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Employment relationship with agency despite a license for the supply of temporary workers of the contractor

Employment relationship with agency despite a license for the supply of temporary workers of the contractor

(Higher Labor Court Baden-Württemberg, decision dated December 3, 2014 – 4 Sa 41/14)

The defendant agency GmbH has used the plaintiff continuously in the same department at the same jobsite since 2011. The plaintiff was not employed by the defendant, but by three successive third-party contractors. The use of the plaintiff by the defendant was based on so-called Framework Work Agreements between the defendant and the third-party contractors. According to court decisions, the plaintiff was however incorporated fully into commercial operations and was under the authority of the defendant in respect to the work being performed. The plaintiff claimed that a mere “Fake Work Contract” was concluded and that an employment relationship between him and the defendant has existed since 2011. The defendant countered by arguing that the employment contracts of the plaintiff were applicable to and binding on the third-party contractors and that each of these possessed a License for the Supply of Temporary Workers. Neither in the Framework Work Agreements nor in the employment contracts of the plaintiff was it disclosed that employee assignment was taking place.

The Higher Labor Court decided that, due to the supply of temporary workers actually occurring, the contracts between the plaintiff and the third parties were null and void (§9(1) of the German Law on Labor Leasing). An employment contract between the plaintiff and the defendant agency, however, did come into existence (§10(1)(1) of the German Law on Labor Leasing. The defendant could not rely solely on the Licenses for the Supply of Temporary Workers of the third-party contractors. This constitutes contradictory behavior, since the defendant wanted to position himself beyond the German Law on Labor Leasing during the entire contractual period, and thus attempted to prevent the social protection of the plaintiff by exploiting the German Law on Labor Leasing.

Practical recommendations
It remains to be seen whether the decision of the Higher Labor Court Baden-Württemberg will be upheld in the event of a review. In particular, the decision is difficult to reconcile with the reasoning of the decision of the Federal Labor Court dated December 10, 2013 – 9 AZR 51/13 (see Newsletter 1st Quarter 2014). In that decision the Federal Labor Court made clear that an employment relationship in accordance with §10 of the German Law on Labor Leasing can be faked only in the absence of a License for the Supply of Temporary Workers.

Nevertheless, the decision furnishes grounds for action when external staff are hired under work/service contracts. However, the provision of a License for the Supply of Temporary Works by the contractor/service provider is itself not sufficient in the event of difficulties in drawing distinctions. in cases where third-party personnel are employed companies should ensure and regularly verify that the contractual relationship is not only called a work/service agreement on paper, but that it actually is one in practice.

By Dr. Alexander Krol

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