Germany: Employers need to review standard employment contracts in light of recent court ruling

The German Federal Labour Court recently held (in a judgment of 24 August 2016 – 5 AZR 703/15, not yet published) that a preclusion period clause in an employment contract was invalid because the clause also referenced the entitlement to minimum remuneration under the Act on the Posting of Workers.

The claimant in the case was a nursing assistant at an out-patient service provider and, as such, was entitled to a certain minimum remuneration under the Act on the Posting of Workers. The employment contract contained a two-stage preclusion period commonly used in practice according to which claims arising from the employment relationship lapse unless they are asserted out of court (first stage) within three months after they become due and in court (second stage) in the event of denial or failure to reply within an additional three-month period.

The claimant had a doctor's certificate stating that she was incapable of working from 19 November to 15 December 2013. The defendant had doubts regarding claimant’s incapacity for work and discontinued payment of remuneration. On 20 January 2014, the claimant asserted the statutory entitlement to continued payment in writing but waited until 2 June 2014 to assert the claim in court. The defendant argued that the entitlement to continued payment was covered by the preclusion clause and had lapsed because it had not been asserted in due time. The Federal Employment Court and the lower courts ruled in favour of the claimant. They held that she was entitled to continued payment of remuneration in the case of sickness pursuant to § 3 (1) of the German Continuation of Remuneration Act. In the opinion of the courts, the contractual preclusion clause was invalid because it also covered the entitlement to minimum remuneration pursuant to § 2 of the German Regulation on Mandatory Working Conditions in the Nursing Care Sector.

In practice, the decision of the Federal Labour Court means that the mandatory entitlements to minimum remuneration under the Act on the Posting of Workers must be explicitly excluded from the scope of application in the wording of preclusion periods. To be on the safe side, the limitation period in employment contracts should also not extend to entitlements to the statutory minimum wage. Although the recent judgment of the Federal Labour Court applied only to entitlements to minimum remuneration under the Regulation on Mandatory Working Conditions in the Nursing Sector, surprises from Erfurt cannot be ruled out.

For more information, please contact Neil Yeats.