The Duration of the Probationary Period in a Fixed Term Employment Relationship

The court concluded that the agreement of a probationary period of a maximum of 50% of the expected duration of the fixed-term employment relationship – up to the statutory upper limit of a 6-month probationary period – should always be permissible.

Meanwhile, the full text of the reasoning for the judgement has also been published. Although a final clarification by the Federal Labor Court is still pending, and a certain residual risk may remain until then, we would nevertheless like to take this opportunity to take a closer look at the decision of the Schleswig-Holstein Regional Labor Court and the resulting consequences for practice:

Background

A probationary period can also be agreed to when establishing fixed-term employment relationships, during which the employment relationship can be terminated by either party with a shortened notice period of just 14 calendar days. This applies in any case when the option of ordinary termination is expressly agreed upon in the employment contract despite the fixed term. Since August 2022, however, the law – specifically Section 15 (3) of the German Part-Time and Fixed-Term Employment Act – requires that the agreed probationary period must be in a reasonable proportion “to the expected duration of the fixed-term contract and the nature of the work”. Due to the vague wording of the legal text, there has been and continues to be a level of uncertainty on the part of the employer since the new regulation came into effect. After all, who can say with certainty what the legislator and – more importantly in practice – the labor courts would understand by this criterion? In the past nearly two years, this uncertainty has led to employers – in line with the motto “better safe than sorry” – agreeing to an extremely short probationary period or foregoing one altogether when establishing fixed-term employment relationships.

Fortunately, with the Schleswig-Holstein Regional Labor Court, a higher labor court has now ventured out of cover for the first time and shed some light on the matter.

The Decision

In a ruling dated October 18, 2023 (case reference: 3 Sa 81/23), the judges ruled that a probationary period of no more than half of the fixed-term contract should always be considered reasonable and therefore effective. Only if this limit is exceeded does the second statutory requirement become relevant at all. An examination of the question of whether the agreed length of the probationary period is also proportionate to the “nature of work” is therefore only necessary if the agreed probationary period covers more than 50% of the expected contract duration.

In concrete terms: Up to a maximum duration of 6 months, agreeing to half of the contractually agreed fixed-term duration as a probationary period is always appropriate within the meaning of the law and therefore permissible. In exceptional cases, however, a probationary period of more than 50% of the fixed term may also be appropriate if the “nature of the work” makes this necessary. The Schleswig-Holstein Regional Labor Court, however, left the question of when such a longer probationary period would be deemed appropriate due to the nature of the activity open, thereby maintaining a level of legal uncertainty in this regard.

Practical Advice

Employers should take this decision as an opportunity to critically review probationary period clauses in their fixed-term employment contracts. In the case of a fixed term of at least 12 months, the maximum permissible probationary period of 6 months can be agreed upon – at least from the perspective of the Schleswig-Holstein Regional Labor Court. However, with a shorter fixed term, the probationary period should not exceed 50% of the contract duration. This applies even if it is foreseeable at the time the contract is concluded that the fixed term will in all likelihood be extended. In this regard, the wording of the law, which refers to the “expected duration”, is ambiguous. However, if employers wish to agree a longer probationary period, legal advice should be sought beforehand. This is because it remains unclear when a probationary period is reasonable in relation to the nature of the work, meaning that there will continue to be pitfalls in this respect in the future, which should be avoided wherever possible.

At least until a decision is reached by the Federal Labor Court – the corresponding appeal hearing is expected to take place on December 5, 2024 – employers should continue to take a cautious approach when in doubt.

We will of course keep you up to date with further developments on this topic.

Photo: Shutterstock / fizkes