The German Federal Labour Court (“Bundesarbeitsgericht”) ruled on 10 December 2013 that a permanent lease of employees does not lead to an employment relationship with the end user/leasing company provided that the company from which the employees are leased holds a valid labour leasing licence.
Although the German Act on Temporary Employment (“Arbeitnehmerüberlassungsgesetz” – “the Act”) determines that an employee may only be leased for a temporary period it does not include a provision that leads to an employment relationship with the leasing company if the employee is leased permanently. Under the Act employment with the end user/leasing company only ensues where employees are leased without the required labour leasing licence but not where they are permanently leased.
Since the Act was amended in 2011 to stipulate that an employee may only be leased for a temporary period it has been hotly debated whether an employment relationship will be established with the leasing company if the employee lease is not temporary. The Act makes no provision for the ‘inadmissible’ (i.e. there is no labour leasing licence) permanent lease of employees. Where employees are leased without the required labour leasing licence then the employees are deemed to have an employment relationship with the end user. Some argue that this position should apply mutatis mutandis in the case of an inadmissible permanent employee lease.
The decision by the German Federal Labour Court provides long-awaited clarity and reduces the legal risks for the end user in case of an employee lease which is not for a temporary period.
However, a permanent lease of employees may have other legal consequences. For example the works council of the leasing company may refuse to agree to the engagement of the leased employee or the public authorities may refuse to grant a labour leasing license or revoke a granted labour leasing license. Therefore, it is still recommended to lease an employee only for a defined and temporary period of time. The employment contracts of the leased employees with the company that offers the employee leasing should be permanent or at least survive the period of time during which a specific lease of the respective employee is agreed with another company. We recommend that an employee should not be leased for an unlimited period of time to a permanent place of work at the end user/leasing company. The maximum period of time which can still be regarded as a temporary lease is hard to define and essentially depends on the individual circumstances. The government intends to amend the Act to include a general maximum period of 18 months for an employee lease.
German Federal Labour Court, decision of 10/12/2013 - 9 AZR 51/13
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