By judgement dated 16 May 2012 (5 AZR 331/11) the Federal Labour Court affirmed the validity of an oral agreement between an employer and employee, pursuant to which the first 20 hours of overtime per month are already remunerated with the monthly fixed salary. In particular, it did not consider such an agreement to be either non-transparent or surprising. Nor is it subject to any requirement to have its contents further examined pursuant to Sec. 307 para. 1 sentence 1 German Civil Code [Bürgerliches Gesetzbuch, BGB], as a clause in general terms and conditions which exclusively regulates the remuneration of overtime as opposed to the employer’s power to order overtime work constitutes an agreement on a principal service which solely concerns the employer’s consideration for services rendered and is therewith not subject to the examination of its contents.

In the case to be decided by the Federal Labour Court the claimant worked at the defendant, an automobile supplier not bound by a collective bargaining agreement, in the stock management department and, with a regular working week of 40 hours, earned a fixed gross salary of € 2,184.84. The employment contract had only been concluded orally. The defendant’s personnel manager had also orally informed the claimant that the first 20 hours of overtime per months were “included in this”. Accordingly, in the past the defendant had only remunerated overtime as of the 21st hour of overtime worked in the month, and then with a 25% bonus. The claimant retroactively demanded inter alia remuneration of the first 20 hours of overtime, which was in turn rejected by the defendant on grounds of the orally agreed fixed overtime agreement.

The complaint was unsuccessful in all three instances. In the opinion of the Federal Labour Court the said oral agreement constituted a general term and condition as it was used by the defendant in a multitude of employment contracts. In particular, the lack of written employment agreement did not exclude the acceptance of general terms and conditions. However, being an agreement concerning a principal service, it was not subject to any further-reaching examination of its content (Sec. 307 para. 3 sentence 1 BGB). Moreover, the Federal Labour Court did not consider the clause to be surprising either, for fixed overtime remuneration clauses are broadly used in the employment sector and, additionally, the oral notification of this clause to the employee and therewith its agreement as an integral part of the employment contract also did not suffice to constitute a “blindsiding” of the employee. Otherwise, oral general terms and conditions would always be surprising and could never become integral parts of a contract. Finally, the clause was also not invalid on grounds of a lack of clarity, as it clearly and comprehensibly regulates in which temporal scope the employment services of the claimant are to be covered by the agreed salary.

The decision does not comment on whether or not a comparable clause would be subject to an examination of its contents if the employment contract simultaneously contained the employer’s power to order overtime work. For purposes of future contract structuring, however, the most recently pronounced decisions of the Federal Labour Court concerning overtime clauses are of considerable relevance. Accordingly, in summary, the following can be established:

  • A clause on the fixed remuneration of all overtime worked is non-transparent and therefore invalid (BAG, NZA 2011, 575).
  • Even in the event of the invalidity of such a clause, however, the employee only has a claim to remuneration if, pursuant to objective criteria, such remuneration could be expected; this is regularly not the case with a salary above the social security contribution ceiling in the statutory pension insurance scheme or in case of senior services (BAG, 22 February 2012, 5 AZR 765/10; BAG 17 August 2011, 5 AZR 406/10). 
  • In contrast, a clause on the remuneration of a specific number of overtime hours is fundamentally valid up to the limit of unconscionability. Not clarified to date, how-ever, is when the said limit is deemed specifically exceeded in this connection. In the aforesaid configuration of the Federal Labour Court decision dated 16 May 2012 (without examination of contents), the Federal Labour Court certainly accepted fixed remuneration for about 12.5%. In a decision dated 1 September 2010 (5 AZR 517/09) the Federal Labour Court did not comment on a desired fixed remuneration for about 18.5% (although the remuneration clause in this case was already deemed invalid on grounds of its non-transparency). Moreover, if one compares this with the previous case law of the Federal Labour Court on reservations of revocation, there are several indications to the effect that in case of a fixed remuneration agreement, as much as 25% of the regular working hours certainly can be validly “flexibilised”.

However, until supreme court clarification of this matter, caution should still be applied when structuring contracts and employers should consider whether they ought to dispense with a clause regarding the ordering of overtime in order to avoid a further-reaching examination of its contents and therewith be able to have as many overtime hours as possible remunerated with the monthly salary.