The Hamm Labor Court ruled in a decision dated August 25, 2026 (1 Ca 487/26) that a fixed-term contract with material reason can be invalid if the underlying prognosis does not hold. This invalid fixed-term contract ruling shows how important it is to examine the reasons for a fixed-term contract with material reason closely. Many employees accept fixed-term contracts without knowing that the stated material reason is often just a shell. This ruling gives you as an affected employee valuable pointers on when you can fight back.
Fixed-Term Contract with Material Reason: When Is It Lawful?
Fixed-term employment contracts in Germany are only permissible under certain conditions. The Part-Time and Fixed-Term Employment Act (TzBfG) distinguishes between fixed-term contracts without material reason and fixed-term contracts with material reason. While a fixed-term contract without material reason is only possible for new hires and with a maximum duration of two years, Section 14(1) TzBfG permits a fixed-term contract if a material reason exists. These include, among other things, a temporary need for labor, the substitution of another employee, or a fixed term tied to a third-party contract.
The decisive point is the prognosis: At the time the contract is concluded, the employer must plausibly demonstrate that the need for your labor is genuinely only temporary. A mere assertion is not enough. The labor court examines whether the prognosis rests on a sustainable factual basis. If it does not, the fixed term is invalid — and your employment relationship continues as an indefinite one. If you want to learn more about the basics of fixed-term contracts without material reason, our article on fixed-term contracts without material reason provides further details.
The Case Before the Hamm Labor Court: What Happened?
The plaintiff had been employed as a care worker at a facility operated by the defendant since December 2022. The defendant itself held a contract with a client (referred to as “C” in the ruling) for the organization and care services at a central accommodation facility. This contract initially ran until March 2024 and was extended several times — most recently until March 2027. The plaintiff initially received a fixed-term contract without material reason until February 2024, which was extended twice. On February 13, 2025, the parties concluded a fourth addendum fixing the employment relationship until March 14, 2026 — with the material reason “fixed-term contract with the client.”
As the contract end approached, the employee sued for a declaration that the employment relationship would not end due to the fixed term. She argued that the facility would continue to operate after March 14, 2026, and that the defendant had even converted comparable employment relationships into indefinite ones. Moreover, deputy care managers had told her she could be taken on if colleagues from a closed facility did not accept the positions. The Hamm Labor Court ruled in the plaintiff’s favor.
Why This Invalid Fixed-Term Contract Was Struck Down
The court based its decision on several grounds. Central was the lack of a sustainable prognosis: Anyone who hires an employee because of a “fixed-term contract with the client” must ensure that the need actually ceases when the third-party contract ends. Here, the defendant already knew when the fourth addendum was concluded in February 2025 that the client had extended the contract until March 2026 — and that a further extension until 2027 was already in prospect. Nevertheless, it fixed the employment contract only until March 2026. This shows that the prognosis was not based on a solid factual foundation.
Added to this was the fact that the facility continued to be operated and the defendant apparently needed staff. The statement by the deputy care managers that the plaintiff could be taken on if other positions remained unfilled also spoke against a permanent cessation of need. An employer who holds out the prospect of rehiring for the same workplace essentially confirms that the need persists. The long contract duration — over three years in total — also gave rise, in the court’s view, to a factual presumption of a permanent need.
What the Ruling Means for Employees with Fixed-Term Contracts
This ruling shows that employees do not have to automatically accept their employment contract expiring. If the stated material reason does not hold, the fixed term can be invalid. This applies particularly when the employer relies on a third-party contract but the actual need continues — for example, because the client has extended the contract or because comparable colleagues have been given indefinite contracts. Even if the employer verbally holds out the prospect of continued employment, that can refute the prognosis.
What matters is: You must take action. A fixed term is not automatically reviewed for its validity. You must file a lawsuit with the labor court within three weeks of the agreed end of the employment relationship (Section 17 TzBfG). This deadline is mandatory. If you miss it, the fixed term is deemed valid — regardless of whether a material reason existed. If you are unsure whether your fixed term is lawful, you should seek legal advice as quickly as possible.
Your Rights: How to Fight an Invalid Fixed Term
The first step is to examine whether a material reason exists and whether the employer’s prognosis is plausible. To do this, you should gather all documents: your employment contract, all addenda, the employer’s contract with the client (if accessible), and any written or verbal assurances. Also document whether colleagues have been given indefinite contracts or whether the facility continues to operate. Such evidence can be decisive in court.
You must then file a so-called fixed-term contract review action within the three-week deadline. The procedure is similar to an unfair dismissal action — if you want to know the details about the deadline and the process, our page on unfair dismissal actions provides an overview. An independent specialist lawyer for labor law can assess your chances of success and draft the complaint. They will also examine whether you have a claim to continued employment while the proceedings are pending — the court can order provisional continued employment, as happened in the Hamm ruling.
Costs and Risks of a Lawsuit: Litigation Funding as an Option
A fixed-term contract review action involves costs: attorney and court fees arise, and if you lose, you must reimburse the opposing party. Many employees shy away from these financial risks. One way to limit the risk is litigation funding. In this arrangement, a litigation funder covers the costs of the proceedings in the event of success — and you pay only if you win. RechtStark examines whether funding your proceedings is an option and then assumes the financial side, while your lawyer handles the legal representation.
The chances of success must be realistic for this. In the case before the Hamm Labor Court, the prospects were apparently good — the court not only declared the fixed term invalid but also ordered continued employment until the conclusion of the legal dispute. The defendant bears the costs of the proceedings, and the value in dispute was set at 13,366.40 euros. Such rulings show that fighting an invalid fixed-term contract can be well worth it.
Conclusion: What to Watch for with Fixed-Term Employment Contracts
The Hamm Labor Court ruling is an important signal for all employees with fixed-term contracts. It confirms that courts take the employer’s prognosis seriously. A material reason such as “fixed-term contract with the client” is only sustainable if the need actually ends. If you are faced with an extension of the third-party contract, or if the employer itself holds out the prospect of continued employment, you have strong arguments against the validity of the fixed term.
Examine your contract carefully: Is the material reason plausible? Have there already been multiple extensions? Do you work in a facility that is obviously continuing? If so, keep the three-week deadline in mind and seek advice in good time. A successful lawsuit secures not only your job but also your financial situation. And if you lack the funds for litigation, litigation funding through RechtStark is a sensible alternative to enforce your rights without bearing the full cost risk.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.