Abstract
This article critically examines the European Court of Justice's (ECJ) decision in the TimePartner case and its implications for labour market integration in the context of temporary agency work. The author supports the ECJ's position on the rule-exception relationship within Directive 2008/104/EC, emphasising equal treatment for temporary agency workers. The analysis explores the alignment between the ECJ's approach and the Directive's goal of creating a non-discriminatory, transparent, and proportionate framework for worker protection. Within the German legal landscape, where there has been reluctance to implement the Directive, complex collective agreements have led to substantial remuneration disparities between regular employees and temporary agency workers. The absence of statutory regulations on overall protection for temporary agency workers, coupled with reluctance on the part of courts to intervene in collective agreements, presents challenges for labour market integration. The article also addresses the assumption of an inherent warranted correctness of collective agreements and its potential implications for EU law enforcement, recognising this may limit the judicial review of collective agreements for compliance with EU Directives, potentially undermining EU law effectiveness. In conclusion, this analysis sheds light on the consequences of the ECJ's TimePartner case decision, particularly in Germany, and suggests the need for more detailed, industry-specific collective agreements to better meet the Directive's requirements.
Keywords
Introduction
1 I essentially agree with the presentation of the decision of the ECJ in the TimePartner case 2 by the speaker. 3 The following considerations are not a contradiction, but rather supplement the considerations. First, a brief classification from the perspective of German law, which is affected by the decision to an extent that is still unclear. The Federal Labour Court (BAG) will not make its decision on the basis of the preliminary ruling 4 in the TimePartner case until 31 May 2023. 5 The BAG had suggested to the ECJ that it should not be required to review collective agreements in temporary agency work to determine whether they safeguard the overall protection. To this end, it had referred to the assumption of an ‘inherent warranted correctness’ of collective agreements. The ECJ was not convinced, and the consequences of this for the application of the Directive and its implementation are examined in more detail here.
Regarding the decision in the TimePartner case, the ECJ was, in my view, right to focus on the rule-exception relationship in Art. 5 of Directive 2008/104/EC. It therefore interpreted the rule in Art. 5(1) of the Temporary Agency Work Directive (TAW Directive) 6 broadly and the exception in Art. 5(3) narrowly. 7 This view is by no means exceptional but corresponds to the interpretation of exceptions in general. In my opinion, the interpretation of the ECJ is also convincing when taking into account the purpose of the Directive, which is to create a non-discriminatory, transparent, and proportionate framework for the protection of temporary agency workers, cf. recital 12 of Directive 2008/104/EC. The fact that this creates a potential conflict with flexibilisation is not a problem but is intrinsic to labour law regulation if it is to achieve its protective goals.
It is noteworthy and not uninteresting for the German understanding of the Temporary Agency Work Directive that in Denmark, as in Germany, there has been a great reluctance to control collective agreements for their compatibility with the Temporary Agency Work Directive. In relation to these collective agreements, the BAG once stated that it refused to control wage regulations and even left open whether it would decide different if, from an objective point of view, the wage regulation only represented a pittance. 8 The comparable view in Denmark seems to have changed, so that an implementation of the ECJ case law in the TimePartner case seems possible without further ado. 9
It appears to be remarkable and possibly exemplary that in Denmark collective bargaining is primarily regulated by the user undertaking. In Germany, on the other hand, temporary agency work is regarded - also by the parties to collective agreements - as an independent sector. 10 Temporary agency work does not, so to speak, take place in the user undertaking companies, but out of the temporary employment agencies. In contrast to the German view, the Danish model makes it much easier to comply with the principle of equal treatment through collective bargaining in the relevant sector. 11
The principle of equal treatment in Art. 5 of the TAW Directive
Art. 5(1) of the TAW Directive provides that temporary agency workers, for the duration of the assignment must be granted, at least those working conditions that would apply to them if they had been employed directly by the user undertaking company to do the same job. However, the Directive recognises exceptions to this principle of equal treatment with the regular employees in Art. 5(2)-(4).
