Temporary workers can be paid less

The Federal Labor Court has ruled that temporary workers do not have to earn the same wages as permanent employees for the same work. Financial compensation is not required if a collective agreement is applied.

According to a recent decision of the German Federal Labour Court (Bundesarbeitsgericht – BAG) (judgement of 31 May 2003, case number 5 AZR 143/19), temporary workers do not have to receive the same pay for the same work as the company’s permanent employees. The case was brought by a temporary worker who had been hired by a retail company as an order picker. She was paid an hourly rate for her work for the user company that was approximately one third lower than that of comparable permanent workers directly employed by the user. The temporary worker claimed the difference to the wage of the permanent workers. The employment relationship was governed by the collective agreement of the IGZ (Interessengemeinschaft Zeitarbeit) and the trade union ver.di.

Preliminary ruling by the European Court of Justice

As the temporary worker also claimed a breach of Article 5(3) of the Temporary Agency Work Directive (Directive 2008/104/EC), the Federal Labour Court referred the case to the European Court of Justice in Luxembourg. The European Court of Justice had ruled in the preliminary ruling procedure that temporary agency workers may only receive lower pay if the unequal treatment is compensated for by a collective agreement (ruling of 15 December 2022, case number – C-311/21).

Decision of the Federal Labour Court: Collective agreement does not have to provide financial compensation

In its decision, the Federal Labour Court followed the ruling of the European Court of Justice. There is a compensatory advantage for the temporary worker on the basis of the applicable collective agreement: the temporary worker is also entitled to payment of remuneration for periods in which he or she is not loaned to a company under the collective agreement. The temporary employment agency bears the economic and operational risk for the periods during which the temporary worker is not on loan.  In addition, the remuneration under the collective agreement may not fall below the wage floors set by the government and the statutory minimum wage. Furthermore, the principle of equal pay may only be derogated from during the first nine months of the assignment to a hirer.  In the court’s view, this collective agreement, together with the statutory protection for temporary agency workers, meets the requirements of the EU Temporary Agency Work Directive. However, financial compensation is not required.

What does this Ruling mean for temporary agencies?

Temporary employment agencies that apply a collective agreement and have agreed with their workers appropriate compensation for the financial disadvantages compared to the permanent workforce may pay the lower collectively agreed wage for the first nine months of a temporary assignment. However, they must comply with all the requirements of the collective agreement and applicable laws. If there is no collective agreement, the principle of equal pay applies from the first day of the assignment.

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