I. Background

Employment contracts are often limited in time. In 2015, according to the Federal Statistical Office, about eight percent of employees aged 25 and over had a fixed-term contract. A fixed-term contract gives the employer some flexibility. Without the possibility of a time limit, the hiring of employees would often be too risky and therefore not feasible. For the employee, on the other hand, a fixed-term contract is often associated with uncertainties. Employees and employers alike are interested in a satisfactory solution. How such a – mutually satisfactory and interest-oriented – solution for the individual conditions of a time limit can and should be provided has therefore always been controversially discussed and judged inconsistently.

II. Time limitation with and without an objective reason

In the case of fixed-term employment contracts, a strict distinction must be made between fixed-term contracts with an objective reason and those without such a reason. The legislator has listed some possible reasons for a time limit in section 14 para. 1 sentence 1 German Part-Time Limitation Act [Teilzeitbefristungsgesetz – TzBfG]: The nature of the work performance or the only temporary operational need can justify a time limit.
If the employer limits the employment relationship without an objective reason, the employee is particularly in need of protection. The consequence of this is that an unfounded fixed term is only legally permissible under strict conditions. The TzBfG standardizes the so-called “prohibition of pre-employment” in section 14 para. 2 sentence 2. According to this section, each employer is only permitted to set a time limit of a maximum of two years without any objective reason, whereby up to four time limits are possible until the two years have been reached, provided that these follow one another seamlessly. Any subsequent fixed term without objective reason is inadmissible. If, however, a time limit is set without an objective reason, this does not lead to the invalidity of the employment contract. Only the time limit is invalid with the consequence that the employment contract is now valid for an unlimited period.

III. Previous jurisdiction of the BAG

In 2011 (judgment of 6 April 2011, file no. 7 AZR 716/097), the BAG declared a further time limit to be permissible beyond the legal wording of section 14 TzBfG if the previous employment had already taken place more than three years ago. An employment relationship that has taken place so long in the past would no longer violate the purpose of the norm. If an employee returns to his previous employer after three or more years, a fixed-term contract would not create the same degree of uncertainty as a fixed-term contract in the case of previous employment that took place only a few months ago. The BAG did not allow itself to be persuaded otherwise in the following years, even though numerous regional labor courts and parts of the specialist literature strongly criticized this case law.

IV. Judgments of the BVerfG

On 6 June 2018, the BVerfG decided on the unfounded limitation in two cases (resolution of 6 June 2018, file no. 1 BvL 7/14 and file no. 1 BvR 1375/14).

1. Facts of the cases

The first decision of the BVerfG was based on the following facts: An employee considered his unfounded fixed-term contract to be invalid and brought an action before the Braunschweig Labor Court for the suspension of the term of his employment contract. The Braunschweig Labor Court took a different view from that of the BAG, suspended the proceedings and submitted the question to the Federal Constitutional Court for a decision as to whether section 14 para. 2 sentence 2 TzBfG was compatible with the Constitution.
The other case concerned a constitutional complaint. One employee had already sued for the suspension of the term of his employment contract. The courts had joined the BAG and declared the renewed limitation in time to be admissible after three years had elapsed. The employee filed a constitutional complaint against this decision and had it reviewed by the BVerfG.
The legal questions of the two proceedings are almost identical.

2. Judgment of the BVerfG

The BVerfG has decided that the provision of section 14 para. 2 sentence 2 TzBfG is compatible with fundamental rights. The provision does not violate the freedom of employees to choose an occupation; the employers’ freedom of professional and economic activities is also not violated since the employer has sufficient alternatives. The prohibition of pre-employment is in line with employee protection and social and employment policy objectives.
On the other hand, the time limit of three years for the prohibition of pre-employment introduced into the provision by the BAG was fundamentally contrary to the clearly discernible will of the legislature. The recognizable basic legislative decision was binding for the labor courts and also for the BAG.
However, the BVerfG still considers exceptions to the prohibition of pre-employment possible and permissible under certain conditions. If no chain limitation is imminent and the prohibition of an unfounded fixed term is not necessary in order to maintain the indefinite employment relationship as the standard form of employment, an unfounded fixed term is still possible despite previous employment. The BVerfG lists as example cases in which previous employment took place a long time ago or was completely different. The BVerfG does not determine when a previous employment must have ended to have occurred a very long time ago. The fact that it must have been more than three years ago is self-explanatory. But are four years already a very long time? The exact conditions remain uncertain.

V. Outlook and conclusion

Even if the decision of the BVerfG appears clear and understandable at first glance, considerable legal uncertainties are discernible at second glance. The BAG’s pragmatic three-year rule was much easier for employers to handle than the current provisions of the BVerfG will be for exceptional cases. In addition, the planned but not yet implemented amendments to the TzBfG by the Grand Coalition (in particular the reduction of the unfounded time limit to 18 months and the limitation of the unfounded time limit to 2.5% of the employment relationships in companies with more than 75 employees) must be kept in mind. With regard to the stricter prohibition of pre-employment, in the case of a planned temporary employment, older data on a potential pre-employment must also be carefully collected and kept available.