What is meant by temporary employment

Fixed-term employment contract: basics and termination

1. What is a “fixed-term” employment contract?

Traditionally, an employment contract is concluded for an indefinite period. The contract therefore runs indefinitely and only ends when the employer or employee terminates the contract or when the employee retires.

A fixed-term employment contract, on the other hand, is limited in duration from the outset and ends without notice. Employers often have an interest in such contracts, e.g. if only temporary staffing needs due to a sick colleague have to be covered.

Legal regulations on such fixed-term employment contracts can be found in Sections 14 et seq. Of the Part-Time and Temporary Employment Act (TzBfG).

2. What types of time limits are there?

There are different ways to determine when exactly the employment relationship should end with a fixed-term contract.

Time limitation

In the case of a time limit, the point in time at which the employment relationship is to end is determined when the contract is concluded. This can be regulated over a period of time or also over a specific date.

Examples:

  • On August 1st, 2020, Mr X signs an employment contract for 12 months with the employer. The employment relationship ends automatically on July 31, 2021.
  • On August 1, 2020, Mr. X signs an employment contract with the employer for the period up to December 31, 2020. On this date, the employment relationship is automatically terminated.

Purpose limitation

With a fixed-purpose term, the employment contract does not end at a certain point in time, but when a certain event occurs. When the contract is concluded, it does not have to be clear when exactly this will happen.

Example: Mr X concludes an employment contract with the employer on August 1st, 2020. He is supposed to represent a sick colleague. It is therefore agreed that the employment contract will end as soon as the colleague is healthy again. When exactly that will be is still unclear.

In the case of a fixed-purpose employment relationship, however, the employment relationship does not end immediately when the purpose occurs. The employer must first inform the employee in writing that the event has occurred. After receiving this notification, the employee still has a “grace period” of two weeks before the employment contract is actually terminated (cf. Section 15 (2) TzBfG).

3. When is a time limit legal?

The employer cannot limit every employment contract arbitrarily. In order for a time limit to be legal, certain requirements must be met.

The first requirement for effectiveness is that the time limit is concluded in writing. An oral contract is therefore not enough. Instead, employers and employees have to put the content of the contract on paper and both sign it. The purpose and / or duration of the limitation must be specified in the fixed-term agreement.

Strictly speaking, only the fixed term itself has to be in writing, not the entire employment contract. However, it is advisable to keep the entire employment contract in writing and to regulate the time limit in it.

Whether such a written contract for a limited period is effective also depends on the type of time limit. A distinction is made between time limits with a material reason and time limits without any material reason.

Time limit with material reason

A time limit is initially possible if there is an objective reason for it. Examples of such reasons are listed in Section 14 (1) TzBfG:

  • The operational need for work is only temporary.
     
    Examples:
    The employee should only work on one specific project.
    Representing a sick colleague or a colleague on parental leave.
     
  • The employee has just finished his training or studies and just wants to bridge the waiting time until he later takes another job.
  • The nature of the work justifies the time limit.
Example 1: Gift packers in retail stores are only needed during the Christmas season; Harvest workers only during harvest time.
Example 2: The employment contract of a producer for a broadcasting corporation can be limited under certain circumstances due to the nature of the work. This is what the Federal Labor Court decided. The case shows how much it depends on the circumstances of the individual case:

The employment contract was limited in time because, according to the broadcaster, "the available post is advertised for a limited period from a programmatic point of view [...] and the employee is involved in the program". It is therefore a peculiarity of a producer's work performance that he is only required for certain program sections and periods.

The Federal Labor Court decided: In principle, a time limit in broadcasting can be justified by the nature of the work performed. This is also supported by the freedom of broadcasting stipulated in the Basic Law. Ultimately, however, the interests of freedom of broadcasting must be weighed against those of the employee. What speaks in favor of the broadcasters is that changing topics in reports, programming techniques, competitive situations and the changing tastes of radio listeners and television viewers make it necessary to change the program structure.

Employees, on the other hand, regularly have an interest in the continuation of their employment relationship so that their position is secured. However, this does not apply to any previous activity at broadcasting as a freelancer. A previous position as a freelancer with the same or comparable activities as in the employment relationship can still balance the sender's interest in the employee's replacement. If a broadcasting corporation employs a program-designing employee with the same activity for a long time, it can be concluded from this that, from their point of view, it is not necessary to change the employee.

This shows that it depends on the individual case. A producer's employment contract cannot always be limited in time. It is crucial to weigh up the mutual interests.

  • The time limit serves to test the employee.
  • Reasons in the person of the employee justify the time limit.
     
    example: If the employee himself wishes the fixed term. Here, however, the courts pay very close attention to whether the desire actually comes from the employee himself.
     
  • The employee is employed in the public sector.
  • The time limit is based on a court settlement (= agreement to end a legal dispute).

The reasons mentioned in § 14 TzBfG are only standard examples of the legislature. Other reasons that are not listed can also justify a time limit. However, if one of the examples from the law can be given as a reason, this means more legal certainty for employees and employers.

