Personnel Partnerships - Cross-company personnel deployment for temporary support during the crisis

The current starting situation

The spread of the corona virus is a considerable burden on the economy. Many companies in Germany are forced to reduce their business operations or even to close down completely or partially. In other sectors of the economy, such as food retailing or companies providing services of general interest, the increased demand for products or the increased demand can hardly be met. In these sectors, personnel capacities are often insufficient in view of the crisis situation.

In this context, there are currently widespread reports of so-called personnel partnerships. In the following, we present various legal options for structuring such personnel partnerships. 

Variant 1: Suspension agreement and time limit 
The "McDonald's - Aldi" model

Employee and employer agree by mutual consent that the existing main employment relationship will be temporarily suspended for the period during which the employee is to be employed in another company. For this period, the employee enters into a (new) temporary employment relationship with the company of assignment. 

Legal design

The suspension of the employment relationship with the principal employer has the consequence that the essential obligations of the contracting parties cease to apply. The employee is not obliged to perform his work during the period of suspension. In return, the main employer's obligation to pay remuneration is eliminated. The ancillary obligations under the employment contract, such as the duty of secrecy and confidentiality, remain in force. For security reasons and as an incentive for the employee, it should be made clear that the employee will return to the previous employment after the end of the fixed-term contract. Furthermore, as an additional incentive for the employee, a termination by the main employer during the period of suspension can be excluded.  

The following applies to the limited-term employment relationship in the employing company: In the case of new hires, a fixed-term employment relationship of up to two years is permissible without need to provide a reason, unless a fixed-term or unlimited employment relationship had already existed with the same employer before (Sec. 14 Subsec. 2, TzBfG). It must be taken into account here that the limitation of an employment contract must be agreed in writing in order to be effective (Sec. 14, Subsec. 4, TzBfG). If the agreement on a fixed-term contract is validly agreed, the employment relationship ends upon expiry of the period for which it was entered into. 

The cooperation agreement between the participating companies may also contain provisions on the termination of the cooperation, on prohibitions of solicitation or on any commission claim upon conclusion of an unlimited employment contract with the employing company following the personnel partnership. A reference to special confidentiality obligations should also be included. 

Voluntariness

If an obligation of the employee to temporarily work for a third party does not result from a possibly applicable collective bargaining agreement, the employment of the employee is only possible on the basis of an amicable agreement (Sec. 613 Sentence 2 BGB). 

Crediting of other earnings

If the main employer is obliged to continue to pay the remuneration despite the loss of work (default of acceptance), a crediting of the omitted earnings according to Sec. 615 Sentence 2 BGB is possible. If the employee maliciously omits the possibility of temporary employment with a third party, he must allow the fictitious interim earnings being credited according to this provision. Such crediting is possible in the present case if a relevant collective bargaining agreement regulates the employee's temporary employment with another company and thereby ensures that the provisions of the collective bargaining agreement apply. 

The employee acts maliciously if he intentionally remains inactive in the knowledge of the objective circumstances (possibility of work, reasonableness of the work conditions and consequences of the disadvantage for the employer) or fails to take advantage of the opportunity offered to him to start work. In any case, the activity will be reasonable if a legal basis in a collective agreement guarantees comparable working conditions at the employing company.

As a result of the collectively agreed remuneration, the main employer also has the actual possibility of quantifying and asserting the earnings that were otherwise not earned. 

Participation of the works council

In principle, the hiring of employees in companies with more than 20 employees requires the consent of the works council (Sec. 99 BetrVG). Therefore, the works council in the employing company must agree to the temporary employment. 

The suspension agreement at the main employer is not subject to the works council's right of co-determination. The suspension of the employment relationship is not a transfer within the meaning of Sec. 99, Subsec. 1, Sentence 1, in conjunction with Sec. 95 Subsec. 3 BetrVG. 