The exception under Art. 5(2) of the TAW Directive
For example, according to Art. 5(2) of the TAW Directive, Member States may derogate from its Art. 5(1) with regard to the principle of equal pay for temporary agency workers, but not with regard to the essential terms and conditions of employment in other respects, if two conditions are met. Firstly, the temporary agency workers must have concluded an indefinite contract with the temporary work agency. Furthermore, they must also be paid in the period between assignments. This derogation was originally intended for Germany, which did not want equal pay for temporary workers employed for a fixed term and therefore resorted to Art. 5(3) of the TAW Directive.
The exception under Art. 5(3) of the TAW Directive
Art. 5(3) of the TAW Directive also gives the Member States the option of permitting collective agreements which deviate from Art. 5(1) as a whole. It is therefore possible to deviate both with regard to pay and with regard to the essential working conditions.
However, the prerequisite for this is that the relevant collective agreements maintain the overall protection of temporary agency workers despite the possibility of derogation. According to the case law of the ECJ, the possibility for such derogation is to be interpreted narrowly as an exception to the principle of equal treatment in Art. 5(1). In its decision in case C-311/21 TimePartner 12 it becomes clear that the ECJ sees the criterion of the overall protection of temporary agency workers laid down in Art. 5(3) as a substantive criterion that is open to judicial review and makes such review mandatory. 13 The details of this and the ECJ's review programme have been presented in detail elsewhere. Reference is made to this here. 14
The legal situation in Germany and the actual situation
The legal situation in Germany can only be understood by looking at the legal situation and the actual situation simultaneously. In Germany, Art. 5 of the TAW Directive is regulated by Section 8 of the Temporary Employment Act (AÜG). Section 8(1) AÜG regulates the principle of Art. 5(1) of the TAW Directive, according to which temporary agency workers must be granted the same working conditions and the same remuneration as comparable regular employees. However, this rule has not been applied in practice in Germany to date. On the contrary, temporary agency workers are without exception - paid significantly less than regular employees in user undertakings. The reason for this is the collective agreements the trade unions have concluded with the employers’ associations for temporary agency work. These can supersede the principle of equal treatment under Section 8(2-4) AÜG. In practice, this happens in almost all cases.
Deviation from the essential working conditions
The parties to collective agreements may deviate from the principle of equal treatment under Section 8(1) AÜG in accordance with Section 8(2-4) AÜG. Regarding the deviation from the essential working conditions, the law does not regulate any limits to the possibility to deviate.
It is of particular importance that German law - unlike the Directive - does not differentiate between permanent and fixed-term temporary employment relationships. Rather, the powers of derogation are given without distinction. Germany has not made use of the option under Art. 5(2) of the TAW Directive. 15 This is not only made clear by the lack of differentiation between permanent and fixed-term temporary employment relationships. Unlike Art. 5(3) of the TAW Directive, Art. 5(2) of the TAW Directive only provides for the possibility of derogations from the principle of equal treatment by law, but not for such derogations to be made by the parties to the collective agreement. However, this only means that, contrary to what the ECJ has assumed in the area of Art. 5(3), derogations by the parties to the collective agreement are only possible within expressly regulated legal limits, i.e., they may not themselves constitute the instrument of derogation from the Directive. 16
Deviation with regard to pay
With regard to remuneration, the law requires that the statutory minimum wage or an industry-specific minimum wage must not be undercut (Section 8(2)(1), (5) AÜG). Currently, an industry-specific minimum wage applies to the temporary agency work sector based on Section 3a AÜG, 17 the level of which is determined by an agreement between the parties to the collective agreement. The wages concluded by the parties to the collective agreement therefore never fall below this level, as they set the industry-specific limit for their deviation powers themselves. However, the general statutory minimum wage under the Minimum Wage Act must also be complied with. This would have been undercut in the low-skilled sector after its last increase to EUR 12 in October 2022, therefore the tariff agreement parties were forced to adjust it from EUR 10.88 to EUR 12.43.
