Staff leasing - Restriction of the corporate group privilege
In Germany, staff leasing (or temporary work) is subject to the strict regulations of the Act on Staff Leasing (Arbeitnehmerüberlassungsgesetz, AÜG). However, many exemptions apply for staff leasing between the companies of a corporate group (corporate group privilege); in particular, there is no requirement for an official permit from the Federal Employment Agency (Agentur für Arbeit). The purpose of this is to give groups of companies the option of responding flexibly to different staffing requirements. However, the Federal Labour Court (Bundesarbeitsgericht, BAG) has considerably reduced the scope of applicability of the corporate group privilege in the case of longer-term staff leasing, which is why affected group companies should re-examine their staff leasing arrangements.
Exemptions from the permit requirement
In the case of staff leasing, an employee of an employer (lessor) is temporarily assigned to another business (lessee). The employment relationship with the employer continues, however the employee is integrated into the corporate organisation of the lessee and subject to its instructions/directives. A permit from the Federal Employment Agency is generally required for such staff leasing. There are however a number of exemptions from the permit requirement of which the corporate group privilege probably has the highest practical significance. Accordingly, no permit is required for assignments, “between group companies within the meaning of section 18 of the German Stock Corporation Act if the employee is not hired and employed for the purpose of the assignment”.(Section 1(3) no. 2 AÜG).
Facts of a case – In the case in question, a worker employed as a seat assembler at an automotive group had worked for almost 12 years for a (different) group company on its factory premises. He complained about the lack of a permit under the AÜG, the resulting ineffectiveness of the assignment agreement and, thus, the existence of an employment relationship between him and the lessee.
Restrictive interpretation of the corporate group privilege
In the appeal process, the state labour court in Lower Saxony dismissed the case in its ruling of 9.11.2023, and took the view that both the circumstances mentioned in the provision (hiring and employment for the purpose of the assignment) needed to be cumulatively present in order for the corporate group privilege to be refused in accordance with the literal meaning of the word “and”. The corporate group privilege should therefore then already apply if the employee was not hired for the purpose of the assignment.
Yet, the BAG sees things differently and interprets the “and” in the provision as an enumeration in the sense of “or” (ruling of 12.11.2024, case reference: 9 AZR 13/24). Accordingly, for the application of the privilege the employee may neither be hired for the purpose of the assignment nor employed for that purpose. At any rate, the court will assume the latter if the employee is continuously deployed as a temporary worker in a different group company over many years - which was clearly the case here.
