Lump Sum Remuneration for Overtime based on a (General) Works Agreement

In its decision of June 26, 2019 (ref. 5 AZR 452/18), the 5th Senate of the Federal Labor Court (BAG) dealt with the requirements and limitations of overtime lump sum remuneration clauses in works agreements. So far, the decision is only available as a press release.

Facts of the case

The plaintiff is a union secretary at the ver.di trade union. The parties have agreed a weekly working time of 35 hours and "trust-based working hours". The latter means that the plaintiff has to decide himself in principle when his working hours begin and end. The employment relationship is based on the "General Conditions of Employment for ver.di Employees" (AAB) concluded in the form of a general works agreement. With regard to overtime compensation for trade union secretaries, these differentiate whether they are to "regularly" work overtime: According to which, union secretaries who regularly work overtime receive nine free working days per calendar year as compensation. Conversely, the other employees are entitled to time off for each individual hour of overtime worked, plus an overtime bonus of 30 percent, or to a corresponding overtime payment.

The plaintiff has demanded overtime pay of € 9,345.84 gross for four months. In this regard, he has claimed that he has worked a total of 255.77 hours overtime in these months. The defendant union ver.di has filed an application for dismissal. In its opinion, all overtime hours were already compensated for by the nine compensation days, pursuant to the General Conditions of Employment for ver.di Employees. In addition, it denied that the plaintiff had ever worked overtime to the extent claimed and that it had been ordered, approved or tolerated.

Both lower courts have rejected the claim.

Decision

The appeal of the plaintiff before the 5th Senate of the BAG was successful and led to the case being returned to the Nuremberg State Labor Court.
According to the BAG, the General Conditions of Employment for ver.di Employees are partially ineffective, in as much as they provide for a fixed remuneration of overtime for certain union secretaries. The field of application of the works constitutional standard alone violates the requirement of standard clarity with the requirement of "regular overtime". This is because it is not clear for the employees when such "regular overtime" is taking place. Moreover, the regulation infringes the principle of equal treatment under works constitution law. The "regularity of overtime" alone is no suitable criterion for differentiation. On these grounds, the plaintiff is therefore entitled to compensation for his overtime plus the overtime bonus of 30 per cent.

Practical notes

Nuremberg State Labor Court – as well as the lower court – still considered the disputed provisions of the general works agreement as legally effective. It justified this by the fact that works agreements – unlike employment contract regulations – are not to be measured by GTC legal standards according to Sec. 305 et seqq. BGB [German civil code]. Consequently, Nuremberg State Labor Court also emphasized that the case law of the BAG on similar regulations in works agreements were not to apply here – not even accordingly. However, compliance with the "requirement of standard clarity" in works agreements now required by the BAG considerably limits this different standard of assessment, at least de facto. Therefore, the press release strongly suggests that the BAG also subjects overtime lump sum remuneration clauses in works agreements to a GTC law "transparency control through the back door". In any case, the criterion of the "regularity" of the accumulation of overtime does not meet the requirements set.

Employers who want to pay or compensate for overtime by using a works agreement should pay particular attention to the "requirement of standard clarity" when formulating clauses. This should also include the fact that the operating partners clearly define which overtime is covered by the lump sum remuneration to which extent. If overtime worked by certain groups of workers is to be remunerated in different ways, it must be objectively justified and compatible with the principle of equal treatment under works constitution law. For this purpose, a suitable differentiation criterion is required from the beginning. The mere "regularity" of overtime, in turn, is insufficient. In this regard, it remains to be seen which differentiation criteria the judiciary will recognize as factual justification.