Derogation authority for the first nine months of operation
There are no further limits to the power to derogate during the first nine months of an assignment of temporary agency workers pursuant to Section 8(4) AÜG. Thus, apart from compliance with the minimum wage, the law itself does not provide for any protection of long-time workers against the social partners’ power to deviate. In particular, the law does not contain a provision to the effect that in the event of a derogation from the principle of equal treatment, the overall protection must be preserved. 18
Authority to deviate in the case of an assignment lasting longer than nine months
Furthermore, according to Section 8(4)(2) AÜG, a derogation for a period longer than nine months regarding remuneration, through collective agreement, is also permissible. This requires that no more than 15 months after the assignment to an undertaking, a wage is achieved which is defined by collective agreement as equivalent to the collectively agreed wage of comparable workers in the sector of assignment. In addition, after a period of six weeks at the latest, there must be a gradual approach to this wage.
However, even then there is no complete equal treatment. Above all, it is not the working conditions or the wages in the company of assignment that are decisive. Rather, the parties to the collective agreement autonomously determine what comparable remuneration is in the relevant sector of employment. 19 They then agree on a step-by-step approach to reach this wage. In this way, the law decouples the standard from the actual working conditions at the relevant user undertaking and enables a lump-sum approach for the relevant sector of employment.
Reversal of the rule-exception relationship in practice
Thus, in the Temporary Employment Act there is formally a rule-exception relationship between the principle of equal treatment and the possibility of deviations by collective agreement. In practice, this is reversed. Almost 100% of temporary agency workers are covered by deviating collective agreements. 20 These collective agreements all provide for very significantly lower wages for the hired-out workers. 21 The main working conditions in the hiring company are also regulated differently to a large extend.
As a rule, the collective agreements do not contain any compensation for this, apart from the fact that they provide for remuneration during the non-hiring periods. 22 During the time of the hiring, remuneration may be higher because of additional collective agreements.
This is because German law, as just outlined, does not de facto contain any obligation for collective agreements to respect the overall protection of temporary workers. On a practical level, temporary work is an instrument for the creation of a low-wage sector comprising almost 800,000 people. It was therefore not the intention when the current concept of collective bargaining regulation was introduced in 2004 to ensure that temporary workers receive the same pay as permanent employees. Rather, equal treatment, and thus compliance with Art. 5(1) of the TAW Directive, was and is politically unwanted because temporary agency work is seen by lawmakers as an instrument for combatting unemployment through the creation of a low-wage sector. 23 This corresponds to the fact that, according to statistics from the German Federal Employment Agency, 24 61% of people who start a temporary employment relationship have previously been unemployed. 25
It is not only the lack of legal protection for temporary agency workers that is problematic, but above all, the interaction with the lack of representation of their interests at the collective level. 26 In Germany, all DGB 27 trade unions claim responsibility for temporary agency work in their respective areas. However, many temporary agency workers are not organised in trade unions, which means that their interests are not represented by trade unions as a matter of priority. 28 Nevertheless, they are bound by the collective agreements. This is due to the fact that Germany has permitted reference being made to collective agreements on temporary agency employment in employment contracts, despite the objections to this under EU law. 29 Art. 5(3) does not mention the possibility of an extension of the provisions of collective agreements or agreements concluded in conformity with this Article to other workers that are not bound by the agreement. Therefore, especially in comparison to Art. 18 of the Working Time Directive, it is not unlikely that the collective agreements relating to Art. 5(3) may be only applicable to those workers who are bound by the collective agreements directly. Although membership of a trade union is required in Germany in order to be bound by collective agreements, and temporary agency workers almost always lack this, the collective agreements on temporary agency work are nevertheless applied extensively.
On the contrary, the regular employees may well benefit from low wages for temporary workers, if no substitution effects occur. Temporary agency workers can then be used by unions and the regular workforce to subsidise the wages and working conditions of the generally organised regular employees. The lower wages of temporary agency workers subsidise, so to speak, the better working conditions of the regular employees. In addition, in the event of economic difficulties, they act as a buffer that prevents lay-offs among the regular employees. This saves employers costs, avoids conflicts and protects the employment relationships of the regular employees at the expense of temporary agency workers. The legislator was always happy with this development as long as it successfully attracted unemployed people to temporary agency work, which was actively accompanied by a corresponding reduction in unemployment insurance protection in 2004.
