On 22 November 2016, the Labour Court Cologne decided that an employer who pays late or incomplete wages is obliged to pay lump sum compensation in the amount of 40 Euros to the affected employee (Judgement of 22.11.2016 - 12 SA 524/16).

In 2011 the European Parliament and the Council of the European Union passed the Directive 2011/7/EU on combating late payment in commercial transactions. "The aim of this Directive is to combat late payment in commercial transactions, in order to ensure the proper functioning of the internal market, thereby fostering the competitiveness of undertakings and in particular of SMEs. It shall apply to all payments made as remuneration for commercial transactions." (Art. 1 para. 1 ff. Directive 20111/7/EU).

As of 29 July 2014 the Directive was implemented in German law without limitation by sec. 288 para. 5 German Civil Code. According to sec. 288 para. 5 German Civil Code a creditor is entitled to claim lump sum compensation in the amount of 40 Euros in the event of a debtor's default. This lump sum payment is due regardless of whether loss or damage, and in any amount, has been incurred by the creditor.

In this case the Labour Court Cologne had to determine whether new sec. 288 para. 5 German Civil Code also applies to arrears of wages. The plaintiff claimed among other things a lump sum compensation of 40 Euros from the defendant, due to late and incomplete payment of his wages. The complaint was based on new sec. 288 para. 5 German Civil Code. The Labour Court decided that the already existing provision on default also applies to wages claims. (Judgement of 22.11.2016 - 12 SA 524/16). Consequently, the employer is obliged to pay a lump sum compensation in the amount of 40 Euros to the employee in the event of late or incomplete payment of wages.

However, the Labour Court Cologne has permitted an appeal to the Federal Labour Court.