A prominent position and the powers associated with it do not constitute a reason for a fixed term "according to the nature of the activity"

An employment of an employee in a prominent position and a permanent conflict with the executive board that goes hand in hand with his powers do not constitute a factual reason for an effective fixed term within the meaning of Section 14 (1) sentence 2 no. 4 of the German Law on Part-Time Working and Fixed-Term Contracts (TzBfG). A typical "case of wear and tear", as assumed by case law, for example, in the case of actors due to the audience's need for variety, is then not present. This follows from a ruling of the Federal Labour Court (BAG) (ruling dated June 1, 2022, 7 AZR 151/21).

Facts

The ruling of the BAG is based on the following facts: The defendant hospital as an institution under public law was divided into two campus parts according to its main statutes, each of which represented institutions without legal capacity and each of which was managed by a campus directorate. The plaintiff was employed by the defendant in 2013 as the managing director responsible for both centers. Initially, the parties had agreed on a fixed term until the end of June 2018, but in June 2015 they agreed on an extension of the fixed term until the end of 2019, including a salary increase. The defendant was then unwilling to continue employing the plaintiff beyond December 31, 2019. The plaintiff filed an action for a fixed-term contract with the competent labor court pursuant to Sec. 17 TzBfG. He was of the opinion that there were no grounds for an effective fixed-term contract. The defendant referred to Sec. 14 (1) Sentence 2 No. 4 TzBfG, according to which a reason for a fixed term exists in the "special nature of the activity". Finally, the outstanding activity of the plaintiff, which was accompanied by the commercial and economic responsibility for the two independent parts of the company, required a close and trusting cooperation. The plaintiff's duties also included ensuring the exercise of freedom of research and teaching under Article 5 (3) of the German Basic Law (Grundgesetz - GG). In addition, due to the level of remuneration and the plaintiff's free allocation of working hours, there was a comparability with the typically fixed-term employment contract of a limited liability company managing director who is not subject to directives. The defendant's Articles of Association also provide for a corresponding fixed term.

The Kiel Labor Court dismissed the action, while the Schleswig-Holstein Regional Labor Court amended the first-instance judgment and upheld the action. In its appeal, the defendant sought to have the decision of the labor court restored.

Reasons for decision

The Federal Labor Court dismissed the defendant's appeal. It held that the fixed-term contract at issue was invalid. The ground for a fixed term of "special nature of the activity" was not present here. A fixed term is always only possible if the work performance has special features from which a justified interest of the employer for a fixed term arises which outweighs the employee's interest in an unlimited employment. In the present case, such an overriding interest did not exist with regard to the objections asserted by the defendant. The fixed term was not justified by constitutional aspects. The assertion of constitutional rights (Article 5 (3) GG) is precluded for the defendant, since the defendant is obligated under fundamental rights, but is not the bearer of fundamental rights himself. In addition, the plaintiff was obligated to observe the instructions of the management board and was employed within the framework of an employment contract dependent on instructions, so that an arrangement similar to a contract of service could not be assumed. Even in the case of an activity that was predominantly not subject to instructions, there was no reason for a fixed-term contract within the meaning of the TzBfG, as a fixed-term contract with senior employees in positions of trust also requires a material reason. A position "similar to that of a managing director" does not constitute a reason for an effective fixed-term contract, nor does the permanent conflict between the plaintiff and the management board inherent in the plaintiff's position. The defendant could not rely on the provisions of its articles of association, the requirements of which were in any case not met with the fixed term, which was longer than foreseen in the articles of association, since autonomous statutory law is unsuitable to justify a fixed term.

Note for practice

The decision of the BAG follows the previous case law of the higher courts on the law on fixed-term contracts and does not make it easy for companies to keep open the possibility of a dynamic change in top positions and thus also to provide younger employees with opportunities for promotion. This is because the BAG maintains that a fixed-term contract should be the exception, i.e. only possible within the framework of narrow conditions. Employers who want to allow a certain dynamic and fluctuation in top management positions should therefore in any case adhere to the known guidelines of the case law on the factual grounds for a fixed term or consider other options.