When agency work applies, who needs a licence and how long an assignment may last

A joinery with twelve staff lends a fitter to the business next door for three weeks and invoices €4,200 for it. A metalworking shop takes on a welder through a staffing agency, first for ten months and then, after a two-month break, for nine more. Neither owner looked at the Temporary Agency Work Act beforehand, and both should have.

Three parties, two contracts

Temporary agency work brings three parties together. The lender is the employer of the agency worker, owes the wage and pays the contributions. The hirer uses the worker in its own business and tells them what to do. Between the agency worker and the hirer there is normally no contract at all.

The Act ties agency work to two features that must both be present. Under section 1(1) sentence 2 AÜG the worker is integrated into the hirer's work organisation and follows the hirer's instructions. Anyone who tells an outside fitter when to start, what to work on and with whom is exercising exactly this power to give instructions.

Under a contract for work, by contrast, the contractor owes a result and directs its own people. The heading on the paper does not decide the matter. Section 12(1) sentence 2 AÜG provides that where the contract and the way it is actually carried out conflict, the actual performance governs the legal classification.

For small firms this sentence is one of the most important in the whole Act. An installation contract under which the client's foreman assigns the outside fitters every morning is in reality agency work. Freelancers working on their own are a different question, covered in the course on false self-employment; this course deals with other firms' employees.

A third condition rules out chains. Section 1(1) sentence 3 AÜG only allows lending where an employment relationship exists between the lender and the agency worker. A hirer may therefore not pass workers on to yet another business, and someone who is not the employer cannot lawfully lend anyone.

Duration is part of the concept as well. Under section 1(1) sentence 4 AÜG, lending is only permitted temporarily, up to a maximum period set in subsection 1b. Anyone who wants to fill a post permanently with the same agency worker will therefore sooner or later hit a fixed limit, which is calculated further below.

The licence requirement and its exceptions

A lender who wants to hire out employees in the course of its economic activity needs a licence under section 1(1) sentence 1 AÜG. The Act does not require a business model as a staffing agency for this. Under section 17(1) the Federal Employment Agency administers the Act, and the licence is applied for there.

The duty falls on the lender, but the hirer is not off the hook. A hirer who lets a worker supplied by an unlicensed lender do work commits an administrative offence under section 16(1) no. 1a. The employment relationship may also pass to the hirer. The lender's licence therefore belongs on the table before every assignment.

Section 1(3) AÜG exempts several groups of cases from most of the Act. Three of them matter for trades and small firms. Number 1 covers lending between employers in the same sector to avoid short-time work or redundancies, where a collective agreement applying to both lender and hirer provides for it.

Number 2 concerns group companies within the meaning of section 18 of the Stock Corporation Act, where the employee was not hired and employed for the purpose of being lent out. The holding company's bookkeeper who helps out at the subsidiary for a while is covered. A staff pool set up specifically to work at sister companies is not.

Number 2a is the typical exception for a small business: lending between employers that happens only occasionally, again only for staff not hired and employed for the purpose of being lent out. The fitter the joinery lends to its neighbour once is the textbook case. Whoever turns this into a standing arrangement no longer meets the word “occasionally”.

The exceptions in subsection 3 do not exempt from everything. According to its opening sentence, the construction ban in section 1b sentence 1, the related offence with subsections 2 to 5 of section 16, and sections 17 and 18 on administration and cooperation between authorities still apply. Lending construction workers therefore remains delicate even between neighbours.

Under section 1(1a), seconding workers to a joint venture formed to produce a piece of work is not agency work. The conditions are that the employer is a member, that collective agreements of the same sector apply to all members and that all members are obliged by the joint venture agreement to perform contractual services independently.

Section 1a AÜG also provides a notification procedure. An employer with fewer than 50 employees needs no licence if, to avoid short-time work or redundancies, it lends an employee not hired for lending to another employer for up to twelve months and has notified the Federal Employment Agency in writing beforehand.

• first name and surname, place of residence and address, date and place of birth of the agency worker
• type of work to be performed and any obligation to work away from the premises
• start and duration of the lending
• company name and address of the hirer

Section 1a(2) requires these four items in the notification. The exemption depends on the notification being made before the lending; without it, the licence requirement applies again. An incorrect, incomplete or late notification is also an administrative offence under section 16(1) no. 2a.

Construction has its own barrier. Section 1b AÜG prohibits lending into construction businesses for work usually done by manual workers. It is only allowed where generally binding collective agreements provide for it, or between construction businesses if the lending business has demonstrably been covered by the same framework and social fund agreements for at least three years.

