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Seven extensions did not create a permanent employment

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calendar 26 September 2021
globus Denmark

Two agency workers had their temporary employment contracts extended seven times over a period of a little more than two years, while working for the same company. According to the agency workers, this meant that their temporary employment had turned permanent. The company disagreed. The Danish Maritime and Commercial High Court also disagreed as the extensions had been triggered by delays which the company could neither have influenced nor foreseen.

The case concerned two agency workers who were employed in a company’s IT department. While employed, their temporary employment contracts were extended seven times. As a result, the employees had been employed uninterruptedly in the same company for more than two years.

According to the agency workers, their employment had been extended so many times that a permanent employment had been established. They also emphasized that the company had not had any objective reason to extend their contracts that many times and over such a long period. Moreover, they were also of the opinion that they had largely carried out the same work as those permanently employed. On that basis, their temporary employment should be deemed as permanent.

The company disagreed and argued that there had been an objective reason for each of the extensions. At the time, the company was undergoing a large merger with another company and the IT department was in the process of being outsourced to a foreign company. Therefore, the company needed to extend the contracts.
The main question in this case was therefore if the temporary employments had become permanent due to the several extensions.

Extensions were due to unforeseen circumstances

Initially, the Danish Maritime and Commercial High Court referred to a previous EU case on temporary agency employments. In that case, the European Court of Justice established that it is unlawful if temporary employments ends up becoming permanent situations with the purpose of circumventing the rules on temporary agency work. Companies must therefore not try to conceal a permanent employment behind a temporary agency employment.

In this case, however, the Danish Maritime and Commercial High Court did not believe that the temporary employments had character of permanent employment despite the many extensions. The court pointed out that the period in which the agency workers had worked in the company was influenced by the extensive merger and outsourcing process of the IT department.

In relation hereto, the court emphasized that the original intention had not been for the merger to go on for as long as it did, but that the process had been delayed several times. Because the company neither had had influence hereon nor had been able to foresee the delays, the company consequently continued to have a need for flexibility and a continuous adaption among the employees. This meant that the company could lawfully extend the temporary agency employments over a long period of time without it leading to temporary employments.

Lastly, the court pointed out that the agency workers were covered by a collective bargaining agreement. Pursuant to hereto, the employees would in any case not have been covered by the ban on several extensions.

IUNO’s opinion

The judgement shows that very special circumstances may allow for repeated extensions of a company’s temporary agency workers without it necessarily resulting in permanent employments. However, this will most likely presume that very specific circumstances have resulted in the company not being able to foresee or influence the need for an extension. At the same time, the case confirms that there is no specific limit as to the number of extensions that can be made without creating a permanent employment.

IUNO recommends that companies are aware that several extensions of temporary employments may create a permanent employment, namely if the extensions are not objectively justified. Companies should generally try to avoid extending temporary employments several times over a longer period, as there is the risk that the extensions will be considered a circumvention of the rules on temporary agency work. However, this does not apply if it is necessary to extend the employments due to reasons that the company cannot control.

[The Danish Maritime and Commercial High Court’s judgement in case BS-3222/2021-SHR of 18 August 2021]

The case concerned two agency workers who were employed in a company’s IT department. While employed, their temporary employment contracts were extended seven times. As a result, the employees had been employed uninterruptedly in the same company for more than two years.

According to the agency workers, their employment had been extended so many times that a permanent employment had been established. They also emphasized that the company had not had any objective reason to extend their contracts that many times and over such a long period. Moreover, they were also of the opinion that they had largely carried out the same work as those permanently employed. On that basis, their temporary employment should be deemed as permanent.

The company disagreed and argued that there had been an objective reason for each of the extensions. At the time, the company was undergoing a large merger with another company and the IT department was in the process of being outsourced to a foreign company. Therefore, the company needed to extend the contracts.
The main question in this case was therefore if the temporary employments had become permanent due to the several extensions.

Extensions were due to unforeseen circumstances

Initially, the Danish Maritime and Commercial High Court referred to a previous EU case on temporary agency employments. In that case, the European Court of Justice established that it is unlawful if temporary employments ends up becoming permanent situations with the purpose of circumventing the rules on temporary agency work. Companies must therefore not try to conceal a permanent employment behind a temporary agency employment.

In this case, however, the Danish Maritime and Commercial High Court did not believe that the temporary employments had character of permanent employment despite the many extensions. The court pointed out that the period in which the agency workers had worked in the company was influenced by the extensive merger and outsourcing process of the IT department.

In relation hereto, the court emphasized that the original intention had not been for the merger to go on for as long as it did, but that the process had been delayed several times. Because the company neither had had influence hereon nor had been able to foresee the delays, the company consequently continued to have a need for flexibility and a continuous adaption among the employees. This meant that the company could lawfully extend the temporary agency employments over a long period of time without it leading to temporary employments.

Lastly, the court pointed out that the agency workers were covered by a collective bargaining agreement. Pursuant to hereto, the employees would in any case not have been covered by the ban on several extensions.

IUNO’s opinion

The judgement shows that very special circumstances may allow for repeated extensions of a company’s temporary agency workers without it necessarily resulting in permanent employments. However, this will most likely presume that very specific circumstances have resulted in the company not being able to foresee or influence the need for an extension. At the same time, the case confirms that there is no specific limit as to the number of extensions that can be made without creating a permanent employment.

IUNO recommends that companies are aware that several extensions of temporary employments may create a permanent employment, namely if the extensions are not objectively justified. Companies should generally try to avoid extending temporary employments several times over a longer period, as there is the risk that the extensions will be considered a circumvention of the rules on temporary agency work. However, this does not apply if it is necessary to extend the employments due to reasons that the company cannot control.

[The Danish Maritime and Commercial High Court’s judgement in case BS-3222/2021-SHR of 18 August 2021]

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Anders

Etgen Reitz

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Astrup

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Hessellund Klausen

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Groth Henriksen

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