Employment contracts can be limited in time. But there are certain limits to this time limit. Unless there is an objective reason, the employment contract can be limited to a maximum of two years. The contract can be renewed up to three times during this period.
Time Limit with Objective Reason
A longer time limit for employment relationships is possible with objective reasons. Similarly, employment contracts can also be extended several times in succession. A typical reason might be that the need for additional workers is only temporary, or that there are substitutions during maternity leave, parental leave or illness. Oftentimes, one fixed-term employment contract is followed by another. But beware: Such repeat fixed-term employment contracts cannot be continued indefinitely. If the time limit is legally abusive, a fixed-term employment contract turns into a contract of employment of indefinite duration.
Ruling of the Federal Labor Court on Repeat Fixed-Term Employment Contracts
For a long time it was not clear where the abuse of rights starts in the case of repeat fixed-term employment contracts. However, the Federal Labor Court (Bundesarbeitsgericht, BAG) gave employers clear indications in its decision of October 26, 2016, as to when a further limitation of the employment contract is still permitted and when it is better for employers to avoid a further limitation (Ref.: 7 AZR 135/15).
The case was about the complaint of a substitute teacher who had been employed on the basis of 16 fixed-term employment contracts for almost six and a half years at a grammar school and who substituted different teachers for different reasons. He opposed the termination of the last fixed-term employment contract. He argued that the objective reason for the substitution was not present. In addition, the defendant German Federal State could not invoke the objective reason of substitution because of the entire duration of the contract and the large number of fixed-term employment contracts. There had been an institutional abuse of rights.
In the final instance, the Federal Labour Court dismissed the action. According to the BAG, the determination of the threshold of abuse of rights depends to a large extent on the total duration of the fixed-term employment contracts and the number of contract extensions. It was also important whether the jobs were always the same or changing, the court stated.
Abuse of Rights in Three Stages
In order to determine the legal abuse of the time limit, the BAG followed the legal evaluations in Art. 14 Para. 2 Sentence 1 of the German Part-Time Work and Fixed-Term Employment Contracts Law (Teilzeit- und Befristungsgesetz, TzBfG). According to this, a limitation without objective reasons is possible for a maximum period of two years with a maximum of three extensions. If there is an objective reason, the BAG has defined three stages for examining the legal abuse of the time limit, comparable to a traffic light.
The traffic light turns red if the employer is suspected of abuse of rights. This is the case if
- the employment relationship exceeds the total duration of ten years, or
- a fixed-term contract has been agreed more than 15 times
- the employment relationship exceeds the total duration of eight years and there are more than 12 fixed-term contracts during this period.
An abuse of rights is usually indicated if one of these conditions occurs. Exceptionally, a fixed-term contract may be permissible if the employer can present special circumstances that invalidate the suspicion of abuse.
The traffic light turns yellow if
- the employment relationship exceeds the total duration of eight years, or
- a fixed-term contract has been agreed more than 12 times
- the employment relationship exceeds the total duration of six years and there are more than nine fixed-term contracts during this period.
If this is the case, a thorough abuse control is indicated. Nevertheless, the employee must prove the abuse of rights.
The traffic lights turn green if the above-mentioned limits on the duration of the contract and number of fixed-term contracts are not exceeded.
In the case of the substitute teacher, a comprehensive abuse control was therefore indicated for a duration of the employment relationship of just under six and a half years and 15 fixed-term contracts. Nevertheless, the BAG stated that he had not put forward any further sufficient aspects which would indicate an abuse. Consequently, the complaint was dismissed..
Other Criteria to Consider
The BAG has indeed provided guidelines with this decision. However, the limits are by no means set in stone. According to the BAG, further criteria can be taken into account for the assessment:
- Permanent employment of the employee at the same workplace performing the same tasks
- The duration of the fixed-term employment contracts is repeatedly shorter than the forecast duration, without there being any evidence of a legitimate interest on the part of the employer
- Continuing fixed-term contracts, although there is the possibility of permanent employment
- Seamless continuity of fixed-term employment relationships after each other.
Employers can orientate themselves on the BAG’s ruling when it comes to fixed-term employment contracts. The decision also shows, however, that in addition to the duration and number of fixed-term contracts, other points must be taken into account in order to ensure that a fixed-term contract is not ineffective. In the end, much depends on the circumstances of the individual case.
Employment contracts cannot be limited indefinitely even if there is a material reason.