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Germany — Highest labour court decision nervously awaited by temporary employment agencies

10 February 2010

After last year's decision by the Berlin Labour Court to disqualify the Christian Unions (CGZP) from being able to negotiate minimum salaries with temporary employment agencies, the industry is now looking nervously towards the highest labour court of Germany (Bundesarbeitsgericht), which might confirm the Berlin judgment early this year, Financial Times Deutschland reports.

Germany does not have a minimum salary as such. Minimum salaries are negotiated sector by sector between unions and employers. Temporary employment is regarded as its own sector.

In theory, the government's regulation on 'equal pay for equal work' means that temporary employees must get the same wages as permanent employees who do the same jobs.
In practice, the regulation allows lower wages for temporary employees if these are officially negotiated by unions and temporary employment agencies.

The Berlin Labour Court decided that the Christian Unions must not be allowed to negotiate minimum wages because they are not representative of their members.

Should the highest Labour Court decide that minimum salary negotiations between the Christian Unions and temporary employment agencies are null and void, temporary employment agencies will have to retrospectively pay the difference between the wages they have paid and the wages, which applied to permanent employees over three years. On top of that, the difference on social security payments will have to be paid retrospectively over four years.
The Employer Association of Medium-sized Personnel Services Firms (AMP) warns that 100,000 temporary jobs could be lost if the highest Labour Court agrees with the Berlin judgment and that vast numbers of temporary employment agencies could go bankrupt over the judgment.

It is, however, unlikely that retroactive wage payments will have a massive impact on temporary employment agencies because few temporary employees are members of unions and would have to fight their own individual wars to get their money.

The real problem for temporary employment agencies would be the retroactive social security payments to the government, which would definitely become due.
Rolf Kowanz, Labour Law Specialist at DLA Piper in Munich, said "these [social security] payments would be the more dramatic part of the outcome. If the highest Labour Court agrees with the current judgment, the real question will be whether it also puts in a system to ease the effects this will have on employment agencies."



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