According to a ruling by the Federal Labor Court (BAG), an employee must reimburse his employer for incurred compliance costs, provided the employer sufficiently demonstrates their necessity.
In this specific case, the employer received several anonymous whistleblower reports that a member of the management level had committed several compliance violations. In order to investigate the allegations, the employer commissioned a law firm specialised in compliance investigations to conduct more detailed enquiries. The internal investigation confirmed, among other things, the suspicion of expense and billing fraud. According to the investigation report, the employee had, among other things, invited people to dinner at the employer's expense without official cause and had settled travel expenses for trips he had made to Champions League matches. The employee had received the tickets for the matches at his request from business partners of the employer. In addition, a considerable number of credit card statements had to be audited and the employee had been accused of hiring external staff for his own benefit (for a teaching position) at the expense of his employer. All in all, claims for damages totaling several hundred thousand euros were at issue. For the investigative measures, which were also directed against other employees, and for the preparation of the investigation report, the law firm charged a total of slightly more than EUR 200,000.00 on the basis of a fee agreement with an hourly rate of EUR 350.
After the employee had been dismissed without notice, he brought an action for protection against dismissal, which was dismissed with final effect. The employer, in turn, asserted a counterclaim for the investigation costs incurred in clarifying the suspicions raised by the whistleblowers.
After the Mannheim Labor Court had rejected a claim for reimbursement of costs, the Baden-Württemberg Regional Labor Court (ruling of April 21, 2020 - 19 Sa 46/19) at least granted the employer a claim for reimbursement in the amount of EUR 66,500. These are the costs incurred by the company due to the investigations of the law firm until the notice of termination was issued.
The BAG confirmed the decision of the LAG Baden-Württemberg in principle. The BAG explicitly disagreed with the employee's view that the provision in Section 12a of the Labor Court Act (ArbGG) precludes such a claim for reimbursement of costs. Unlike in other civil proceedings, this provision excludes a claim for reimbursement of legal costs by the parties both procedurally and substantively. However, Section 12a ArbGG does not restrict the parties' claims for damages. In this respect, the BAG emphasized that
"an employer [may] demand compensation from the employee for the necessary costs incurred by the intervention of a specialized law firm if it has commissioned the law firm to conduct investigations against the employee on the occasion of a specific suspicion of a substantial misconduct on the part of the employee and the employee is convicted of a serious intentional breach of contractual duty. Insofar as there is a specific suspicion of a substantial misconduct on the part of the employee, the expenses of the injured party necessary to avert imminent disadvantages shall also be part of the damage to be compensated pursuant to Section 249 of the German Civil Code."
Despite this clarification which is gratifying in principle, the BAG allowed the employee's appeal. In the present case, the employer had not sufficiently demonstrated that the costs incurred by the law firm were actually necessary. The employer would have had to demonstrate,
"which specific activities or investigations were carried out by the commissioned law firm, when and to what extent in terms of time, because of which specific suspicion against the plaintiff."
In this specific case, the BAG rejected the employee's reimbursement obligation. Nevertheless, the decision contains a positive tendency for the employer. Accordingly, a claim for reimbursement against employees for necessary compliance costs incurred by external service providers exists in principle. However, the BAG emphasizes that - in contrast to the scope of application of Sec. 12a ArbGG - "only" the costs of clarifying specific suspicious facts are reimbursable. In the specific case, the investigation order was initially directed at a "whistleblower report" and was expanded - bit by bit - as the investigation progressed and also concerned several suspects.
In this specific case, the BAG denied the claim for reimbursement, as the employer had not been able to explain in a sufficiently clear manner which of the costs claimed had in fact arisen
The hourly rate of EUR 350 charged by the law firm was not problematized by the BAG; in this respect, the LAG Baden-Württemberg stated that this hourly rate was
"the usual for qualified and specialized lawyers."
Against the backdrop of the most recent case law, it is therefore essential for companies to provide complete documentation of the specific procedure. The employer must document and explain at what point in time which suspicious facts existed and why which investigative measures were indicated and commissioned. In addition, a detailed breakdown of the investigative activities must be provided, including a concrete description of the individual suspicious facts that led to the investigation. At the same time, the employer must keep in mind that the costs for the investigative measures must be in reasonable proportion to the total amount of the damages that can be compensated. Consequently, the compliance costs must also be economically appropriate, i.e. proportionate.