Does personnel secondment pursuant to Art. 4 Sec. 3 TVöD constitute inadmissible provision of staff?

Gabriele HeiseLabor Law

In an employer subject to the provisions of the German collective agreement for the public sector (“TVöD”) transfers tasks to a third party, such employer can, pursuant to Art. 4 Sec. 3 TVöD, request his employees previously entrusted with such tasks to now provide their services owed under their employment contract with such third party. Such measure, which is referred to as "personnel secondment" in the collective agreement, thus enables the employer to assign its employees to a third party on a permanent basis.

Personnel secondment is particularly widespread in hospitals and their service companies as well as in municipal companies. Previously, the provisions of the German Personnel Leasing Act (Arbeitnehmerüberlassungsgesetz – “AÜG”) did not apply to them due to the sector exemption pursuant to Art. 1 Sec. 3 No. 2b AÜG. Accordingly, employees could, at their employer’s request, perform their work on a permanent basis for a third-party company without the requirement for a permit or the 18-month time limit otherwise applicable to a provision of staff. This could now change: In its decision of June 16, 2021 (6 AZR 390/20 (A)), the German Federal Labor Court (“BAG”) has asked the Court of Justice of the European Union (“ECJ”) in a case pending before the BAG to answer the question of whether personnel secondments pursuant to Art. 4 Sec. 3 TVöD are covered by the European Temporary Employment Directive’s scope of protection (Directive 2008/104/EC) and whether, if this is to be affirmed, the Temporary Employment Directive permits a sector exemption as regulated in Art. 1 Sec. 3 No. 2b AÜG.

In the proceedings pending before the BAG, the plaintiff is employed by the defendant, which operates a hospital and whose sole shareholder is a corporation under public law. The employment relationship is governed by the collective agreement for the public sector (TVöD) as applicable to municipal employers.

In 2018, the defendant had established a Service GmbH and, subsequently, outsourced various fields of activity to such GmbH, inter alia also the plaintiff’s position. Such outsourcing resulted in a transfer of part of a business (Betriebsteilübergang). The plaintiff objected to his employment’s transfer to the service company pursuant to Art. 613a Sec. 6 BGB (German Civil Code); therefore, it remained in effect unchanged with the defendant. Upon the defendant’s request, however, the plaintiff has, for many years, permanently provided his contractually owed work at the Service GmbH within the scope of a personnel secondment pursuant to Art. 4 Sec. 3 TVöD; the Service GmbH also has the technical and organizational right to issue instructions to the plaintiff.

In its legal action, the plaintiff asserts that his secondment at the Service GmbH violated EU law and constituted an unlawful provision of staff; the defendant, in contrast, considers the personnel secondment to be admissible due to the sector exemption pursuant to Art. 1 Sec. 3 No. 2b AÜG.

The previous instances dismissed the case; the BAG submitted the question of whether or not personnel secondment is covered by the Temporary Employment Directive and the sector exemption is admissible for a ruling to the ECJ.

The ECJ’s rulings may have far-reaching consequences, in particular for municipal companies. If the personnel secondment should be covered by the Temporary Employment Directive’s scope of protection and the sector exemption should violate such Directive, it would constitute an inadmissible provision of staff. In such case, a permit would be required, and the transfer would also be limited to a period of 18 months. For many municipal employers, in particular also for hospitals, a secondment of personnel would no longer be possible in the previous form; this might result in significant labor-law related problems in many facilities.

Practical tip

All employers which previously provided staff to other companies, in particular service companies, by way of personnel secondment should closely monitor the further development and already consider their own and their service companies’ personnel structure and organization. If the ECJ considers the sector exemption to be contrary to European law, this will require quick action as an inadmissible provision of staff may have severe legal and financial consequences. 
We will inform you about the ECJ’s decision.

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