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Calculation and Fulfill­ment of Statutory Minimum Wage Claims

Consideration of Special Payments

On May 25, 2016, the Federal Labor Court passed its long-awaited first judgement on calculation and fulfilment of statutory minimum wage claims and confirmed the previous case law of German higher labor courts on the consideration of special payments for the minimum wage claim.

Sec. 1 of the German Minimum Wage Act (MiLoG) only states that the statutory minimum wage amounts to EUR 8.50 gross per hour. There are no rules on the influence of other remuneration components. By way of example, the Act’s wording does not state if special payments like Christmas bonuses or holiday allowances might be considered part of the statutory minimum wage.

Previous Approach

The only approach for employers so far has been to stick to the judgements of local and higher labor courts (e.g. Higher Labor Court Berlin-Brandenburg, judgements of August 11, 2015 or October 2, 2015 (file nos. 19 Sa 819/15 and 9 Sa 570/15) as well as information from the explanatory memorandum to the MiLoG and information published by Federal Ministry of Labor and Social Affairs as well as customs authorities. All these referred to the same approach as regards the consideration of remuneration components for minimum wage claims. According to that approach, the jurisdiction of Federal Labor Court (BAG) and European Court of Justice (ECJ) on comparable minimum wages shall be decisive. According to ECJ case law (e.g. of November 7, 2013, file no. C-522/12), only those remuneration components shall be considered that do not change the relation between performance of the employee and received reward. According to the BAG, those remuneration components may form part of the minimum wage whose purpose is “functionally equivalent” to the minimum wage’s intention (e.g. judgement of April 18, 2012, file no. 4 AZR 139/10).

As a rule of thumb – that still applies in our opinion – employers had to ask themselves in each case: Does the remuneration component reward the employee’s “normal” work performance? If so, it might be considered part of the minimum wage.

Judgement of the BAG

Though only a press release has been published so far (file no. judgement of May 25, 2016 is 5 AZR 135/16), we assume that the BAG will also refer to above approach as it summarizes that the employer fulfills the minimum wage claim by any remuneration components granted as reward for the employee’s work performance under the employment contract as far as they do not have to be repaid by the employee. Any payments granted for other purposes than rewarding the normal work performance might not be taken into account.

Details of Legal Dispute

The BAG confirmed a previous judgement of the Higher Labor Court Berlin-Brandenburg (January 12, 2016, file no. 19 Sa 1851/15). In the underlying case, the employee received a fixed remuneration plus Christmas bonus and vacation allowance. These special payments have initially been paid out annually and recently – on the basis of a works agreement – in monthly installments. The employer has been of the opinion that these pro rata special payments might be considered part of the minimum wage.

The Higher Labor Court confirmed that understanding of the employer. In the individual case, the court argued that the special payments have been granted solely in return for normal work performance. The payments have only be dependent on the employment within the relevant year. By way of example, the vacation allowance has not been granted for any other reasons than compensating the normal work performance (e.g. not to compensate expenses for vacation etc.).

Practical Implications

Since the BAG has confirmed previous approaches on influence of special payments, the practical implications of the judgement are rather small but employers now have some legal certainty. However, it remains to be seen how the BAG will rule on the influence of other remuneration components.

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