Qualifying-date clauses for mixed-character special payments

A mixed-character special payment which by all means also constitutes remuneration for work performances already provided, cannot be made conditional in General Terms and Conditions of Business on the existence of the employment relationship as at 31 December of the year in which the work performance was provided.

The parties disagreed concerning an entitlement to a special payment for the year 2010, described as “Christmas bonus”. The claimant had been employed by the defendant as Controller since 2006.

Each year, he received a special payment together with the November salary that was equivalent to the respective November salary; this was initially described as ex-gratia payment, then as Christmas bonus as from the year 2007. In addition, the defendant sent its employees a letter in the autumn of the respective year setting out the “Guidelines” for the payment. Among other things, the letter for the year 2010 stated that the payment was being made “to employees of the publishing company in a non-terminated employment relationship as at 31.12.2010”. The employees were also to receive 1/12 of the gross monthly salary for each calendar month with paid work performance. Employees joining the company during the course of the year received the special payment on a pro-rata basis in accordance with the Guidelines. The claimant’s employment relationship ended on 30 September 2010 through termination by him. In his legal action, the claimant asserted a pro-rata (9/12) amount of the special payment.

The previous instances dismissed the action. Upon appeal by the claimant, the Tenth Senate of the Federal Labour Court ordered the defendant to make payment in accordance with the demand for relief.

Mixed character, loyalty to the company and remuneration

In the opinion of the BAG (Federal Labour Court), the special payment is intended on the one hand to tie the employee to the company beyond the end of the year, and thus to reward loyalty to the company. The remuneration simultaneously also covers the work performed during the course of the year. In such cases, qualifying-date clauses such as that agreed here are ineffective under Section 307 Subsection 1 Sentence 1 BGB (German Civil Code). They constitute inappropriate prejudicing of the employee and are at variance with Section 611 Subsection 1 BGB, as they withdraw remuneration from the employee that has already been earned. According to the local guidelines, the entitlement to remuneration was acquired monthly. By contrast, there were no indications that the special payment was intended primarily as counter-performance for periods after departure of the claimant or for work performances not yet provided.

Qualifying-date clause inadmissible as regards remuneration

The effective agreement of a qualifying-date ruling necessarily requires the special payment concerned to be a pure ex-gratia payment that rewards exclusively the loyalty to the company shown in the past and expected for the future. As soon as the payment is (at least also) intended as remuneration for work performances, qualifying-date rulings are generally inadmissible, as they inappropriately prejudice the employee as defined in Section 307 Subsection 1 Sentence 1 BGB.

If the employer wishes to make a special payment conditional on non-terminated existence of the employment relationship as at the date of payment or as at a defined date in the following year, it is advisable to make express reference, when making the corresponding payment, to the fact that this is intended exclusively as reward for loyalty to the company and not (also) as remuneration for the employee’s work performance.

Conclusion

The Senate expressly renounces its previous case law that non-waiver clauses are also admissible if the special payment concerned is intended both as remuneration for work performances already provided as well as to reward loyalty to the company. The additional purpose of the special payment does not alter the fact that the qualifying-date ruling withdraws work remuneration from the employee that has already been earned. The employer has no interest, deserving of protection, in retrospectively altering the relationship between performance and counterperformance.