Thus, employers, trade unions and their members have as little interest in the equal treatment of temporary workers as the legislator. This also explains why, despite the comparatively favourable negotiating position of the trade unions, wages are still being agreed for temporary workers that can be as much as one third lower than those of regular employees. According to statistics from the German Federal Employment Agency, the median income of temporary agency workers as of 30 June 2022 was around EUR 2,000, while it was EUR 3,500 for other employees. 30 Notably, this is in an industry where almost 100% of the employees are covered by collective bargaining agreements. 31
In view of this, adequate ‘overall protection’ of temporary agency workers is neither provided by the legislator nor by the social partners, nor is it intended by anyone. This is also the reason why the decision in the TimePartner case has received such attention in Germany. Germany has in fact only accepted the principle of equal treatment in Art. 5(1) of the TAW Directive because it assumed that it would never be applied.
No correction by the jurisdiction
The lack of statutory regulations on overall protection is not compensated for by the courts in Germany either. Rather, there is great reluctance to develop unwritten restrictions on the use of collective bargaining norms. The BAG points out that the collective freedom of association guaranteed by Art. 9(3) of the German Constitution sets limits on the legal control of collective agreements. 32 This is also emphatically emphasised again by the BAG in its order for referral in the case, and extended to the collective agreements on temporary employment. 33 In principle, any interference with collective agreements in the area of working and economic conditions requires constitutional justification. 34 The German labour courts see such a limit in written law, which, however, they often interpret in favour of a broad margin of discretion for the parties to collective agreements. In the area of remuneration in particular, the BAG strictly rejects any control. It has expressly emphasised that it would at most be prepared to provide such control if, from an objective point of view, the wages in question are starvation wages. 35 Irrespective of this, the BAG does not want to intervene in any way in the weighing of interests of the parties to the collective bargaining agreement. 36
This also explains the way in which the BAG posed the question in its order for referral in the case. 37 In many respects, it was aimed at almost convincing the ECJ that a review of collective agreements on temporary agency work for the preservation of overall protection was unnecessary.
For example, with its first question, the BAG wants to know whether overall protection could not possibly be ensured merely by applying the applicable labour law to temporary agency workers. 38 If that was the case, it would not have had to review anything at all.
Most remarkable, however, is the third question of the BAG, 39 which makes it particularly clear why the ECJ was not prepared to be dismissed with the guarantee of correctness of the collective agreement. The BAG states that this must really be sufficient to ensure overall protection, which means nothing other than that it assumes that this is always ensured in the case of collective agreements. Because the BAG was clearly unsure whether the ECJ would fall for such a clumsy trick, it then finally offers to carry out a substantive review.
However, the BAG again asks whether any other regulations, which it regards as restricting temporary employment, are not to be considered sufficient for the preservation of the overall protection. 40 Here again, however, it is apparent that an attempt is made to somehow avoid controlling the collectively agreed regulations themselves, but to be able to say, based on other circumstances, that they are (always?) lawful.
The fifth referral question 41 is then desperate, in which the BAG once again tries to make a space free of legal protection palatable to the ECJ with reference to Art. 28 of the EU Charter of Fundamental Rights.
Basically, the order for referral is aimed at telling the ECJ in no uncertain terms that, by whatever means, it should prevent the compatibility of the German collective agreements on temporary employment with the Directive from being reviewed. 42 This is a very strange way of dealing with EU law, but it can be explained by the BAG's interpretation of freedom of association, which in my opinion is too broad.
The assumption of an inherent warranted correctness
This view of the BAG is justified by the substantive inherent warranted correctness of collective agreements. 43 Even if this view has not remained unopposed 44 and the case law is not entirely uniform, according to the BAG, collective agreements are attributed such an inherent warranted correctness on the basis of the negotiating balance of both parties to the agreement, which results in the presumption of an appropriate distribution of interests in the collective regulations. 45 Thus, the inherent warranted correctness of collective bargaining agreements is used, among other things, to restrict the judicial review of collective bargaining norms. 46 However, even the basic assumption of inherent warranted correctness must be questioned critically. It is based on the assumption that a private autonomous agreement can only be reached if both sides agree. Such consensus, according to the idea, only emerges if the provisions of the agreement are reasonable for both sides. 47
However, collective bargaining agreements are agreements between a union and an employers’ association. The norms of the collective agreement have a heteronomous effect on the legal relationship of third parties who are not themselves parties to the agreement. 48 Thus, it can also be assumed that the concept of an agreement that is fair to the interests of both parties refers only to the social partners and their interests. 49 Already with regard to the members of trade unions, therefore, the concept of rightful agreement is not convincing. This is because the membership of trade unions is typically heterogeneous. Thus, if trade unions see themselves as membership organisations, they will primarily focus on the interests of their members when concluding collective agreements, which inevitably leads to potential for discrimination, especially against minorities.
