Overtime compensation despite the release from work?

Created by Stephanie Breitenbach | |  Labor Law

When concluding a termination agreement, a notice of termination or if an employee is released from his working duties within – as consequence of – legal proceedings any remaining holiday entitlement and credits on the working time account (overtime) should be compensated for by the release. In a very recent decision, the Federal Labour Court (BAG) has stated what exactly employers have to consider in such a case.

In the case that was decided on by the Federal Labour Court (BAG) (ruling of the BAG dated 20 November 2019, Az 5 AZR 578/18) a secretary has filed a claim against the instant termination of her employment relationship. As so often the parties have reached an agreement at court that the extraordinary instant termination was converted into an ordinary termination and the secretary was released from her working duties until the end of the ordinary termination period with the continued payment of her salary (“garden leave”). It was explicitly stated in the settlement agreement that the remaining holiday entitlement shall be “granted and taken in kind” within the release period.

Thereupon the secretary claimed overtime payment for a total of 67 hours overtime (plus interest) that she still had on her working time account. The respective claim was won in the first instance and was dismissed in the second instance by the labour court Hamm. The secretary filed an appeal with the Federal Labour Court against this decision and won in the final instance. The Federal Labour Court stated, that „if an employment relationship ends and credits on the working time account can’t be compensated for by taking time off, the employer is obliged to compensate for this credit in money (pay overtime compensation). The court settlement must either clearly state that any credit on the working time account is being compensated for with the release from all working duties or the general circumstances must clearly indicate that any overtime is being compensated for through the release. If there are no such indications, any credit on the working time account (overtime worked) shall be paid to the employee despite the fact that full compensation is paid during his garden leave.

Practical tip

The ruling of the Federal Labour Court (BAG) explicitly only relates to release agreements within a court settlement. However, the evaluation can be transferred identically to all other types of releases, for example when concluding a termination agreement or when issuing a notice of termination. Our advice is that employers should in all cases ensure that it is recorded in writing that the release from all working duties compensates for any remaining holiday entitlement as well as any credit on the working time account! In the case of doubt a respective settlement clause should be part of any termination agreement respectively any court settlement agreement stating that with the fulfilment of the agreed on obligations all mutual claims are settled.