Provision of temporary workers in contrast to other forms of contract

Temporary employment is a constellation where a temporary employee is hired out (in other words: lent out) by his temporary employment agency to a customer (hirer).

In a nutshell, an employee is a person who is subject to another person’s right to issue instructions on the basis of a (work) contract and owes such other person the provision of labour for payment.

Pursuant to sec. 1 (1) sentence 2 of the Law on Temporary Employment (AÜG, Arbeitnehmerüberlassungsgesetz), a temporary worker is a person who is integrated as an employee into the hirer’s organisation and bound by the hirer’s instructions. The right to issue instructions is therefore key to the question as to whether or not a person is a temporary employee. A constellation constitutes temporary employment as soon as the real employer is no longer entitled to issue instructions to the employee for a given task, i.e. when this right has been transferred to a third party (for example, the employer’s customer and hence the hirer).

The revised AÜG contains a definition of the term ‘temporary worker’ in sec. 1 (1) sentence 2 AÜG. This must be read together with the newly introduced sec. 611a of the German Civil Code (BGB, Bürgerliches Gesetzbuch), which now defines the term ‘employee’ indirectly via the legal definition of the employment contract.

Sec. 611a BGB

The employment contract obliges the employee, in the service of another person, to perform work that is subject to instructions and is determined by a third party in personal dependence. The right to issue instructions can be related to the content, implementation, time and place of the activity. A person is bound by instruction if this person is not essentially free to organise their activities and determine their working hours. The degree of personal dependence also depends on the nature of the respective activity. In order to determine whether an employment contract exists, an overall assessment of all circumstances must be made. If the actual performance of the contractual relationship indicates that an employment relationship exists, the designation in the contract is irrelevant.

This new definition included in the BGB basically reflects only previous jurisprudence of the Federal Labour Court (Bundesarbeitsgericht).

Example of temporary employment

A car manufacturer urgently needs more personnel due to rising demand, but cannot find new employees. He therefore hires temporary employees from a personnel service provider (temporary employment agency) and employs these temporary employees in his company. The car manufacturer issues specific work instructions to the temporary workers which they carry out, but the temporary workers are paid by the temporary employment agency.

Distinction from service contracts and contracts to produce a work

External personnel can also work for a customer on the basis of a service contract or a contract to produce a work (read more…). The contractor owes the customer the contractually agreed services and/or the economic success. The contractor’s employees assigned remain bound by the contractor’s instructions.

A delicate situation exists in the case of service contracts and contracts to produce a work in conjunction with temporary employment because if a contract, albeit described as a service contract or a contract to produce a work, actually constitutes temporary employment, it can become expensive for both the customer and the contractor(read more…).