BAG Ruling: Employers Bear the Salary Risk in the Event of an Invalid Dismissal

In its decision of January 28, 2026 (Case No. 5 AS 4/25), the German Federal Labour Court (Bundesarbeitsgericht – BAG) issued a landmark ruling on whether employers can exclude employees’ salary claims through contractual provisions in employment agreements pending a judicial determination of the validity of an employer-initiated dismissal.

Under Section 615 sentence 1 of the German Civil Code (Bürgerliches Gesetzbuch – BGB), an employee is generally entitled to remuneration for the period until the validity of an employer’s dismissal has been legally clarified, even if the employer no longer employs the individual during that time. This entitlement is known as "Annahmeverzugslohn" (default-of-acceptance pay). The BAG has now clarified that this claim cannot be contractually excluded, thereby reversing its previous position.

Excluding Default-of-Acceptance Pay Claims Is Invalid, Rules the BAG

In a dispute concerning default-of-acceptance pay claims, the Fifth Senate of the BAG initially took the view in 2023 that Section 615 sentence 1 BGB was not a mandatory provision of law and that the parties could therefore validly agree to exclude claims for default-of-acceptance pay (judgment of March 29, 2023, Case No. 5 AZR 55/19).

The Fifth Senate has now departed from this position following a 2025 decision of the Second Senate of the BAG, which held that Section 615 sentence 1 BGB constitutes a mandatory legal provision at least to the extent that it cannot be waived in advance in cases involving an invalid dismissal or a dismissal that only takes effect at a later date (decision of June 18, 2025, Case No. 2 AZR 91/24).

The Fifth Senate has therefore now clarified that a contractual provision completely excluding an employee’s entitlement to default-of-acceptance pay is ineffective. According to the BAG, while deviations from Section 615 sentence 1 BGB may generally be agreed by contract, this does not apply to the period between the issuance of an invalid dismissal and the court’s determination of its validity, particularly where the exclusion of default-of-acceptance pay would jeopardize the employee’s livelihood.

The Protective Purpose of the German Dismissal Protection Act Would Be Undermined

Among other arguments, the Fifth Senate relied on the protective purpose of the German Dismissal Protection Act (Kündigungsschutzgesetz – KSchG), particularly Section 11 thereof. This provision states that, where a dismissal is invalid, certain earnings obtained by the employee must be offset against “the remuneration owed by the employer after the dismissal.” According to the BAG, this wording clearly demonstrates that the legislature assumed that the employee’s remuneration claim continues to exist despite an invalid dismissal. This conclusion is further supported by a systematic interpretation of other provisions of the Dismissal Protection Act.

If a complete contractual exclusion of this entitlement were permitted, it would undermine the purpose of the mandatory dismissal protection rules, namely the preservation of the employment relationship and, with it, the employee’s remuneration as the basis of their economic livelihood. The purpose of dismissal protection law is not only to protect the employment relationship itself but, above all, to safeguard employees’ remuneration as their economic foundation.

According to the Court, this protection would be entirely deprived of its value if parties were allowed to waive Section 615 sentence 1 BGB in advance.

Consequences of the Judgment for Employers

A complete contractual exclusion, agreed in advance, of default-of-acceptance pay claims in the event of an invalid dismissal or a dismissal that only becomes effective at a later date is not permissible. Any contractual exclusion clauses of this nature are invalid, meaning that employees remain protected against loss of income.

The ruling affects not only individual employment contracts but also collective bargaining agreements where they seek to exclude default-of-acceptance pay during the period between the issuance of an invalid dismissal and the final judicial determination of its validity.

Employers should therefore ensure that all legal requirements for an effective dismissal are met and that dismissals are structured in a legally compliant manner.

We would be pleased to assist you with any questions relating to dismissal law.