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Germany – Politicians differ over legality of retroactive payments from staffing agencies

30 December 2011

There is still confusion over whether German staffing agencies, which had signed collective bargaining agreements with the (now officially) illegal Christian Unions (CGZP) will have to pay billions of Euro for outstanding social security payments and underpayment of temporary employees.

In general, agency temporary employees receive equal pay for equal work unless there are specific collective bargaining agreements in place between temporary employment agencies and unions. CGZP's claim to fame was that it consistently negotiated far lower pay and working conditions on behalf of temporary employees than other German unions.

In December 2010, the highest labour court (BAG) ruled that CGZP cannot be regarded as a union because it is not sufficiently representative of temporary employees and can therefore no longer negotiate collective bargaining agreements in the future.

The big question is now whether BAG's verdict applies retroactively, in which case temporary employees can claim the difference between their CGZP level of pay and equal pay for equal work. The same would apply to the pension funds and the social security offices. The matter will be decided by the German courts on a case-by-case basis.

The German pension fund (Deutsche Rentenversicherung) has already initiated the inspection of 1,700 temporary staffing agencies and has issued retrospective pension contribution claims of 7.7 million Euro.

In an official letter leaked to Frankfurter Allgemeine Zeitung newspaper the Secretary of State for the Economy, Bernhard Heitzer has asked his colleague Gerd Hoofe in the Ministry of Employment to be flexible in the ministry's application of retroactive payment claims from staffing agencies.

Heitzer wrote "there is the threat of further retroactive payments, which could amount to 2 billion Euro. Agency temporary employment is an important instrument for the flexibility of employers and it has contributed to the job creation in this country. We are therefore concerned that retroactive payments might result in the bankruptcy of staffing agencies and the loss of agency jobs."

Heitzer also points out that the Hamburg Social Court has expressed doubts over the legality of retroactive payments.

The Social Democrat opposition (SPD) and the unions believe that the Ministry of Employment should show no mercy for staffing agencies whilst the conservative coalition partner CDU/CSU thinks that staffing agencies acted in good faith when they signed collective bargaining agreements with CGZP and should therefore be protected by the 'Protection of Confidence' law (Vertrauensschutz).

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