According to decisions of the Federal Supreme Labor Court, the subsequent resumption of the suspended employment relationship also does not constitute a hiring or transfer requiring approval. It is therefore not generally subject to the co-determination of the works council. However, the works council must consent to the resumption of the employment relationship after the suspension of the employment relationship, pursuant to Sec. 99, BetrVG, if the circumstances of the employment change fundamentally (see BAG dated April 5, 2001 - 2 AZR 580/99). 

Dissolution of the personnel partnership

If the temporary staffing requirement decreases, the termination of the fixed-term employment relationship can be considered in accordance with the general regulations. However, this presupposes that the ordinary right of termination is expressly provided for. If the waiting period according to Sec. 1 Subsec. 1 KSchG (6 months) has not yet been fulfilled, no reason for termination is required. 

The suspension agreement should provide for a return clause between the employee and the main employer in the event of early termination of employment with the host employer. 

Option 2: Temporary joint operation

In addition, several companies may temporarily cooperate closely to pursue a common business purpose. 

Legal design

According to the principles developed by the Federal Supreme Labor Court, a business can be run by several employers as a joint operation (cf. Sec. 1, Subsec. 1, Sentence 2, BetrVG). A joint operation of several enterprises ("joint operation") is to be assumed if the operating resources of the participating enterprises available in a business establishment are combined, ordered and used in a targeted manner for a uniform technical work purpose and if the use of human manpower is controlled by a unified management apparatus (see BAG dated February 11, 2004 - 7 ABR 27/03). This presupposes that the independent companies involved have legally joined together to form a joint management (management agreement). An important criterion here is the cross-employer deployment of personnel.

On the other hand, several undertakings do not establish a  joint operation if one of the undertakings limits itself to making personnel available to the other for the latter's operational purposes without itself pursuing any purpose other than the provision of personnel. This must be taken into account accordingly. Consequently, the business purpose of all companies involved must be more than the lease of personnel. To this end, it must be examined, taking into account the circumstances, which other business purpose is pursued in each case. A business purpose need not be permanent. Rather, a temporary business purpose can also be considered. Such a common business purpose could possibly be the maintenance of a supply function for patients and personnel in companies of general interest. 

The management agreement must show that there is equal management by all employers. Joint management may relate to specific departments or parts of the company. Joint management can, for example, be achieved by joint personnel management, which makes decisions on essential personnel, social and labor matters. In addition, the agreement should contain provisions on the jointly used operating and personnel resources and on their concerted management. The agreement may also be concluded tacitly and is already presumed to exist if the companies actually join together for joint management and act accordingly.  

The agreement should include provisions on possible non-solicitation agreements, the possibility of dissolution of the joint venture and possible commission claims between the participating companies in the event of employee takeovers. A reference to special confidentiality obligations is also important.

In the case of cooperation of employees in a temporary joint undertaking, the employees' contractual relations with their respective contractual employer will remain unaffected. The general principle of equal treatment must be observed not in relation to the joint operation, but in relation to the company. Thus, the principle that only the employees of oneundertaking are to be treated equally, even if they are employed in a joint operation across the undertakings, remains valid. Working conditions, such as wages in particular, do not therefore necessarily have to be standardised across the companies in the joint operation. 

The formation of a joint operation has consequences under dismissal law. In determining the threshold value for the application of the German Protection Against Dismissal Act (Kündigungsschutzgesetz - KSchG), the employees employed in the two companies engaged in the joint operations are added together in the determination pursuant to Sec. 23 Subsec. 1 Sentence 3 KSchG. In the case of Sec. 17 KSchG, what matters is the total number of employees to be dismissed by all participating employers in relation to the number of employees in the joint operations (see ErfK/Kiel, 20th ed. 2020, KSchG Sec. 17 marginal no. 10a). Within the framework of the social selection in the event of dismissal for operational reasons, a cross-company social selection of all employees in the joint operation takes place.

