Employers in Germany should be aware of recent case law dealing with bonus entitlements.
A clause dealing with discretionary remuneration and bonuses often found in German employment contracts has been declared unenforceable by the German Federal Labor Court. In a case involving an employee’s right to a discretionary bonus of a month’s pay he had received for twenty years, but which was not outlined in the employment contract, the court ruled that the employee was entitled to the benefit as it was an implied term of the individual employment contract. It had become an expected benefit because it was offered repeatedly.
The issue is of relevance to German employers, who may frequently include clauses such as the one below in employment contracts as a way of providing control over the award of discretionary payments or benefits:
Benefits not provided for in this contract of employment which are awarded by the employer to the employee shall be deemed fully voluntary and subject to revocation at any time. Also, if the employer repeatedly and regularly awards certain payments, no legal entitlement shall be created for the employee with regard to any such payments in the future.
Employers in Germany should be aware that the use of such “catch all” employment contract language may not prevent a binding agreement and entitlement to discretionary payments or benefits. If you would like assistance with contract review, please contact Chris Davies.
Very impressively handled and very specific. Great job. Thank you.
High Street Partners