Residency law aspects of labor leasing for third-country nationals

Skilled Worker Shortage and Its Impact

To overcome the challenges of the skilled worker shortage in Germany, companies must increasingly rely on expertise within their own company at foreign locations or from outside the company. In this context, increasing use is being made of external personnel via labor leasing, including cross-border arrangements involving third-country nationals. According to Section 1 (1) sentence 2 of the German Temporary Working Act (AÜG), labor leasing occurs when the respective employees of the lender are integrated into the work organization of the domestic company (the borrower) and are subject to its instructions. Third-country nationals in the sense mentioned above are those who do not belong to EU/EEA states or Switzerland and therefore cannot claim freedom of movement rights.

Influence of German Residency Law

In addition to the much-discussed labor law requirements and pitfalls of cross-border labor leasing, residency law restrictions must also be strictly observed when planning these assignments. According to Section 40 (1) No. 2 of the Residence Act (AufenthG), the Federal Employment Agency must refuse its consent during the visa/residence permit process if the third-country national is to work in Germany as part of a labor leasing arrangement. A visa or residence permit with the corresponding work authorization is generally always required for third-country nationals if work is to be performed in Germany. This can lead to the following problem: if labor leasing is involved and the Federal Employment Agency must give its consent as part of the process, this consent cannot be granted and the residence title will be rejected.

Residence Titles Without the Consent of the Federal Employment Agency

Conversely, labor leasing of third-country nationals is always possible if these third-country nationals can obtain residence titles that do not require consent from the Federal Employment Agency. Such residence titles include, among others, the EU Blue Card in the higher minimum salary range, which is adjusted annually (€45,300 gross per year for 2024), settlement permits, and residence permits for the purpose of family reunification. Since the EU Blue Card requires an employment contract with at least six months’ validity with the host company in Germany, there is often a lack of flexibility and short-term options. However, obtaining an EU Blue Card in Germany can be a good solution for companies that wish to lease their employees further within Germany. This is an often feasible approach, particularly in the IT sector. For example, a company could consider establishing a branch in Germany and employing third-country nationals via the EU Blue Card in Germany in order to then lease these specialists locally on a project basis. However, this is only recommended if the branch is not established solely to facilitate the entry or employment of third-country nationals.

Residence Titles Requiring the Consent of the Federal Employment Agency

Examples of residence titles requiring consent include – among many others – residence permits for skilled workers with vocational training (Section 18a AufenthG), for skilled workers with academic training (Section 18b AufenthG), and the ICT Card (Section 19 AufenthG). ICT stands for Intra-Company Transfer. While residence permits under Sections 18a and b AufenthG are applicable for scenarios involving permanent employment in Germany, the ICT Card is used for intra-corporate transfers. However, the residence titles mentioned here must generally be refused if labor leasing is involved. In this regard, the following exception must be noted: the grounds for refusal under Section 40 (1) No. 2 AufenthG cannot be applied in the case of cross-border, intra-group leasing to Germany according to Section 1 (3) No. 2 AÜG. This means that the consent of the Federal Employment Agency for residence titles for the purpose of a secondment, such as the ICT Card, can be granted if intra-group labor leasing is involved.

Consequences of Non-Compliance with Residency Law Regulations

Failure to comply with the residency law regulations described can lead to various consequences. For example, the issuance of residence titles in ongoing proceedings may be rejected. This, in turn, can lead to delays or losses regarding the required specialists. Furthermore, previously granted consents for residence titles can be subsequently revoked if the criteria of Section 40 AufenthG are met at a later date. A revocation of the residence title can lead to the third-country national (and potentially their family members) being required to leave the country. There are therefore significant consequences to consider from both the employee’s and employer’s perspective.

Conclusion

In addition to labor law aspects, residency law considerations must also be taken into account when structuring labor leasing for third-country nationals. This applies to both cross-border and purely domestic labor leasing of third-country nationals within Germany.