If there is a material reason, the time limit can be set for a largely freely chosen period. The time limit can be extended at the end of the contract. Several extensions in a row are also possible.

Danger: If certain time limits are exceeded, the courts often assume an abuse of the regulations and declare the time limit to be invalid. This is often the case with fixed-term contracts of over eight years or more than twelve extensions.

Unfounded time limit

A fixed-term employment contract is also possible without a material reason. One then speaks of a "reasonless" time limit, which is possible according to § 14 TzBfG in the following constellations:

  • If the time limit does not exceed two years. The time limit can be extended up to three times within these two years. The number of extensions and the number of time limits may be regulated differently by means of a collective agreement.
    A fixed term without any objective reasons according to Section 14 (2) TzBfG is excluded if the employee has already worked for the employer "previously" before the conclusion of the fixed-term employment contract. “Before” does not mean every job with the same employer that was in the infinitely distant past. A fixed-term fixed-term without any objective is still effective if the “previous” employment was a long time ago or the employee was working in a completely different position at the time.
  • When the company is still young. In the first four years after the company was founded, an unlimited term of up to four years is possible. A time limit may be extended several times within these four years.
  • If the employee is over 52 years old and was unemployed for at least four months prior to the conclusion of the contract. In this case, the employment contract may be limited to five years, although the fixed term can also be extended several times.

4. Can a fixed-term employment contract become a permanent one?

Of course, employers and employees can convert the contract at any time. If both agree, the fixed-term contract becomes an open-ended contract.

However, the employer can also make mistakes when the contract is limited in time:

  • The written form was not adhered to (see above). If the parties only verbally agree on a fixed-term employment contract, they are actually concluding an open-ended employment contract. This also applies if you don't know anything about it.
  • The time limit was agreed too late. A time limit must "stand" before the employee starts work.
  • The factual reason does not exist. The employer cannot simply give a factual reason that does not actually exist. If, for example, it is clear that the sick colleague to be represented will not come back, he cannot “serve” as a reason for a time limit. Even then, the fixed-term contract changes to an open-ended contract (if it is not possible to set a fixed-term contract without any objective reason).
  • The employee works longer than agreed in the fixed-term. If the employee works for the employer beyond the fixed term, this creates an open-ended employment relationship. It is even enough for the employee to work just one day longer than agreed.

If one of the aforementioned errors occurs, the employment relationship is deemed to be concluded for an indefinite period. There is then a "normal", open-ended contract. The employer can only get rid of this by giving notice.

If the employer does not see his mistake, employees should submit the so-called "Limitation action“Raise. The court then examines the effectiveness of the time limit. If the time limit is extended several times, only the last time limit is examined by the court. The employment relationship itself is not endangered by the lawsuit.

The action for an extension of term must be filed within three weeks of the end of the fixed-term employment relationship. After this period has expired, the court will dismiss the action.

5. Can a fixed-term employment contract be terminated?

At least an ordinary - i.e. timely termination - is excluded during the term of the fixed-term contract. An exception to this can only be made if an ordinary termination is expressly provided for in the employment contract or a collective agreement. Another exception is if the employment relationship was concluded for more than five years. In this case it is allowed but only the employee terminate after five years with a notice period of six months

Extraordinary termination - i.e. without notice - is possible at any time, even with a fixed-term employment contract. However, there must be an important reason for this in accordance with Section 626 of the German Civil Code. In addition, the interests of the employer must be weighed against that of the employee. An extraordinary termination is ineffective if the employee has a greater interest in remaining in the company than the employer in having the employee leave it. The hurdle is high.

Classic examples are significant breaches of duty such as theft at work or persistent fraud in working hours.

Danger: Employees should nevertheless quickly consult a labor law attorney after they have given notice. Even an actually illegal termination becomes effective if a dismissal protection suit is not brought within three weeks.

6. Conclusion

  • A fixed-term employment contract ends without having to be terminated.
  • The contract either expires on a specific date or after a specified event has occurred (e.g. return of a sick employee).
  • A time limit must be in writing and have a specific reason. Under certain conditions, a time limit without a reason is also possible.
  • In the case of formal errors, a fixed-term contract can become an open-ended contract.
  • As a rule, a fixed-term contract can only be terminated for extraordinary reasons.

7. Frequently asked questions

Can an employment contract be limited in time?

Yes. In principle, a so-called factual reason is required for this (example: pregnancy representation). If there is no material reason, it can usually be limited to a maximum of two years.
What types of time limits are there?

Purpose and time limitations are common. In the context of a fixed-purpose employment relationship, the employment relationship ends if the underlying purpose no longer applies (example: the employee represented returns to the workplace). The time limit is limited to a specific date or a specific duration.
When can a fixed-term contract be terminated?

Ordinary termination is usually not possible. Exceptions apply if the contract provides for a right of termination or is designed for more than five years. In the second case, only the employee may properly terminate after this period. An extraordinary termination is never ruled out, but the prerequisites for this are high.