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Germany — Court ruling could cost temporary staffing agencies billions of Euro

09 December 2009
Monday's ruling by the labour court of Berlin to declare minimum wages negotiated by the 'Tariff Association of Christian Unions for Temporary Employment and Staffing Agency Services' (CGZP) as null and void will have a far-reaching impact for hundreds of employment agencies in Germany if the highest labour court (Bundesarbeitsgericht) confirms the judgment next year.

The Berlin court had argued that CGZP is not a representative enough organisation to negotiate minimum salaries on behalf of temporary employees.
The renowned professor of labour law Peter Schueren told WirtschaftsWoche magazine "the likelihood that the highest labour court will confirm the judgment is great because CGZP was so obviously set up to abuse the system."

According to Schueren, temporary employment agencies could face a retroactive bill of between one and three billion Euro for underpayment of social security contributions based on illegally low salaries.

Schueren said "temporary employment agencies will have to make financial provisions. In the case where they can't pay, their clients will have to come up with the money."

If the judgment is confirmed temporary employment agencies will have to pay between 10,000 Euro and 16,000 Euro for each of roughly 200,000 temporary employees over the period of the last four years.

Earlier this year the German office of the Austrian staffing agency Trenkwalder must have smelled a rat when they terminated their collaboration with CGZP and joined the Federal Association for Temporary Employment (BZA).

Meniar, the in-house temporary employment agency of drugstore chain Schlecker also pays minimum salaries based on CGZP contracts and will be nervously awaiting the decision by the highest labour court.

In theory, hundreds of thousands of temporary employees could also claim the difference between the CGZP pay and the pay their permanent counterparts have received in the past. Scheuren estimates that this could amount to between four and seven billion Euro of extra claims.



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