Calculation of compensation for absence in the case of income from self-employment

LAG Berlin-Brandenburg Judgement v. 20.03.2025 - 5 Sa 734/24

In its ruling of March 20, 2025 (Ref.: 5 Sa 734/24), the Berlin-Brandenburg Regional Labour Court ruled that it is harmless if a contractual provision on a post-contractual non-competition clause does not contain a provision on the amount of the mandatory compensation for non-competition required for the agreement to be binding pursuant to Section 74 (2) HGB if the parties have otherwise referred to the statutory provisions of Sections 74 et seq. HGB. Pursuant to Section 74 c HGB, any income from self-employment is only to be offset against the entitlement to payment of the compensation for non-competition if it could not be earned during the performance of the terminated activity. The employee would then also have to provide information on this in accordance with § 74 c (2) HGB.

I. Facts of the case

The parties are essentially in dispute about the payment of compensation for non-competition arising from a post-contractual non-competition clause.

The plaintiff had been employed by the defendant since March 1, 2019 as Head of Business Development with a gross monthly salary of EUR 6,600.00 plus variable remuneration. In the employment contract dated February 15, 2019, a post-contractual non-competition clause was agreed for a period of 24 months after termination of the employment relationship. In April 2020, the defendant sent the plaintiff a draft amendment agreement to the employment contract regarding the remuneration agreement, which the plaintiff rejected. In an email dated May 2, 2020, the defendant responded to the plaintiff's rejection and at the same time declared that it would waive the post-contractual non-competition clause from the employment contract. In his reply email, the plaintiff referred to the written form for such a waiver.

A meeting then took place between the plaintiff and the managing director of the defendant on June 10, 2020. As a result of the meeting, an amendment agreement to the employment contract was signed. There is a dispute between the parties as to whether this amendment agreement changed the employment contract provision on the post-contractual non-competition clause. The plaintiff claims that he signed a version without a waiver of the post-contractual non-competition clause, while the defendant claims that both parties signed a version with a waiver of the post-contractual non-competition clause.

The plaintiff terminated the employment relationship between the parties by giving notice of his own accord on August 15, 2020. However, he subsequently took up a new employment relationship and generated income from a self-employed activity as an expert for weapons and ammunition, which he had already carried out on the side during his employment relationship with the defendant. After the termination of his employment relationship with the defendant, the plaintiff demanded payment of compensation for non-competition in accordance with the post-contractual non-competition clause contained in his original employment contract. The defendant refused payment, citing its alleged waiver of the post-contractual non-competition clause. As a precautionary measure, the defendant also requested the plaintiff to provide information about his income from self-employment and employment.

The Berlin Labour Court dismissed the action. The plaintiff appealed against this decision to the Berlin-Brandenburg Regional Labour Court.

II. Reasons for the decision of the Berlin-Brandenburg Regional Labour Court

The Berlin-Brandenburg Regional Labour Court partially upheld the plaintiff's appeal and awarded him compensation for maternity leave in the gross amount of EUR 69,200.50 (already less earnings earned elsewhere) for the period from November 9, 2020 to August 15, 2022. For the period from August 16, 2020 to November 8, 2020, the court dismissed the appeal as currently unfounded, as the plaintiff had not provided sufficient information on other earnings for this period.

1. Effectiveness of the post-contractual non-competition clause

In the opinion of the Berlin-Brandenburg Regional Labour Court, the parties agreed an effective post-contractual non-competition clause in the employment contract with an obligation on the part of the defendant to pay compensation in the amount of half of the contractual compensation last received by the plaintiff. The fact that the corresponding provision in the employment contract does not contain a provision on the amount of the mandatory compensation for non-competition required for the agreement to be binding pursuant to Section 74 (2) HGB is irrelevant, as the parties have agreed that the statutory provisions of Sections 74 et seq. HGB apply. In view of the regulatory density of the statutory provisions, this reference is sufficient to cover all essential elements of a provision on a post-contractual non-competition clause. If a contractual non-competition clause refers to the relevant provisions of the HGB for all details of the agreed regulation, then in case of doubt this constitutes a promise of compensation for non-competition in the statutory minimum amount (BAG judgment of 28.06.2006 - 10 AZR 407/05).

2. No proven effective waiver of the post-contractual non-competition clause

Furthermore, there was no effective waiver by the defendant of the post-contractual non-competition clause prior to the termination of the employment relationship pursuant to Section 75a HGB. In principle, it is possible to revoke or amend the content of a post-contractual non-competition clause by means of a bilateral amendment agreement to the employment contract. However, after taking evidence, the court came to the conclusion that the parties had not reached such an agreement on June 10, 2020. The defendant had not been able to meet its burden of presentation and proof for an amendment to the employment contract provision on the post-contractual non-competition clause.

