Fixed-term Employment Contracts

Fixed-term Employment Contracts / Befristete Arbeitsverträge

April 04, 2024

According to the statutory framework, permanent employment contracts should be the rule and fixed-term contracts should only be permissible in individual cases. However, a fixed term increases flexibility and can be an opportunity to create new and later permanent jobs. A fixed-term employment relationship ends automatically at the end of the term, meaning that ordinary notice of termination is not required and the rules on protection against dismissal do not apply. The extent of the working hours or the employee's position in the company is not relevant for a fixed-term contract.

Statutory basis

Regulations on fixed-term employment can be found in particular in the Part-Time and Fixed-Term Employment Act (TzBfG), but also in the Part-Time Early Retirement Act (AltTZG), the Act on Parental Allowance and Parental Leave (BEEG) and the Act on Fixed-Term Employment Contracts in Science (WissZeitVG), among others.

In principle, the possibility of concluding a fixed-term contract is based on the principle of freedom of contract ensuing from Article 2 (1) of the German Basic Law (GG).

Types of fixed-term contracts

On the one hand, there are fixed-term and fixed-purpose contracts: the duration of a fixed-term employment relationship is determined by the calendar (either a number of weeks/months/years or up to a specific date), while in the case of fixed-purpose contracts (Section 3 (1) sentence 2 TzBfG), the duration depends on the purpose or nature of the work to be performed. The two can also be combined.

There is also the employment relationship subject to a condition subsequent, which ends if a future, uncertain event occurs, e.g. the works council refuses to give its consent, the employee is not fit for work due to ill health or his licence to practise his profession is withdrawn.

In principle, a fixed-term employment contract must be justified by a material reason, Section 14 (1) TzBfG, which must be present at the time the contract is concluded. However, in exceptional cases, there is the possibility of a fixed term without objective grounds in accordance with Section 14 (2), (2a) and (3) TzBfG and Sections 1 et seq. WissZeitVG. A fixed term with a material reason is permissible in accordance with § 14 Para. 1 Sentence 2 TzBfG if one of the reasons stated there exists at the time the contract is concluded, whereby this is a non-exhaustive list. There are also factual reasons outside the TzBfG that justify a fixed term, such as partial retirement (Section 8 (3) AltTZG), concerns about the extension of an employee's residence permit, third-party funding of research projects at universities (Section 2 (2) WissZeitG) or the employee's express and justified request for a fixed term.

The objective reasons of the TzBfG are:

• temporary operational need: This does not include general uncertainty about the development of labour demand in the company; this risk must be borne by the employer. When the employment contract is concluded, it must be foreseeable on the basis of a concrete forecast that there will be no need for the employee after the expiry of the planned fixed term and the employee must have been hired precisely to cover the temporary need. Such a temporary need may exist in the case of permanent tasks of the employer that increase temporarily on a one-off or regular basis (e.g. seasonal work), temporary additional tasks (e.g. temporary project) or a foreseeable decrease in the need for labour.

• Following training/studies: The reason for a fixed term is employment immediately following training or studies, as this can make it easier to enter working life by gaining professional experience.

• Substitution: An objective reason is employment to replace an employee who is temporarily absent - e.g. due to illness, holiday, parental leave, further training, secondment - whereby the employment relationship of the absent employee continues and the employer can expect their return. There is therefore a temporary need for the work of the substitute due to the return. It is not required that the substitute must take over the specific tasks of the absent employee.

• Special nature of the work performance: In this context, the objective reason arises from a need inherent in the work performance not to conclude the employment relationship for an indefinite period. This is recognised for employment relationships in the media, art, theatre and professional football sectors.

• Probation: The employer's desire to test the employee to see whether he or she is up to the tasks and compatible with the workforce can be a factual reason for a fixed term, although this is generally less applicable as a fixed term of up to two years is also permissible without a factual reason. There is no justifiable trial purpose if the employee has already worked for the employer and the employer can already sufficiently assess the employee on this basis. In this case, the duration of the fixed term must be reasonable and should not normally exceed six months.

• Personal reasons of the employee: The objective reason must then lie solely in the social interests of the employee, for example because he/she wants to bridge a transitional period until the start of studies or other employment.

• Budget: The funds allocated for remuneration in the respective employment relationship must be expressly earmarked for a fixed-term employment under budgetary law in order to justify the fixed term.

A fixed term as part of a court settlement does not require any further factual justification if the court has contributed to the content of the settlement and the parties agree to the termination of dismissal protection proceedings or declaratory proceedings (on the existence of the employment relationship in the case of a fixed term).