With regard to the thresholds for employee participation in companies under the One-Third Participation and Co-Determination Act, the prevailing voices in  literature also argue that all employees of the joint operations are attributed to each participating company. Against the background of the temporary nature of the joint operation, however, it can be argued that the organization must be of a certain duration in order to establish participation (cf. on the establishment of a works council-capable enterprise, the following comments under "Participation of the Works Council"). 

Voluntariness 

The employer can determine the content, place and time of the work performance in more detail at his own discretion (Sec. 106 GewO). Consequently, the employer may in principle unilaterally transfer the employee to the joint operation, provided that the employment contract or any applicable collective bargaining agreement does not restrict the right to transfer in this respect, which is unlikely to be the case. 

If a transfer is not possible, a change notice is possible. However, this is not expedient in the case of a joint operation planned on a temporary basis only, as the change would only be possible after the notice period has expired - and thus regularly too late. For an extraordinarily immediate change of notice, the prerequisite of unreasonableness for the employer is usually not met. Something else could at most result from special circumstances in the individual case (e.g. in the case of an economic situation of the employer that threatens the existence of the company, because even short-time work compensation for the employee is out of the question and therefore not available as a milder means of termination. ). 

Participation of the works council

The joint operation is basically understood as a "new" operationin the sense of the Works Constitution Act. However, the election of a works council requires that the organisation is set up for a certain period of time. It is not necessary to assume a longer or indefinite duration for this. A works council can also be elected in a seasonal operation pursuant to Sec. 1 BetrVG (cf. Fitting, BetrVG, 29th edition 2018 Sec. 1 BetrVG marginal no. 77). Therefore it can be argued under consideration of the intended duration and arrangement of the personnel partnership that the organization is not put on a sufficient duration and therefore no operation in the sense of Sec. 1 Subsec. 1 Sentences 1 and 2, BetrVG, is present. Accordingly, the works councils of the original businesses would continue to perform the tasks pursuant to the BetrVG. A codetermination-obligatory operational change under Sec. 111 BetrVG in form of a spin-off would not exist. 

However, if an organisation is set up on a permanent basis, the establishment of a joint operation can be considered as a separation from the original operation. A spin-off requires a balance of interests as a result of the change of operations in the sense of Sec. 111 BetrVG. Therefore in the existing establishments of the enterprises involved, their work councils, if existing, are to be involved. 

On the basis of a residual mandate pursuant to Sec. 21, Subsec. 1, Sentence 1, BetrVG, the works councils of the spinning-off companies must at the same time be involved in the recruitment of the new company pursuant to Sec. 99, BetrVG.

As soon as a works council has been elected in the joint operation, the works council of the joint operation is entitled to the rights under Sec. 99 ff. BetrVG, if the common enterprise employs more than 20 employees.

Dissolution of the personnel partnership

The dissolution of the joint operations requires the dissolution of the joint management apparatus. It is not sufficient to simply terminate the management agreement. Rather, a clear separation of personnel matters and operating resources must be brought about again. Depending on the circumstances, a transitional or residual mandate of aworks council formed in the joint venture (if any) may be considered. 

Option 3: External personnel deployment on the basis of temporary employment

Temporary employment is characterized by the fact that an employee is provided by one employer ("lender") to a third party ("hirer") for remuneration and for a limited period of time for the performance of work. 

Legal design

For this purpose, a written contract of transfer between the lender and the hirer is required first. In addition, an employment relationship must exist between the lender and the (temporary) employee. The work performance of the employee takes place in the business of the hirer. The employee is temporarily integrated into the work organization of the hirer and is subject to the latter's instructions.

The lender is obliged to pay the remuneration to the employee and to continue to pay remuneration in the event of holiday and illness. In doing so, he must grant the employee, for the period of assignment to the hirer, the essential working conditions, including remuneration, applicable in the business of the hirer for a comparable employee of the hirer (principle of equality). 

Permit requirement and exceptions 

In principle, the hiring out of employees is subject to a formal approval. The permit is issued by the Federal Employment Agency. 

