Temporary work: CJEU again scrutinising maximum duration of temporary assignments

The Court of Justice of the European Union will once again have to consider the maximum duration of a temporary assignment in the first sentence of section 1(1b) of the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG) in a request for a preliminary ruling. Specifically, the question is how it affects the maximum assignment period if a transfer of business has taken place on the side of the user undertaking during a temporary employee’s assignment.

In order to clarify the issue, the Ninth Senate of the German Federal Labour Court submitted a request for a preliminary ruling to the CJEU on 1 October 2024. The outcome of these proceedings has important practical implications for temporary employment and agency work.

1. Background

The story behind the request for a preliminary ruling is a legal dispute between a company in the plumbing supplies industry (the defendant) and a temporary agency worker (the claimant). The claimant was employed as a temporary agency worker in logistics, picking products, from 16 June 2017 to 6 April 2022. Initially, the user was a production company that managed logistics as a business unit. On 1 July 2018, there was a partial transfer of operations from the production company to the defendant. In this transfer, the defendant acquired the logistics department from the production company. The claimant continued to be employed in this department even after the transfer of business. In the legal dispute, the claimant asserted that an employment relationship was established between the parties on 16 December 2018, since the statutory maximum assignment period under section 10(1) of the German Temporary Employment Act was exceeded. The first sentence of section 1(1b) of that Act stipulates that the temporary agency may not assign the same temporary employee to the ‘same user undertaking’ for more than 18 consecutive months. However, the collective agreement applicable to the industry in which the employee works may deviate from the statutory maximum assignment period.

The defendant did refer to the longer maximum assignment period under the collective agreement for temporary employment in the metal and electrical engineering industry in North Rhine-Westphalia. However, this argument was unsuccessful because the conditions were not met: the logistics activities performed by the defendant were not part of the manufacturing process, as would have been required. Therefore, the defendant did not run a business covered by the collective agreement. The defendant therefore had to observe the statutory provisions on the maximum duration of the temporary assignment.

The decisive question is therefore whether (i) the production company (as the seller of the undertaking) and the defendant (as the buyer of the undertaking) are to be regarded as the same user undertaking or (ii) whether the maximum assignment period restarts when the client company changes hands.

While the Labour Court dismissed the action, the Higher Labour Court upheld the action upon the claimant’s appeal. It ruled that the decisive factor for calculating the maximum assignment period is whether the transfer modalities remain the same despite the transfer of business. Therefore, the formal transfer to the specific company is not the deciding factor.

In the appeal on a point of law, the Federal Labour Court has now stayed the proceedings. It considers it necessary to clarify whether and, if so, on what terms the seller and the buyer are to be regarded as a single ‘user undertaking’ within the meaning of Article 3(1)(d) of Directive 2008/104/EC when calculating the maximum assignment period in the event of a transfer of business.

2. Practical implications

The Ninth Senate has also stayed simultaneous proceedings pending the CJEU’s decision on the request for a preliminary ruling. Clarifying this issue is of general importance as a uniform clarification will lead to greater legal certainty.

The CJEU now has to decide. And a lot depends on this decision. If the CJEU comes to the conclusion that a transfer of business on the part of the user does not interrupt the assignment period, this will have far-reaching consequences in practice for both the temporary agency and the user undertakings. The assignment period after the transfer of business will then normally be cut short considerably. The acquirer of the undertaking must keep a close eye on this. Otherwise, there is a risk that an employment relationship might be presumed by law. However, such a situation is often not desired, especially not by a business acquirer, as it usually involves back payments of social insurance contributions and taxes. In addition, if the maximum assignment period is exceeded, both sides face substantial fines. In some cases, criminal liability and regulatory consequences (up to and including exclusion from public tenders) may even be considered.

Now, businesses and lawyers have no choice but to await the decision of the CJEU. This issue should be taken into account when conducting due diligence and in company purchase agreements when selling companies.

Security can be created with an efficient compliance system that also significantly reduces liability risks. One component of this is our legal tech solution "Noerr Contractor Compliance Check", which supports companies in the commissioning and deployment of external personnel. The tool integrates all the necessary processes for the efficient and legally compliant procurement of external personnel in one platform. For further information, please visit our website.

If you are interested in the topic, please register for our quarterly update on the use of external personnel - webinar on 30 October 2024. We look forward to your participation.