Exclusion clauses without exclusion of minimum wage entitlement ineffective

Employment contracts regularly include exclusion clauses according to which mutual claims must be asserted within three months from their maturity. With its decision of September 18, 2018 (file no.: 9 AZR 162/18), the German Federal Labor Court (“BAG”) has now declared a clause, which does not explicitly exclude claims to minimum wage, to be ineffective. Such clauses, however, can be found in numerous current employment contracts.

The plaintiff asserted claims for payment in lieu of holiday. The employer rejected such claim by reference to the employment contract’s exclusion clause. According to such clause, all claims not having been asserted within three months from their maturity should in general be forfeited.

The BAG decided in favor of the plaintiff and declared the entire clause to be ineffective. According to the Erfurt judges, an employment contract’s exclusion clauses must explicitly exclude the minimum wage entitlement. Otherwise, they are ambiguous and as such fail the transparency test for General Terms and Conditions. The ineffectiveness relates to the entire clause, i.e., it affects all claims under the employment. Thus, an ineffective clause has far-reaching consequences which pose a high risk for employers. If the clause is ineffective, the statutory limitation period of generally three years applies within which employees can assert all of their claims under the employment.

The BAG’s statements apply to all employment contracts which have been concluded or amended as of January 1, 2015. Whether or not the decision will be applicable to older contracts’ exclusion clauses (due to the legitimate expectation) remains to be seen from the decision’s publication.

Practical tip:

All employment contracts – primarily those which have been concluded or amended after January 1, 2015 – should be examined immediately. If the minimum wage entitlement has not been explicitly excluded from the exclusion clause’s scope and if such clause has not been expressed comprehensibly, new exclusion clauses should be agreed upon. Upcoming contractual amendments should be taken as opportunity to agree upon new exclusion clauses meeting such requirements. All future contracts must be amended accordingly in advance.