In a Judgment dated 18 September 2018 the Federal Labour Court ruled that limitation periods, which do not exclude a claim for the Minimum Wage (Mindestlohn) according to the Minimum Wage Act (Mindestlohngesetz), are invalid. This results in the ineffectiveness of thousands of limitation periods in employment contracts. In Germany, limitation periods within which a claim must be asserted are commonly agreed in employment contracts. These generally amount to three months and are therefore considerably lower than the limitation periods provided by law. However, the exclusion periods may be invalid, because employment contracts are subject to the terms and conditions control (AGB- Kontrolle).

This means that every clause in the contract needs to be controlled regarding its effectiveness. Among other things contract clauses are invalid, if there is disproportionate disadvantage to the contracting party. Such a disadvantage also exists if the clause is not clear and understandable or violates fundamental principles of a legal regulation. There is no validity preserving interpretation of the clause. If the clause is incomplete or does not include or exclude necessary contents, then the whole clause is void.

Against this background, the Federal Labour Court ruled that limitation periods that do not explicitly exclude the Minimum Wage guaranteed by law are invalid. The Minimum Wage Act requires that agreements restricting the assertion of the Minimum Wage are not effective. So far, there was disagreement between the Higher Regional Labour Courts, as to how to deal with this legal regulation in terms of the control of general terms and conditions (AGB- Kontrolle). Now the Federal Labour Court has finally decided the dispute. This applies at least to contracts concluded from 31 December 2014, as the Minimum Wage Act entered into force on 1 January 2015. As a consequence the claims, which may in principle be subject to an limitation period, are governed by the limitation period by law in the event of invalidity of the clause. This is, depending on the nature of the claim, regularly at least three years.

It is to be expected that due to the same reasoning in the future further non-excluded claims will lead to the invalidity of the limitation period. Companies should therefore urgently revise their employment contracts and include an appropriate clause. Such a clause could be formulated as following: § XXX limitation period I.

Claims from the employment contract need to be asserted in writing to the other party within three months from the due date. If the respondent does not respond or does not acknowledge the claim, the claimant needs to bring an action within three further months. II. All rights that are not claimed in due time in accordance with paragraph I expire without replacement. III. This does not apply to claims for the Minimum Wage, for pensions, for property rights (such as surrender claims, for violations of personal rights, for employment, for the removal of a warning letter from the personal file, for classification, regarding activity as a works council member as well as claims due to liability for intent or gross negligence. For these claims, the limitation period provided by law applies.