3. Crediting of other earnings pursuant to Section 74c (1) sentence 2 HGB

Pursuant to Section 74c HGB, the plaintiff must have offset against the compensation for non-competition due that which he has acquired or maliciously failed to acquire during the period for which the compensation is paid by utilizing his labour elsewhere. Proceeds generated from the utilization of the labour are all monetary benefits in compensation for the work performed, in particular the direct generation of monetary benefits for the performance of work within the framework of a service or employment relationship. However, according to established case law, income from self-employment can also be taken into account (see BAG ruling of 16 November 2020 - 10 AZR 152/05). Therefore, in addition to the plaintiff's employment income from his new employment relationship, his income from his self-employed activity as an expert for weapons and ammunition is also eligible. The fact that the plaintiff had already exercised this self-employed activity during his employment relationship with the defendant did not, in the opinion of the Regional Labour Court, generally preclude the crediting of the income earned from this activity after the termination of the employment relationship with the defendant.

According to Section 74c (1) HGB, however, only that which the employee earns through the utilization of his work that has become free as a result of the termination of the employment relationship is creditable. If, however, the employee previously had an employment relationship that occupied him as his main occupation to the usual extent and he enters into such a main employment relationship again, then only the income earned from this is to be taken into account. The Regional Labour Court was of the opinion that additional income in a case such as the one in question should not be taken into account, as it was not related to the release of the employee. This is in line with the current case law of the Federal Labour Court on this issue (see BAG judgment of May 14, 1969 - 3 AZR 137/68). The plaintiff had indisputably worked full-time for both the defendant and his new employer for the duration of the post-contractual non-competition clause. In addition, the plaintiff had already been self-employed as an expert for weapons and ammunition for the duration of his employment relationship with the defendant. Consequently, the income earned from his self-employment during the period of the post-contractual non-competition clause was not related to the release of his workforce and was therefore not to be offset against the compensation for non-competition pursuant to Section 74 c (1) HGB. Only the plaintiff's income from his new full-time employment was to be offset against the compensation for non-competition to be paid by the defendant.

Furthermore, it follows from the statutory provision in Section 74c (1) sentence 1 HGB that a comparison of the income from other employment on the one hand and the compensation to be paid for non-competition on the other hand is not permitted for a larger or the entire period of the non-competition clause and that the offsetting must rather be carried out pro rata temporis, i.e. as a rule according to the individual months (see BAG judgment of 16.11.2005 - 10 AZR 152/05). Other earnings are taken into account in accordance with § 74c (1) sentence 1 HGB if the compensation, including the other earnings, would exceed the amount of the contractual benefits last received by the employee by more than one tenth. According to this provision, the plaintiff would also have to have some of the income from his new full-time employment offset against the compensation for maternity leave to be paid by the defendant.

4. Employer's right to information about the amount of other income pursuant to Section 74c (2) HGB

With regard to the employer's right to information about the amount of other income earned by the employee pursuant to Section 74c (2) HGB, the Berlin-Brandenburg Regional Labour Court clarified that it is generally sufficient to provide information about the new employer and submit payslips in order to satisfy the right to information. In the case of other earnings from self-employment, on the other hand, the income tax assessment should generally be submitted. In the present case, however, it was not necessary to submit the income tax assessment, as the income from the plaintiff's self-employment as an expert on weapons and ammunition could not be offset against the compensation for loss of earnings to be paid by the defendant.

III. Conclusion and practical advice

The present decision deals in a welcome manner with various questions in connection with the crediting of other earnings during the period of validity of post-contractual non-competition clauses and emphasizes the special features of income from self-employment.

In line with the established case law of the Federal Labour Court, the Berlin-Brandenburg Regional Labour Court clarifies that the comparison between the income from other employment on the one hand and the compensation for non-competition to be paid by the employer on the other hand must be made in relation to a monthly period ("pro rata temporis") and cannot be based on a longer period or even on the entire period of the post-contractual non-competition clause.

It also states that only other earnings can be offset against the compensation for non-competition that are generated by a worker who has become available due to the termination of the employment relationship. Accordingly, income from self-employment to the extent that this self-employment was already carried out by the employee during the term of the employment relationship cannot be offset against the compensation for maternity leave to be paid by the employer.

Finally, the Berlin-Brandenburg Regional Labour Court clarifies that the employer's right to information about the amount of other income earned by the employee pursuant to Section 74c (2) HGB can generally be fulfilled by stating the new employer and submitting pay slips. In contrast, in the case of self-employment, it is generally necessary to submit the income tax assessment.