The Bundesarbeitsgericht (BAG), Germany’s Federal Labour Court, confirmed in a recent ruling that employers can claw back collectively agreed bonus payments from employees under certain circumstances.

It is common for employment contracts to include provisions on collectively agreed bonus payments, for instance when employers promise to pay a Christmas bonus. We at the commercial law firm GRP Rainer Rechtsanwälte note, however, that an employee’s entitlement to receive this annual bonus payment can be made conditional on the employment relationship continuing until a cutoff date outside of the reference period for payment in the following year. This position was reaffirmed by the Bundesarbeitsgericht in a ruling from 27 June 2018 (Az.: 10 AZR 290/17).

In the case in question, the employment contract stipulated that the employee was entitled to receive a collectively agreed yearly bonus payment on the 1 December. The contribution was also meant to serve as remuneration for work that had been performed. The contract further stated that the employee was to repay this bonus payment if he or she leaves the employment relationship during the period ending on 31 March of the following year through their own fault or of their own volition. In this case, the employee had terminated the employment relationship in October, in due time for this to take effect from January 2016. His employer paid out the agreed bonus to him on 1 December in the amount of one month’s wages and after the employment relationship was terminated demanded it be repaid. The employee refused to repay the bonus, arguing that the relevant tariff provision was invalid, disproportionately restricted his scope for terminating the employment relationship and breached his fundamental right to choose and pursue a professional activity.

The Bundesarbeitsgericht nonetheless held that the employer was entitled to repayment of the bonus, ruling that such a provision would be considered invalid if it were firmly established as a clause in the general terms and conditions of the employment contract and placed the employee at an undue disadvantage. The BAG clarified that the content of tariff wage agreements incorporated in their entirety into employment contacts, on the other hand, is not subject to this kind of review.

The Court found that the employee’s obligation to repay the amount arose from a provision in a tariff wage agreement concerning a cutoff date and did not violate any superior rule of law. The BAG noted that while the result amounted to a restriction on the employee’s freedom to choose and pursue a professional activity, this restriction was proportionate.

Lawyers who are experienced in the field of employment law can advise employers in relation to both individual and collective employment law.