new employment with an unsubstantiated time limit could be permissible in the opinion of the Federal Labour Court.

The Federal Labour Court has been criticised many times for its decision.

The Federal Constitutional Court has now ruled in favour of the critics of the Federal Labour Court. It considers the view of the Federal Labour Court to be an unconstitutional extension of the law. In its interpretation of the relevant provision of the law, the Federal Labour Court did not take sufficient account of the legislative will to limit fixed terms without cause.

This decision is constitutionally and politically correct. The courts are not substitute legislators and are not authorised to be. An extensive interpretation can therefore only ever take place within narrow limits.

However, the Federal Constitutional Court also emphasises that the labour courts may well come to the conclusion that this general prohibition implied by the law may be unreasonable in individual cases.

If employers continue to resort to fixed terms without cause in the future, it must be examined and assessed very carefully in individual cases whether there was a previous employment, regardless of whether it was a very long time ago, or of a completely different type or short duration. In such cases, renewed temporary employment without cause may be permitted. These principles will have to be further defined by the courts. Until then, it is not advisable to conclude a fixed-term contract without cause with employees who have already been employed by the employer in the past.