Exclusion clause covering wage claims invalidated by court decision

The Federal Labour Court has ruled that a clause in an employment contract that purports to impose a time limit on claims by an employee is invalid if it covers claims for pay guaranteed by the minimum wage.

The minimum wage, which currently stands at €8.50 per hour, was introduced in Germany back in January 2015, after much political debate over whether wage regulation was really necessary. In a recent case the Federal Labour Court, the highest German employment court, considered the effect of the minimum wage on contract clauses that purport to limit the time within which employees can bring claims against their employer.

Many German employment contracts provide that an employee wishing to make a claim against their employer must do so within a specified time, otherwise the right to bring a claim is lost. Such exclusion clauses were already subject to strict rules: they are only enforceable if the restriction applies equally to claims by employers and provided the time limit for claiming is not unreasonably short - around three months generally being considered acceptable.

In the case before the Court, the employment contract contained a clause that was in line with the existing rules. Nevertheless, the Court ruled that it was invalid. The Court reasoned that, as the clause covered pay claims, that encompassed claims in respect of that part of pay that was guaranteed by the minimum wage. Ruling that this was an unfair restriction on the ability to claim the minimum wage, which rendered the entire clause invalid, the Court made it clear that the minimum wage cannot be forfeited by the imposition of a time limit for claiming outside the statutes of limitations.

The Court’s decision will affect almost every exclusion clause in employment contracts in Germany, which will require amendment in order to be enforceable.