06. Feb 17

BAG: Fixed-term employment contract pursuant to court settlement

Even in the case of fixed-term employment contracts concluded pursuant to a court settlement, employers need to ensure that the fixed term is effective. That was the verdict of the Bundesarbeitsgericht (BAG), Germany’s Federal Labour Court.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: In the absence of an objective justification, the maximum duration of a fixed-term employment contract cannot exceed two years. A longer fixed term is possible if there is an objective reason justifying this. On such reason may be a court settlement.

That being said, employers that conclude a fixed-term employment contract pursuant to a court settlement need to mindful of how that settlement came about, as demonstrated by a ruling of the Bundesarbeitsgericht from June 8, 2016 (Az.: 7 AZR 339/14). The instant case concerned a fixed-term employment contract concluded by a federal state authority with the plaintiff. The contract was initially limited to a period of two years. After these two years passed, the employer filled the position with another applicant. This alone prompted the plaintiff to take opposing legal action. To settle the legal dispute, the federal state sought to accommodate the plaintiff by offering to conclude a one-year fixed-term employment contract by way of a court settlement. Both parties approved this.

The plaintiff then brought another legal action once this contract also came to an end, arguing that the fixed term had not been effectively applied to her employment contract because it had not been objectively justified. She went on to say that the application of a fixed term had not come about pursuant to a court settlement. However, the BAG dismissed the claim, stating that for a court settlement it is generally not enough for the parties to present a unanimous settlement proposal to the relevant court, as this entails a lack of supervisory involvement on the part of the court. In the present case, the parties to the dispute had in fact initially developed the settlement, but this was subsequently only submitted by the employer to the court. The latter proceeded to examine its content and forwarded it to the plaintiff’s side as a court proposal. The plaintiff later approved the settlement.

Thus, the prerequisites for a court settlement had just barely been met, with the result that the employment contract’s fixed term was effective. Employers should nonetheless always ensure that the court plays a decisive role in the settlement.

Should any issues arise relating to the workplace, lawyers who are experienced in the field of employment law can offer advice.

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