This also applies to the representation of the interests of temporary agency workers, many of whom are not organised. As a result, trade unions have no particular interest in providing temporary agency workers with the necessary protection. 50 They can hardly lose members in this area. Regulations whose provisions are detrimental to temporary workers and favourable to regular employees are therefore logical from a perspective that sees trade unions primarily as membership organisations, as is the case in Germany. Of course, none of this would be a problem if the application of these collective agreements was assumed to be limited to the members of the trade unions that have concluded them. In Germany, however, the collective agreements on temporary agency work are mostly applied on the basis of reference clauses contained in employment contracts.
The inherent warranted correctness from the perspective of EU law
From the perspective of EU law, however, the assumption of inherent warranted correctness of collective agreements would probably mark the end of its effective enforceability. If EU law were to recognise the inherent warranted correctness of collective agreements that make use of the power to derogate from EU Directives, these derogations could no longer be subject to judicial review. 51 This would have the effect of limiting the effective enforcement of EU law against collective agreements.
This was probably the actual objective of the BAG proposal. The BAG wanted the ECJ to give it the go-ahead to refrain from monitoring the compatibility of collective agreements with EU law. Of course, it must be acknowledged that the ECJ has partly created this problem itself. For if, as in TimePartner, it refrains from obliging the Member States to legislate on derogations and their limits, 52 a central element of the implementation of EU law is missing. 53 Then all that remains is the control of the collective agreement itself.
From the perspective of the doctrine of collective bargaining autonomy as collectively exercised private autonomy, 54 which is dominant in Germany but - rightly - not undisputed, 55 this is unfortunate. On the other hand, anyone who recognises that parties to collective agreements are engaged in heteronomous norm-setting and, as intermediary powers, have considerable social power, has fewer problems with this. 56 And this is the approach adopted by the ECJ. Consequently, it also demands judicial review of the compatibility of collective agreements with the Directive. In its view, they are to be treated no differently than statutory law. This is all the more true when - as in Germany - they are all too often forced to operate in a legal vacuum because the state does not adequately perform its task of creating laws or does so inadequately. 57
Art. 28 GRC
This finding is questioned in Germany, in particular with regard to Art. 28 of the EU Charter of Fundamental Rights. 58 However, this approach is based on a very German understanding of collective freedom of association. From the perspective of EU law, the doctrine of collectively exercised private autonomy is not the right starting point for classifying the activities of social partners. The ECJ has never followed this doctrine, but rather largely equates collective bargaining and national legislation. However, this also means that from its perspective, as far as collective bargaining parties make law within the scope of EU law, they are bound by it. 59 While in Germany the collective agreement is protected from control, the ECJ protects the parties subject to the agreement by controlling the collective agreement and thus ensures the effective implementation of EU law. The question of constitutional justification, which is difficult from a German perspective, can then very easily be drawn by the ECJ from the interests which the relevant Directive was enacted to protect.
Summary
The derogation of mandatory EU law by collective agreements is a common but problematic concept. This is especially true when the provisions of collective agreements work almost exclusively in favour of the employer side.
Above all, however, derogation from EU law standards must not be confused with their non-application. Neither Art. 5(2) nor Art. 5(3) of the TAW Directive speak of a non-application of these provisions, but only of derogations. This implies, however, that the use of these powers is not possible without restrictions. In Germany in particular, such provisions are repeatedly used by the legislator to refrain from implementing the Directive completely or partially. This creates an opportunity to circumvent the obligations to transpose the Directive. The ECJ only has the choice in this case of binding either the states or the parties to collective agreements. It chooses the latter, thereby releasing the states from their implementation obligations in a problematic way, 60 but in doing so it is better suited to ensuring the practical effectiveness of EU law.
