German Temp Workers Can Be Paid Less if Labor Pact Confers Offsetting Benefits

​Temporary workers in Germany can be paid less than permanent employees in a comparable position if a collective bargaining agreement grants them advantages that neutralize, or compensate for, the unequal treatment, the country's Federal Labor Court ruled.

The decision cleared up legal uncertainty by confirming that German statutes allowing such an exception to the country's equal treatment principle, which encompasses equal pay, comply with European Union (EU) laws, according to legal experts.

In its ruling, the court acknowledged a temporary agency worker had been subjected to unequal treatment by being paid a lower hourly wage than permanent employees, but it clarified that an EU directive allows such treatment under certain collective bargaining agreement provisions.

"Unequal treatment is only permissible if such disadvantage is offset or neutralized by other terms and conditions," said Verena Braeckeler-Kogel, an attorney with Pusch Wahlig Workplace Law in Cologne, Germany.

Temporary Agency Worker Protection

The European Court of Justice (ECJ) previously had noted that countervailing benefits that offset the differing treatment and respect the overall protection of temporary agency workers can allow for an exception from the equal treatment principle, said Gerlind Wisskirchen, an attorney with CMS Germany in Cologne.

The German labor court's decision codifies the ECJ ruling into German law, confirming the exception can apply in the country, Wisskirchen said. She noted that the court cited the following points in its ruling:

• A potential countervailing benefit under collective bargaining agreements is continued payment between assignments. In Germany, unlike in other European countries, this is also possible under fixed-term temporary employment contracts. In the recent case, continued payment had been guaranteed by the collective bargaining agreement.
• German lawmakers have ensured that the economic and business risks lie with the temporary employment agency and not with the workers during nonassignment periods.
• German minimum-wage regulations guarantee the wage to be paid, and it can't be undercut, even by the collective bargaining agreement.
• A deviation from the principle of equal treatment in Germany generally is possible only for an assignment's first nine months.

In the German court's opinion, "the combination of continued payment during the nonassignment period with the statutory protection regulations fulfills the requirements of the directive," Wisskirchen said. "The overall protection of temporary agency workers is ensured."

Clearing Up Legal Uncertainty

The court assumed there was sufficient overall protection of the temporary workers to offset the disadvantages caused by unequal payment, Braeckeler-Kogel said.

Even before the decision, the possibility of exception to Germany's principle of equal treatment already existed, according to the lawyers. "Nevertheless, it was disputed until now whether the applicable collective agreements and German exemption possibilities were compatible with European law. The ruling has now resolved this legal uncertainty," Wisskirchen said.

The ruling confirms the current legal situation and provides legal certainty, which will benefit employers, Wisskirchen said. "Employers can rely on the fact that the exceptions used are legally effective. This guarantees the ability to plan the deployment of temporary workers," she said. "In addition, there is no danger of retrospective payment of wages."

Braeckeler-Kogel added that in practice, there were many collective bargaining agreements providing for lower remuneration for temporary workers, and these were used by many agencies. This practice is also in line with German law, as the Temporary Work Act explicitly allows exemptions from equal pay and equal treatment under a collective bargaining agreement in certain circumstances.

"However, there had always been legal uncertainty whether such statutory provision in German statutory law was indeed in line with EU law," she said.

Consequently, there were concerns by agencies that they could be subject to retrospective payments and additional social security contributions. "These concerns now turned out to be unfounded, and there is legal certainty for employers that relevant collective bargaining agreements with lower remuneration can still be agreed and used for temporary workers," Braeckeler-Kogel said.

"This ruling has significant implications for agencies offering temporary workers. These can still operate on the basis of lower wages for the first nine months of an assignment, provided that the relevant collective bargaining agreement provides for sufficient compensation of such disadvantage," she added. "Therefore, agencies should always check whether the collective bargaining agreements that they are using are compliant with these principles."

Companies using temporary agencies are also well-advised to check whether the agencies are fully compliant so they can avoid additional liabilities or higher costs in the future, Braeckeler-Kogel said.

"As the Temporary Work Act is very complex and formal, noncompliance can result in high fines and also in undesired consequences, such as a direct employment relationship with the temporary worker," she said.

Dinah Wisenberg Brin is a writer based in Philadelphia.