In Germany, many companies have resorted to utilizing temp workers through a third-party agency instead of hiring their own personnel. Temp workers typically are leased from an agency that employs the temps and assigns them to the company (lessee). This staffing model has increasingly received political criticism and judicial attention.

An area of particular concern is that some companies utilize temp workers “permanently” in order to replace parts of their regular workforce. For example, the lessee company may not agree with the agency and the temp on a defined term of the lease. Companies might seek permanently to use temp workers for staffing their reception area or IT department and thereby reduce costs instead of hiring their own staff. After an amendment to the legislation governing temp work, these companies faced the risk that the temp workers they permanently lease would be deemed their own staff.

In 2011, the German Parliament amended the law regulating the temp workers’ sector—the German Act on Temp Workers (AÜG). The AÜG expressly provides that the leasing of temp workers must be “temporarily” in order to be lawful under the AÜG with the consequence that the leasing arrangement regarding a temp must be agreed to for a defined period (e.g. twelve months). However, the AÜG was not clear in identifying how to determine when, or the consequences to an employer, for a worker leased “temporarily” versus one who was leased “permanent”.

Some Higher Labor Courts (e.g. the Higher Labor Court Baden-Württemberg) ordered that a temp worker who is permanently assigned to the lessee (i.e. not temporarily, or for a defined period only) becomes an own employee of the lessee. According to the Court, the AÜG’s purpose is to only allow a temporary placement of temp workers, and an assignment of a temp worker in conflict with this purpose would result in the temp worker becoming an employee of the lessee.

Other Higher Labor Courts (e.g. Berlin-Brandenburg) rejected this view. They concluded that such strict sanction cannot be derived from violating the AÜG.

On December 10, 2013, the Federal Labor Court (case no. 9 AZR 51/13) ruled that no employment relationship is established when a temp worker’s assignment to the lessee is not temporary. The highest German labor court argued that in absence of an express sanction in the AÜG, the labor courts has no competence to “impose” the fiction of an employment relationship to companies leasing temp workers permanently. According to the judgment, it is solely up to the legislature, either on the EU level or on a national level, to implement such a harsh consequence into the law.

The recent judgment of the Federal Labor Court creates clarity and certainty for the sector of temp work. For now, under AUG, companies utilizing temp workers permanently will not be deemed their employer. However, the new German Federal Government has already announced that it intends to amend the AÜG by allowing temp work only for up to 18 months. It is well possible that express sanctions for the permanent leasing of temp workers will find its way into amendments to the AÜG.