Permission is not required if an employer with fewer than 50 employees, in order to avoid short-time work or dismissals, transfers to an employer for a period of up to twelve months an employee who is not hired and employed for the purpose of transfer (Sec. 1a AÜG). The Employment Agency must be notified in writing of this transfer in advance. 

In addition, regardless of the size of the company, no permission is required, in particular for transfers under the following conditions:

• in the same branch of industry to avoid short-time work or dismissals, if a collective agreement applicable to the hirer and lender provides for this, in the case of intra-group transfers (Sec. 1, Subsec. 3, No. 1, AÜG)
• Transfer between group companies within the meaning of Section 18 of the German Stock Corporation Act (AktG), unless the employees are hired and employed for the purpose of transfer (Sec. 1 Subsec. 3 No. 2 of the German Act on the Transfer of Temporary Staff)
• occasional transfers between employers, provided that the employees are not hired and employed for the purpose of the transfer (Sec. 1, Subsec. 3, No. 2a AÜG)

According to the Federal Ministry of Labor and Social Affairs, the requirements of Sec. 1 Subsec. 3 No. 2a AÜG for such occasional staff leasing in current crisis-related cases of need are generally met.

These include the following requirements:

• Due to the current crisis situation, there is an unforeseen shortage of personnel at the hirer's premises or the hirer has lost work.
• The employer has no intention of becoming a permanent lender. Therefore, the hiring out must be occasional.
• The employee may not be recruited and employed for the sole purpose of being hired out.
• In any event, the transfer is limited in time to the duration of the crisis situation.
• The employee must have agreed to the transfer.

So far, the provision has regularly been interpreted very narrowly. "Occasionally" means that the takeover is carried out as planned or only occasionally in case of special need (cf. Committee Drs. 17/11/431 "Lack of intention to repeat"). According to the case law of the Federal Supreme Labor Court, strict requirements must be imposed on the conditions "occasionally". The purpose of the exception provision is to exclude both with regard to the employee as well as to the leased enterprise occasionally occurring transfer agreements, such as the covering of a short-term peak demand of another enterprise (see BAG dated January 20, 2016 - 7 AZR 535/13).

Especially in comparison to the provision of Sec. 1a AÜG, which allows small companies to hire out employees for a period of two months in order to avoid short-time work or to dismiss them to an employer without a permit to hire out employees, the period of employment should be limited to one month. 

Even if the statement of the federal or state government does not have the force of law, it is reasonable and recommendable in the present case, taking into account the current situation, to consider the possibility of the exemption provision of Sec. 1, Subsec. 3, No. 2a AÜG as the basis for a personnel partnership. 

Voluntariness

The employer can determine the content, place and time of the work performance in more detail at his own discretion (Sec. 106 GewO). However, the employee is not obliged to perform his work for a third party without a separate agreement, Sec. 613 Sentence 2 BGB. If, therefore, no obligation to perform work - even temporarily - for third parties arises from the employment contract or any applicable collective bargaining agreement, an amicable arrangement is necessary. 

Participation of the works council 

In principle, the hiring of employees in companies with more than twenty employees requires the consent of the works council (Sec. 99 BetrVG). Also the employment of employees in the context of an employee leasing is subject to the co-determination in the enterprise of the hirer according to Sec. 99 BetrVG. 

Dissolution of the personnel partnership

The termination of the personnel partnership in the form of temporary employment is to be regulated in the temporary employment service contract. Accordingly, a short-term termination option should be provided for by both parties as soon as the use of the temporary workers is no longer necessary. 

The temporary employment service contract should also contain a provision on a possible solicitation ban or on a commission agreement when the hirer takes over a previously hired employee. 

Summary

We would be happy to advise you on the examination and conceptual design of a personnel partnership. In addition to the concepts presented, the hiring of machines together with operating personnel or the use of external personnel on the basis of a contract for work and services can also be considered. 

In any case, against the background of the current situation, our familiar labour law instruments can be used to develop flexible solutions for bridging temporary personnel requirements.