Update Employment Law December 2021
A provision in an employment contract stipulating that ten hours of overtime per month be compensated with the agreed remuneration is valid
LAG Mecklenburg-Vorpommern, Judgment of 14 September 2021 -2 Sa 26/21
The Regional Labour Court of Mecklenburg-Western Pomerania recently had to decide on the validity of a clause in an employment contract on the generalised compensation of overtime work with the agreed monthly wage.
The plaintiff was employed in the department of payroll and financial accounting at the defendant’s business and earned a gross monthly salary of 1,800.00 Euros with a 40-hour week. His employment contract contained a provision according to which up to ten hours of overtime work per month in excess of the company's working hours were compensated with the monthly remuneration. Therefore, up to ten additional hours were not compensated in addition to the usual remuneration of the plaintiff.
The plaintiff, who had left the company in the meantime, filed a claim for overtime compensation for a total of 92 hours over a period of one year at EUR 10.23 gross per hour. He argued that the regulation on the compensation for overtime was invalid, as it was surprising on the one hand and misleading on the other hand, since the contract regulated that 40 working hours were the regular working time. The plaintiff based the accusation of a ‘misleading clause’ on the fact that the defendant had allegedly planned to make him believe that the regular weekly working time was only 40 hours, although in fact he regularly had to work more than 40 hours.
The Stralsund Labour Court upheld the claim merely to the extent of EUR 20.46 gross. Only in one calendar month, the limit of ten hours had been exceeded by two hours for which overtime compensation was due. For the remaining claim, the Labour Court dismissed the lawsuit, arguing that the compensation clause in the plaintiff's employment contract was valid. In his appeal, the plaintiff further sought remuneration for the full 92 hours of overtime.
Decision of the Regional Labour Court
The Mecklenburg-Western Pomerania Regional Labor Court upheld the judgment of the Labour Court.
The clause on compensation for overtime was effective. Firstly, the clause was in no regard ‘surprising’ within the meaning of section 305c para 1 BGB (German Civil Code). A provision according to which overtime in excess of the operational working time of up to ten hours per month is to be compensated with the agreed monthly remuneration is not in itself unusual in an employment contract, but rather common practice. Further, the contract contained the clause under the heading ‘Remuneration’ and therefore in an usual place in the employment contract where it should have been expected.
Additionally, the court did not consider the clause invalid due to a lack of transparency pursuant to section 307 para 3 sentence 2 BGB, since it is clear from the employment contract itself which working hours are covered by the clause. The wording "compensated" clearly shows that no further payment will be made. It was also apparent to the plaintiff that he might have to work up to ten hours of overtime per month for the agreed monthly compensation without additional payment. Due to the clear limit, it must have been obvious for the plaintiff what he might have to do in terms of overtime work that will not be additionally compensated.
The court further argued that the alleged untruthfulness of the defendant is not plausible. The rules of the employment contract do not contain any statement on the frequency of overtime work. Due to the clear and transparent regulation, it is clear what is expected from the plaintiff in return for the agreed remuneration.
Finally, the court stated that the validity of a generalised compensation of overtime work is not dependant on a certain minimum annual remuneration. The clauses are not only permissible in contracts with well-earning employees. Such a clause may be freely agreed-on by the parties according to the general principle of freedom of contract.
As long as an agreement in an employment contract regarding a generalised compensation for overtime work is within the usual framework, it can in principle be included in any usual place in the employment contract (for example under the heading "remuneration"). However, the Regional Labour Court states clearly that it is particularly important that the provision is transparent. The employee must know what is in store for him, i.e. the maximum amount of unpaid overtime work expected from him.
The generalised compensation clauses are further generally admissible for any employees, irrespective of their agreed remuneration. However, an employer needs to make sure that the expected total working time does not violate the various statutory minimum wages (e.g. deriving from the Minimum Wage Act or from the principles of profiteering).
Therefore, caution is required when drafting employment contracts with such clauses. These clauses should be drafted professionally and regularly reviewed.