An unfounded fixed term is possible if it does not last longer than 2 years in total and the fixed-term employment relationship is extended a maximum of three times during this period, Section 14 Para. 2 TzBfG; in the case of newly established companies, a maximum duration of 4 years applies in the first four years after establishment in accordance with Section 14 Para. 2a and the possibility of extending the employment relationship an unlimited number of times during this period. According to § 14 Para. 3, the maximum total duration of the fixed term is 5 years if the employee is older than 52 at the start and was unemployed immediately beforehand. An extension in this sense is the written agreement of the parties to the employment contract on a changed termination date within the term of the contract, without other working conditions also being changed. An unfounded fixed-term contract for a maximum of 2 years in accordance with Section 14 (2) is not permitted if a fixed-term or permanent employment relationship has already existed between the same parties. However, this does not apply if the previous employment relationship existed a very long time ago, lasted only a very short time or had a completely different object.

Validity of a fixed term

In accordance with Section 14 (4) TzBfG, every fixed-term employment contract must be in writing, i.e. a written, personally signed agreement. This is intended to create legal certainty. However, the written form requirement does not apply to the entire employment contract, but only to the provision for a fixed term. Before the employment relationship begins, i.e. before the employee starts work for the first time, each contracting party must have a signed copy available. A breach of the written form requirement leads to the existence of an open-ended employment relationship.

The requirements for the permissibility of a fixed term depend on the type of fixed term.

In the case of a fixed term, this must be sufficiently defined or at least determinable by interpretation, otherwise the employment relationship is deemed to have been concluded for an indefinite period. A fixed term for a specific purpose is only permissible if the parties to the employment contract agree to make the duration of the contractual relationship dependent on its purpose and if the duration is objectively clear from the type, purpose and nature of the work owed, i.e. the fulfilment of the purpose is at least objectively determinable.

It is not necessary for the reason for the fixed term - if one is necessary - to be included in the contract or communicated to the employee in order for the fixed term to be effective.

Termination of fixed-term employment contracts

Fixed-term contracts are automatically terminated at the end of the agreed term.

A fixed-term employment contract ends with the fulfilment of the purpose, for example the return of the replaced colleague, otherwise at the earliest two weeks after the employee has received written notification from the employer of the date on which the purpose was achieved, see Section 15 (2) TzBfG. This notification must also fulfil certain requirements, on the one hand the written form and on the other hand the recognisability of the termination date, otherwise an unlimited employment relationship can arise under the requirements of Section 15 Para. 6 TzBfG, otherwise the notification can be made up for. Depending on the specific case, the termination is not dependent on the fulfilment of the purpose, but on the discontinuation of the purpose, e.g. when the project for the duration of which the employee was hired is discontinued. The principles of termination for a fixed term for a specific purpose apply accordingly to a fixed term by a condition subsequent.

A fixed-term employment relationship can only be terminated by ordinary notice if the employment contract (or, if applicable, an applicable collective agreement) contains a corresponding contractual provision, Section 15 (4) TzBfG, which must be sufficiently specific. If the contract contains notice periods or provides for termination for specified reasons with a notice period, this is deemed to be an agreement of an ordinary termination option.

Extraordinary termination for good cause is always possible regardless of any contractual provision and cannot be excluded by the employment contract.

Limitation of individual working conditions

The limitation of individual working conditions, such as a temporary increase in working hours, is usually carried out by means of a mutually agreed partial amendment to an existing employment contract. The requirements for this type of fixed term are generally not governed by the TzBfG; however, insofar as general terms and conditions are concerned, a review of the content is carried out in accordance with Sections 307 et seq. BGB is carried out. Within the scope of this content review, fixed-term employment conditions are effective, for example, if the entire employment contract could be permissibly limited in time.

Legal enforcement

The employee can have the legality of the fixed term reviewed by the labour court. According to § 17 sentence 1 TzBfG, the employee can bring an action for a declaratory judgement within three weeks of the termination of the employment relationship by expiry of the agreed period in order to have the continuation of the employment relationship determined. If the court determines that the fixed term is invalid and the employment relationship has therefore not ended, the employee is entitled to continued employment until the final judgement.

As part of the review of fixed-term contracts, it is only checked whether there was an objective reason justifying the fixed term at the time the contract was concluded or whether one of the exceptions for a fixed term without objective reason applies. The duration of the fixed term is not checked for its objective justification and can only serve as an indication for checking whether an objective reason was merely pretended. However, the judicial review includes a review of abuse of rights, i.e. whether the employer is abusing fixed-term employment relationships. This must be carried out if the total duration of the fixed-term contract exceeds six or eight years and more than nine or twelve extensions have been made. In the case of a duration of more than eight or ten years and more than 12 or 15 extensions, it is assumed that the fixed term is an abuse of rights, which the employer can refute by presenting justifying circumstances. Below this limit, the assumption of an abuse of rights depends on the circumstances presented by the employee.