This applies more than ever! The Federal Labor Court has now further restricted the possibilities for limited-term employment contracts and abandoned its previously lax case-law on limited-term employment contracts in cases where the employee was previously under contract with the same employer. The reason for this was a ruling by the Federal Constitutional Court that clearly rejected the long-standing case-law of the Federal Labor Court.

Previous Legal Situation

In the face of fierce criticism, the Federal Labor Court weakened the so-called previous-employment restriction (Vorbeschäftigungsverbot) in 2011 (ruling of April 6, 2011 - Ref.: 7 AZR 716/09). Accordingly, employee contracts could be limited to a period of up to two years without a particular reason if said employees had previously been contracted by the employer. The only prerequisite was that the previous employment had been more than three years before the current employment. However, there was no legal basis for this case-law.

Decisions of the Federal Constitutional Court

Last summer, the Federal Constitutional Court ruled that this case-law had no legal basis. According to the Federal Constitutional Court, the previous interpretation of the previous-employment restriction for the period within the last three years did not correspond to the intent of the legislator. From the law, it was clear that in principle, a fixed-term employment contract for which there is no justifying reason under the Part-Time and Limited Term Employment Act (TzBfG) and which is between the same parties should only be permissible once, and only on initial recruitment. However, according to Federal Constitutional Court exceptions to the previous-employment restriction can be possible if there is no risk of the employee to be forced into a »chain« of repeated limited-term contracts, or in cases where the employment for an unlimited term remains the norm, for example if the previous employment was very long ago, of a completely different nature, or of a very short duration.

New Legal Situation

Against the background of the decision of the Federal Constitutional Court, the Federal Labor Court reversed its case-law in a decision on January 23, 2019 (Ref.: 7 AZR 733/16) and decided that the limitation of the term of an employment contract without a justifying reason under the TzBfG is inadmissible if the employee had worked for approximately one-and-a half-years for the same employer eight years ago, and this job involved similar work. Any exception to the previous-employment restriction was rejected by the Federal Labor Court as the previous employment was only eight years in the past and thus »not very long ago.« The Federal Labor Court also denied a protection of legitimate expectation: when finalizing contracts with the employee, the employer had in any case had to take into account the possibility that the Federal Constitutional Court would reject the case-law by the Federal Employment Court being disputed at the time.

Practical Consequences

It is imperative that you check the current limited term employment contracts that are not justified by a qualifying reason under sec. 14 TzBfG. In particular, such limited term agreements are now inadmissible in cases where previous employment was within the last eight years. These contracts thus do not end at the agreed end-of-term, but care considered to be entered for an unlimited term. The employee must, however, file a timely complaint to the relevant labor court regarding the unenforceability time limit. It remains to be seen in which cases employment contracts whose durations are limited for no particular reason are (still) permissible.

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