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Settlement in court does not routinely justify any fixed term

Settlement in court does not routinely justify any fixed term

The complainant employee was employed repeatedly with interruptions by the respondent employer from August 01, 2000 to May 26, 2012 based on fixed-term employment contracts.

The applicant filed a petition for review of the fixed term against the last period of fixed-term employment. After settlement out of court, the complainant informed the labor court that agreement exists on the complainant’s continued employment for a fixed term from July 01, 2012 to December 31, 2012. The respondent stated that she was in agreement with this decision. The labor court then issued a decision dated June 21, 2012, announcing that a settlement had been reached. In December 2012, the complainant filed a new petition for review of the fixed term. In her view, there was no objective reason for fixed-term employment. This was not based on a legal settlement as defined by sec. 14 para. 1 sentence 2 no. 8 of the Act on Part-Time Employment and Fixed-Term Contracts (German TzBfG), because the settlement came about pursuant to sec. 278 para. 6 sentence 1, 1st variant of the Civil Procedure Code (German ZPO). The respondent argued that based on good faith, the complainant had no right to file suit. At any rate, there was alleged to be an objective reason according to section 14 para. 1 sentence 2 no. 3 TzBfG.
The labor court found for the complainant, the Higher Labor Court (Saxony-Anhalt, decision dated February 26, 2015 – 3 Sa 318/13) rejected the suit. The successful appeal led to the decision being reversed and remanded.

The Federal Labor Court decided that a settlement reached according to sec. 278 para. 6 sentence 1, 1st variant ZPO generally does not justify limiting an employment contract to a fixed term pursuant to section 14 para. 1 sentence 2 no. 8 TzBfG, as the court normally does not share responsibility in concluding a settlement if the parties only present one settlement proposal to the court. That was the case here. Only if the settlement is concluded pursuant to section 278 para. 6 sentence 1, 2nd variant ZPO in such a way that the parties accept a written settlement proposal of the court by submitting briefs to the court does the court share responsibility in the content of the settlement. Therefore, only such a settlement according to the 2nd variant basically fulfills the conditions of sec. 14 para. 1 sentence 2 no. 8 TzBfG.

With respect to the objective reasons, the Federal Labor Court decided that the courts are required not only to examine the actual existence of an objective reason but also whether in weighing all circumstances of the individual case, the employer has resorted to fixed-term employment contracts in abuse of the law, in order to meet long-term labor demands. Determining the limit of institutional legal abuse decisively depends on the total duration of the fixed-term contracts, along with the number of contract extensions. By contrast, an interruption of two years of successive terms generally precludes successive terms of employment and thus any legal abuse.

Recommendation for practice

That is why employers are advised in corresponding settlements to ensure the involvement of the court in formulating and citing the definitive regulation of sec. 278 para. 6 sentence 1, 2nd variant ZPO. In addition, the Federal Labor Court confirms a test schema for the check for abuse in subsequent fixed-term contracts, which had already been established at the end of 2016 (Federal Labor Court, decision dated October 26, 2016 – 7 AZR 135/15).

Settlement in court does not routinely justify any fixed te

In this respect, employers are advised to comply with the above-mentioned limits in the extension of employment contracts extended based on objective grounds. It should be taken into consideration, however, that the existence of legal abuse (cf. sec. 242 Civil Code – German BGB) is ultimately a question of merits, in which all the circumstances of the individual case are to be fully considered. That is why in special cases, there may be deviations from the above-mentioned limits.

By Dr. Katrin Hasler-Hagedorn

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