Application, term and expiry of the licence

Under section 2(1) AÜG the licence is granted on written application. The authority may attach conditions and requirements, even later, and may grant it subject to revocation where the application cannot yet be assessed conclusively. What matters most to the hirer is that the licence exists throughout the whole assignment.

Under section 2(4) the licence is limited to one year. The lender must apply for renewal no later than three months before the year ends. If the authority does not refuse before expiry, the licence is extended by another year. Here the authority's silence works in the lender's favour.

If renewal is refused, the licence is deemed to continue for winding up contracts concluded while it was valid, but for no more than twelve months. Under section 11(3) and section 12(2) the lender must inform agency workers and hirers without delay of the loss of the licence and of the expected end of the winding-up.

Once the lender has operated lawfully for three consecutive years, the licence may be granted without a time limit under section 2(5). It expires if the lender has made no use of it for three years. A trade business that applies for a licence as a precaution and never lends anyone loses it again this way.

Label and name the worker before anyone starts

A licence filed away as a precaution does not protect against a wrongly labelled contract. Under section 1(1) sentence 5 AÜG, lender and hirer must expressly describe the arrangement in their contract as temporary agency work, and they must do so before the agency worker is lent or starts working at the hirer.

Sentence 6 additionally requires both to specify the individual agency worker before the lending, with reference to that contract. A framework contract for “up to five helpers” is therefore not enough. Before every assignment it must be settled and recorded which person is coming on the basis of which contract.

Section 12(1) AÜG governs the form: the contract between lender and hirer must be in text form. In it the lender declares whether it holds the licence under section 1. For the hirer this declaration is more than a formality, because it is the first piece of evidence it can show in an inspection.

The hirer states in the contract what particular features the planned work has, what professional qualification it requires and what essential working conditions, including pay, apply to comparable employees of its own. The last item is only omitted where a collective agreement deviates under section 8(2) and (4) sentence 2.

• express description of the contract as temporary agency work
• the lender's declaration as to whether it holds the licence
• features of the work and the professional qualification required
• essential working conditions of comparable permanent staff, unless a deviating collective agreement applies
• naming of each agency worker before the assignment starts, with reference to the contract

The agency worker is informed in advance too. Under section 11(2) the lender tells the worker before each assignment that they will work as an agency worker and gives the hirer's name and address in text form. On signing, the lender also hands over the licensing authority's information sheet on the Act.

If the labelling or the naming is missing, the employment contract with the lender becomes void under section 9(1) no. 1a, and under section 10 an employment relationship with the hirer arises. The second module shows how this legal fiction works and how the agency worker can avoid it by a declaration of their own.

The maximum assignment period

Section 1(1b) sentence 1 AÜG contains two mirror-image prohibitions. The lender may not lend the same agency worker to the same hirer for more than 18 consecutive months. The hirer may not let the same agency worker work for more than 18 consecutive months. Both sides therefore breach the rule together.

The wording is tied to the same person and the same hirer, not to the post. Switching lenders therefore does not help. Sentence 2 counts in full the period of previous lending by the same or another lender to the same hirer.

Counting has one condition: no more than three months may lie between the assignments. If the break is longer than three months, earlier assignments are disregarded and the count starts again. With a break of exactly three months or less, the earlier months of assignment count in full. It is the assignments that are counted, not the break.

The 18 months are not set in stone. Under sentence 3, a collective agreement of the parties in the sector where the work is done may set a different maximum period. What counts is the agreement of the sector in which the worker is deployed, that is the hirer's sector, not an agreement for the staffing industry.

Hirers not bound by a collective agreement have two routes. Under sentence 4 they may adopt deviating rules of such an agreement within its scope through a works or service agreement. Where the agreement allows deviating rules in a works agreement under sentence 5, sentence 6 lets them provide for up to 24 months, unless it says otherwise.

Both routes require a works or service agreement, and so an employee representative body to conclude it with. A small business with no works council and no collective agreement therefore cannot extend the maximum period itself. For it, the statutory limit of 18 months remains.

Where several collective agreements could apply, sentence 7 points to the one representative of the hirer's sector. Churches and religious communities under public law may provide for different maximum periods in their own rules under sentence 8.

Exceeding the limit carries two risks. The employment contract with the lender becomes void under section 9(1) no. 1b, and lending beyond the maximum period is an administrative offence under section 16(1) no. 1e. Anyone who wants to keep a proven agency worker longer should therefore hire them directly in good time.

In practice this means the hirer keeps its own record for each agency worker, with the start and end of every assignment, even across changing lenders. Only the hirer knows all assignments on its premises; an individual lender may see only its own part of the chain.