Fixed-term contracts are a promising route into the labour market
Fixed-term contracts offer jobseekers a successful way of entering or re-entering the labour market. This is especially true after a long period of unemployment. Fixed-term contracts are therefore an essential component of the successful German labour market.
More than three quarters of those initially employed on fixed-term contracts are offered subsequent employment in their company. The proportion of employees taken on as permanent employees has risen significantly in recent years (2009: 30 %, 2019: almost 45 %). The proportion of employees who were not retained after a fixed-term contract was still almost 40% in 2009. It has declined sharply and is now just under 25 % in 2019. The share of fixed-term contracts in all employment relationships has been stable at below 10 % for years, and will be 7.2 % in 2019.
Maintaining and expanding possibilities for fixed-term contracts
Fixed-term contracts enable employers, for example, to quickly build up or - as in the financial crisis of 2008/2009 or in the current pandemic situation - to maintain employment in the face of uncertain production expectations. Unlike the public sector, which has created its own justification for fixed-term contracts with the so-called budgetary fixed-term contract, fluctuating order levels and uncertain future prospects are not sufficient grounds for concluding a fixed-term employment contract under current law. Therefore, calendar-based fixed-term contracts (so-called objective-based fixed-term contracts) are of particular importance in order to secure employment and create new employment.
Restricting the possibility of concluding fixed-term employment contracts would therefore become a severe test of endurance, especially for people with clear placement obstacles. Of course, employers and companies also need room for manoeuvre in order to be able to react flexibly to fluctuations in orders. However, such fixed-term contracts are an important help for people who have a hard time on the labour market.
What is needed is not less, but more flexibility in forms of employment that make it easier for employers to react to customer wishes and to deploy their employees in a flexible and adapted manner. To this end, clauses opening up collective bargaining can be used, for example, to further develop the right to work on a fixed-term basis. They can be an instrument for strengthening and consolidating collective bargaining autonomy. This applies to the collective bargaining design of factual reasons as well as to the preservation of the possibility of designing calendar-based fixed-term contracts for a period longer than two years and more than three extension periods.
In addition, the legislator should also further develop the so-called first employment requirement. Although the Federal Constitutional Court ruled in its decisions announced on 6 June 2018 (1 BVL 7/14 and 1 BVR 1375/14) that the so-called initial employment requirement is compatible with the Basic Law under certain conditions. However, as can also be deduced from the reasons for the decision, the initial employment requirement for fixed-term employment on a calendar basis is not required by the constitution. In order to achieve more legal certainty, the restrictions on the requirement of first employment stated by the Federal Constitutional Court should therefore be implemented in a standardised manner. To this end, it would make sense to set the period of time at no more than three years after which a fixed-term employment contract with the same employer can be used again.
Insofar as the use of fixed-term employment relationships has so far been classified by the labour courts as an abuse of rights, this has almost always been the case with public employers or service providers. In most cases, the decisions are based on so-called "chain fixed-term contracts" in which the employer regularly agrees fixed-term employment contracts with the same employee over a very long period of time with the objective reason of replacement. The Federal Labour Court has rightly placed limits on this development. The case law of the Federal Labour Court could be incorporated into the Part-Time Working and Fixed-Term Employment Act in order to counteract the use of fixed-term employment relationships which is perceived as an abuse of rights. Furthermore, there is no need to amend the law to combat abuse, because in private sector companies calendar-based fixed-term contracts and fixed-term contracts with a material reason are used with restraint and appropriately.
Adapt reasons for time limits
The factual grounds for a fixed-term contract should be adapted to the needs of the company. In particular, there is a need for a supplementary specification of the factual reason of "temporary need" in order to give companies the possibility to use this factual reason with legal certainty. This is because employers cannot meet the requirements laid down by case law in the event of a highly volatile order situation. A "temporary need" should be recognized for the effectiveness of a fixed term, for example, if a company wants to develop a new product and launch it on the market, the success of which is initially still unclear, so that no reliable statement can yet be made about the continuation of the employment need for new employees. The same applies, for example, if the continuation of an order situation cannot be predicted with certainty because the employer must first apply for a follow-up order or a new order. A legally secure fixed-term contract would also give employees the chance of permanent employment.