No temporary work: landmark ECJ ruling on permanent staff provision

What is a provision of staff?

Time and again, employers such as municipalities, hospitals under municipal sponsorship, and public utilities subject to a collective bargaining agreement for the public sector (“TVöD”) establish service companies and outsource tasks. If employees performing these tasks object to the transfer of their employment relationship to the new service company, they are often provided for permanent work by way of staff provision. Art. 4 (3) of the TVöD expressly permits the provision of staff, and Art. 1 (3) no. 2b) of the German Law on Temporary Employment (“AÜG”) excludes the provision of personnel from the AÜG’s scope on the basis of the TVöD.

Until now, it was unclear whether this permanent provision of staff, which is permissible under national law, falls within the scope of the European Temporary Agency Work Directive (Directive 2008/104), violates such Directive and may therefore no longer be permitted under national law.

With a recent decision dated June 22, 2023 (ECJ dated June 22, 2023 - C-427/21), the ECJ has now provided clarity. It has explicitly stated that a permanent provision of staff after outsourcing does not fall within the scope of the Temporary Agency Work Directive. 

A lawsuit had been filed by an employee of a clinic in Baden-Württemberg, which is run in the legal form of a GmbH (German limited liability company) and whose sole shareholder is a legal entity under public law. The employment relationship was governed by the collective agreement for the public sector in the area of the Federation of Municipal Employers’ Associations as amended September 13, 2015 (“TVöD”).

In 2018, the clinic outsourced various areas (including its “post office”, “archive” and “library”) in which the plaintiff worked to a service GmbH founded by the clinic. Such spin-off and transfer of tasks would generally have resulted in the transfer of the plaintiff’s employment relationship with the clinic to the service GmbH. However, the plaintiff exercised his statutory right (Art. 613a (6) BGB (German Civil Code) and objected to this transfer in due time.

Due to such objection, the plaintiff’s employment relationship with the defendant clinic continued. The clinic subsequently made the plaintiff permanently available to the service GmbH for work by way of staff provision pursuant to Art. 4 (3) TVöD. Although the plaintiff continued to be employed by the clinic, he was required to perform the services owed under his employment contract at the service GmbH, which was also authorized to give him technical and organizational instructions. The plaintiff continued to receive his remuneration from the clinic.

The plaintiff filed an action against the permanent provision of staff and his obligation to work for the service GmbH for a declaration that he was not obliged to perform his work permanently at the service GmbH despite the relocation of his work area. In support of his claim, he argued that the regulation permitting such a staff provision violated EU law and in particular the European Temporary Agency Work Directive 2008/104 because it led to a permanent provision of staff. 

After the competent courts of instance dismissed the action, the plaintiff appealed to the German Federal Labor Court (“BAG”). The BAG initially suspended the proceedings and referred questions to the ECJ for a preliminary ruling in 2021, in particular on whether the European Temporary Agency Work Directive applies to cases of staff provision such as the present case.

In its decision of June 22, 2023, the ECJ concluded that the Temporary Agency Work Directive was not applicable to cases such as the present one.

When is an employment relationship subject to the Temporary Agency Work Directive according to the ECJ?

In order for an employment relationship to fall within the scope of the Temporary Agency Work Directive, the ECJ has held that an employer must intend, both at the time the employment contract is concluded and at the time of each of the actual provisions of staff, to provide the employee in question to a hiring company on a temporary basis only. 

These requirements are not fulfilled if, as in the case at hand, the employee has originally been hired in order to perform the tasks of his employer, namely the clinic, and if such employer, at the time of the employment contract’s conclusion, had no intention to provide the employee to a hiring company. According to the ECJ, the intention of a temporary provision was lacking not only at the date of hiring but also upon provision to the third-party company if – as in the case at hand – the employment relationship with the employer continued only because the employee had exercised his right to object to this employment relationship’s transfer to such third-party company. 

Since the defendant clinic had no intention to provide the plaintiff to a hiring company and the provision was not temporary but permanent, the Temporary Agency Work Directive is not applicable in the ECJ’s opinion. 

According to the ECJ, the Temporary Agency Work Directive exclusively relates to temporary employment relationships, transitional employment relationships or employment relationships limited in time, but not to permanent employment relationships. 

The Temporary Agency Work Directive’s objectives – the flexibility of companies, the creation of new jobs or the promotion of the temporary workers’ access to unlimited employment, cannot be achieved in cases where, as in the case at hand, the tasks performed by an employee are finally transferred to a third-party company and the employee’s employment relationship with his previous employer continues due to such employee’s objection to his employment relationship’s transfer. Furthermore, the temporary worker’s protection provided for by the Temporary Agency Work Directive is not required and therefore not applicable for employees such as the plaintiff who objected to his employment relationship’s transfer to the third-party company and for whom all work conditions remain in place. 

The BAG has to finally decide on the case. However, due to the ECJ’s clear stance, there is no reason to fear that the BAG will consider the permanent provision of staff due to the TVöD subsequently to the tasks’ outsourcing to a third-party company and consequently the privileged treatment of these cases pursuant to Art. 1 (3) No. 2b) AÜG to be in violation of Union law. 

According to the ECJ’s decision, the permanent provision of staff subsequently to an outsourcing, as provided for by the TVöD and the AÜG for public employers, is thus still permissible. This also puts an end to the concerns that the ECJ might deprive employers of this option, which would have resulted in substantial personnel-related problems and additional cost for many of them, are off the table.