February 9, 2018
Authored by: Martin Lüderitz and Jens Peters
The formation of a new government in Germany has not yet been completed however since February 7, 2018, the coalition agreement has been signed. Such political guidelines were consistently implemented during the last legislative periods.
The changes affect fixed-term contracts which require no objective grounds for limitation. The maximum permissible duration of such fixed-term contracts will be reduced from 24 to 18 months. While previously a three-time extension of these contracts was allowed, this should now be possible only once within those 18 months.
The permitted number of such fixed-term employment contracts will also be limited. Employers with more than 75 employees should only be allowed a maximum of 2.5 percent of the workforce for non-material fixed-term contracts. Exceeding the quota leads to the ineffectiveness of any further fixed-term employment contract, and to permanent employment contracts.
Fixed-term contracts with objective grounds for limitation, in practice used if the employee has been previously employed or the maximum duration of fixed-term employment contracts as per above has expired, are also affected by the new regulations. If the employee previously had an indefinite, or one or more fixed-term employment contracts with a total duration of five years or more with the same employer, a renewed time limit is prohibited – even if there are recognized objective grounds for the limitation. An important point to note is: The maximum period of five years, also includes periods during which the employee was lent to the employer by other companies.
The announced changes to the law represent a significant loss of flexibility for employers in Germany regarding new hires. In the future, the agreement on fixed-term contracts will require more than ever a detailed legal review.
Bryan Cave LLP has a team of knowledgeable lawyers and other professionals prepared to help employers to meet these challenges. If you or your organization would like more information on fixed-term contracts or any other employment issue, please contact an attorney in the Labor and Employment practice group.