Germany: Fixed-term employment without objective grounds is valid despite the general prohibition of pre-employment, if the previous employment relationship ended 22 years ago

German case law regarding the validity of fixed-term employment contracts has recently been subject to significant change. Under German law, there are two types of fixed-term employment: fixed-term employment based on objective grounds and fixed-term employment without such objective grounds. These two different types are linked to different statutory requirements and restrictions. If a fixed-term included in an employment contract is invalid as per these requirements, the employment relationship in question is deemed to have been concluded for an indefinite time.

The fixed-term employment based on objective grounds requires a specific reason, as stipulated in the law, justifying the limitation of the employment contract. Such reason for example, exists if an absent employee needs to be replaced for a specific time, such as during the parental leave of another employee. As long as objective grounds exist, fixed-term employment is generally permissible without a time limit or a limit on the number of consecutive contracts. On the other hand, fixed-term employment without objective grounds is only permissible for a total period of up to two years and only if the company has not employed the employee before. This prohibition of pre-employment causes recurring legal issues for employers, also due to the changes in case law that have to be observed.

The Federal Labour Court used to interpret the statutory prohibition of pre-employment in a way that only previous employment relationships of the past three years have to be considered, i.e. after a period of three years it was permissible to re-hire a previous employee under a new fixed-term contract without objective grounds. However, in 2018, the Federal Constitution Court ruled that this interpretation of the law by the Federal Labour Court was unlawful, as the wording of the law did not provide for restricting the prohibition of pre-employment only to previous employment relationships within the past three years. The Federal Labour Court adapted this ruling and found in January 2019, that generally any previous employment with the same employer hinders re-hiring an employee based on a valid fixed-term contract, without objective grounds. The Federal Labour Court did say that there is some room for exceptions, for example in cases where the previous employment was very long ago, of a completely different nature or of a very short duration. However, the requirements that need to be fulfilled in order for one of these exceptions to apply are quite unclear at the moment.

The latest decision of the Federal Labour Court from August 2019 at least provides some clarity regarding the question of when a previous employment is deemed to be “very long ago”. In the case before the court, the employee was employed by the defendant from October 1991 to November 1992. 22 years later, in 2014, the defendant rehired the employee. The parties agreed on a fixed-term employment contract. There were no objective grounds justifying the fixed-term. After the employment expired in 2016 due to the fixed-term, the employee went to court claiming he was actually employed for an indefinite period, as the fixed-term was invalid due to a violation of the prohibition of pre-employment.

While the Federal Labour Court recently ruled, in a similar case, that a previous employment that ended eight years before the conclusion of a new fixed-term contract with the same employee does not qualify as “very long ago”, the court in this case ruled in favour of the employer. The court found that the new fixed-term employment, without objective grounds, did not violate the prohibition of pre-employment as the previous employment relationship dates back 22 years. The court deemed that the period of 22 years between the two employment relationships was so long that it qualified for an exception from the prohibition of pre-employment. Employers will have to wait for further case law to narrow down the current benchmarks set by the Federal Labour Court at eight years and 22 years between two employment relationships. In the meantime, as there is still a high level of legal uncertainty, employers should ensure that applicants who shall be hired based on a fixed term employment agreement, without objective grounds justifying the fixed term, have not previously worked within their company based on an employment agreement at least during the past 22 years.