According to a recent decision from the German Federal Labor Court, necessary travel time spent in the employer’s interest generally has to be compensated like working time. This decision impacts business travel, especially for multinational companies.

The plaintiff, a German employee, was sent to a construction site in China for business-related purposes by his employer, the defendant. At the employee’s request, the employer booked a roundtrip flight in business class with a stopover in Dubai instead of a direct flight in economy class. The total travel time for the outward and return flight was four days. For each day of travel, the employer paid the employee the remuneration agreed to in the employment agreement for his regular eight-hour working day. This practice was quite common among German employers, as travel time on trains or airplanes was regarded as rest time with no expectation of compensation. The employer claimed that further travel time need not be compensated, while the employee sought compensation for his additional 37 hours actually spent travelling. The employee argued that the entire travel time must be compensated like regular working time.

The Local Labor Court dismissed the employee’s claim, but the State Labor Court held that the employer must compensate the employee for the additional 37 hours. The employer appealed. The Federal Labor Court later ruled that necessary travel time exclusively spent in the employer’s interest for business-related purposes is generally to be compensated like working time irrespective of whether the employee had been actually working or resting. The obligation results from the fact that “work” within the meaning of section 611 para. 1 of the German Civil Code (Bürgerliches Gesetzbuch - BGB) does not only include the actual contractually agreed activity, but also any activity performed on behalf and in the interest of an employer that is directly related to the work activity. Pursuant to the Federal Labor Court, this also includes necessary travel time if such time is spent in the employer’s interest and if it is directly related to the obligation to perform work abroad. As a result, such travel time must be compensated like work unless specific, agreed-upon protocols on travel time provide otherwise.

In the absence of sufficient State Labor Court’s findings on the actual necessity of the entire travel time, the Federal Labor Court was unable to reach a final decision and therefore remitted the case back to the competent State Labor Court in order to determine whether the entire travel time (including the stopover in Dubai) claimed by the employee was necessary for business-related purposes.

German Federal Labour Court (Bundesarbeitsgericht - BAG), judgement as of October 17, 2018 – case no. 5 AZR 553/17

Decision’s Implications

The new ruling affects the business practice on travel time compensation of numerous employers and requires their attention. The case received a lot of media attention and generated subsequent questions by employees and works councils. The ruling does not, however, result in a general or unlimited compensation claim for all travel time spent for business purposes.

The ruling applies only if no specific regulations on travel time have been agreed by contractual or collective agreement. For now, employers still have the opportunity to agree on different compensation regulations for travel time (even its exclusion) provided that the German minimum wage limit and the statutory requirements for employment-related terms and conditions are observed (which will usually be the case). Considering that it is generally possible to deem compensated any overtime work of employees with high base salaries (EUR 80,400 gross in West-Germany and EUR 73,800 in East-Germany), one could also argue that this also includes overtime resulting from business-related travel time. This approach has not been decided by the courts and leaves options for the drafting of agreements and policies.

Thus, employers that want to limit such compensation to travel time that falls within the employees’ regular daily working time only or that want to provide only partial or different compensation for travel time are well advised to agree on specific travel time regulations by contract with the employees or collective agreement with unions or works councils. As long as no specific travel time regulation exists, employees will be entitled to claim the same compensation for business-related travel time as for working time. The financial risk for an employer is obvious.