Starting from this approach, it is also consistent and logical not to recognise an inherent warranted correctness of the collective agreement within the scope of application of EU law insofar as the implementation of minimum requirements of the Directive is concerned. 61 This does not preclude leaving the parties to the collective agreement room for discretion. 62 In this respect, judicial review can certainly take into account Art. 28 of the EU Charter of Fundamental Rights. 63
If one dares to look ahead to the consequences of the ECJ's decision in the TimePartner case in Germany, the problem is that there are only collective bargaining agreements for temporary agency work as an industry. This leads to significant differences in the remuneration of regular employees in the user undertakings and temporary agency workers. Whereas the ECJ tends to examine the extent to which there is a deviation from the working conditions of regular employees, i.e., a deviation from the principle of equal treatment, in Germany Art. 5(3) of the TAW Directive is understood as a waiver of the principle of equal treatment.
For the parties to collective agreements, this means that the general and sector-independent approach to regulating temporary agency work cannot be maintained. Instead, the collective agreements must be more detailed and must at least focus on the relevant industry in which the work is performed and the conditions under which it is performed. It would certainly be easiest to conclude collective agreements for temporary agency work in the relevant sectors. According to the case law of the ECJ, this seems to be the minimum requirement.
It would be possible, however, to expand the system of collective agreements on sector surcharges that exists in Germany and to combine the sectoral collective agreements in temporary agency work with the relevant supplementary collective agreements. 64
Amendment
After this article was written, the BAG made its decision based on the preliminary ruling in the TimePartner case on 31 May 2023. In it, the court declared the collective agreements already concluded in Germany to be compatible with Art. 5(3) of the TAW Directive.
The collective agreement at issue, at least in conjunction with the statutory provisions for temporary agency workers, met the requirements of Art. 5(3) of the TAW Directive. It is true that the plaintiff was disadvantaged because she received a lower remuneration than she would have received if she had been hired directly for the same job by the user enterprise. The Federal Labour Court pointed out that Art. 5(3) of the TAW Directive expressly allows for a worker to be placed in such a disadvantaged position, if it is done with ‘respect for the overall protection of temporary agency workers’. According to the ECJ, compensatory advantages must make it possible to neutralise the unequal treatment. The Federal Labour Court was of the opinion that, according to the case law of the ECJ, a possible compensatory advantage is the continued payment of wages even in periods when a temporary worker is not posted, both in the case of permanent and fixed-term temporary employment relationships. The Federal Labour Court pointed out that under German law, non-hire periods are always possible even in the case of fixed-term temporary employment relationships, for example, if temporary workers are not hired exclusively for a specific assignment or if the hirer contractually reserves the right to have a say in the selection of temporary workers. The collective agreement that was the subject of the proceedings guarantees the continued payment of remuneration during periods when a temporary worker is not hired out.
In addition, without it being clear whether the Federal Labour Court considers this to be a sufficient or necessary criterion, the German legislature, by means of Section 11(4)(2) AÜG, has made it mandatory in the field of temporary employment that temporary work agencies bear the economic and operational risk without restriction for periods during which temporary workers are not on assignment, because the claim to remuneration for default of acceptance under Section 615 sentence 1 of the German Civil Code (Bürgerliches Gesetzbuch - BGB), which is in itself excludable, cannot be waived in the temporary employment relationship. The Federal Labour Court also pointed out that the legislator has ensured that the collectively agreed remuneration of temporary agency workers may not fall below the lower wage limits set by the state and the statutory minimum wage. In addition, the Federal Labour Court noted that since 1 April 2017, derogation from the principle of equal pay under Section 8(4)(1) AÜG is generally limited in time to the first nine months of the temporary employment relationship.
The decision in the case confirms the assessment that the Federal Labour Court is by no means prepared to carry out a review of the concrete deviation from the equal pay principle. It also confirms that the Federal Labour Court refuses to review specific collective agreements. The ruling states basically that in Germany, collective agreements always are in conformity with Art. 5(3), no matter how low the wages are (within the limits of minimum wages) and no matter how big the difference in wages paid to workers employed by the user undertaking is, because temporary agency workers get paid in periods when they are not hired out. It has to be called into question whether this conforms with the TimePartner ruling, especially in the case of fixed-term employment.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
