Trust-based working time does neither preclude payment for a time credit nor the general entitlement to overtime pay

Working times recorded on signed time recording sheets are considered approved and – for the time being – undisputed.

Federal Labor Court, June 26, 2019 – 5 AZR 452/18

Facts of the case

The parties – a trade union secretary (plaintiff) and trade union ver.di (defendant) – argued over the remuneration of overtime. The “General Working Conditions for ver.di Employees” (“Allgemeine Arbeitsbedingungen für die ver.di-Beschäftigten”; hereinafter: “General Working Conditions”) concluded in the form of a general works agreement, applied to the employment relationship. They specified that compensation days for overtime worked were only granted if overtime and/or work at inopportune times were performed on a regular basis as well as  overtime was performed at weekends or on public holidays (Article 10(5) General Working Conditions). The compensation was a flat rate of nine working days per calendar year, while no additional overtime payments were provided for. In contrast, employees who worked overtime on an irregular basis were compensated individually and received compensatory time off plus an overtime bonus of 30% for any overtime worked. The plaintiff had been tasked to individually determine the beginning and end of his working time. He recorded his working hours in time sheets, which were signed by a superior.

Decision

The Federal Labor Court (“Bundesarbeitsgericht”) upheld the plaintiff’s appeal, overturned the ruling of the lower instance, and referred the matter back to Nuremberg State Labor Court for a new hearing and decision.

The Federal Labor Court reviewed the validity of the clause in Article 10(5) General Working Conditions and rejected it in two respects. The Court also addressed the relationship between trust-based working time and compensation for overtime and commented on the graded burden of producing evidence and burden of proof in the context of trials relating to overtime.

Invalidity of the overtime clause in Article 10(5) General Working Conditions

In the correct opinion of the Federal Labor Court the regulation, as a general woks agreement, is subject to the requirements of clarity and certainty of legal provisions, which the wording “regular overtime” in Article 10(5) General Working Conditions fails to satisfy. Thus, the wording of the phrase might be filled in with a large number of conceivable contents. In addition, the provision infringes the principle of equal treatment pursuant to Section 78 Works Constitution Act (“Betriebsverfassungsgesetz”) in conjunction with Section 3(1) of the Constitution (“Grundgesetz”). Accordingly, employees who regularly work overtime and are paid on a flat-rate basis in accordance with Article 10(5) General Working Conditions without an upper limit for overtime hours would be treated unequally compared with those who only work overtime on an irregular basis and are therefore compensated individually. After all, in the case of unusually high overtime hours, the employer only owed the payment of a flat-rate remuneration which is significantly lower than the specifically calculated individual compensation.

Trust-based working time does not rule out overtime pay

In the opinion of the Federal Labor Court, there may also be a positive time credit within the scope of trust-based working hours and a claim to remuneration for overtime. This may be the case if it is no longer possible for workers to schedule their compensatory time off independently, as they simply are unable to take time off because of the amount of work allocated. The agreement of trust-based working time cannot therefore justify unequal treatment under Article 10(5) General Working Conditions where it is not possible for employees working under the trust-based model to compensate the excessive burden of work with individually selected compensatory time off.

Burden of producing evidence and burden of proof in trials relating to overtime

The Federal Labor Court further held that the employer’s signing of the times recorded by the employees constitutes approval and that these times are thus made non-contentious. In a trial, employees are deemed to have satisfied their burden of producing evidence by identifying the signed working hours and the resulting balance in a brief. It is then up to the employer to prove that the hours were not actually worked as recorded.

Assessment

The decision is only partially convincing.

While it is welcome that employers are permitted to make arrangements in works agreements which would frequently be ineffective as general terms and conditions (“Allgemeine Geschäftsbedingungen”) in employment contracts, the content of the works agreements must then be determined and groups of employees may only be treated differently on objective grounds. Where compensation for overtime hours is specified, this must be clearly regulated; differentiation criteria (“regular”) must also be unambiguous.

Where this fails, the works agreement as a whole, not just the individual provisions, may turn out to be invalid. According to the correct assessment of the Federal Labor Court, an ineffective clause will only then not lead to the entire nullity of the works agreement if the remaining part of the works agreement continues to represent a sensible and self-contained regulation even without the ineffective provision. In the specific case, the Federal Labor Court – generously – presumed partial invalidity, with only the provision on “regular” overtime workers to be deleted. According to the otherwise applicable standard of the Federal Labor Court, this is not convincing. The provision on the other employees is not sufficiently “detached” from this special regulation for the presumption of its partial invalidity to be justified.

Finally, the Federal Labor Court also stated something that is self-evident by holding that the agreement of trust-based working hours could not lead to eliminating overtime pay. If the employer allocates employees too much work volume, so that they can no longer compensate for overtime on one day by working shorter hours on other days, overtime must be remunerated.

The statements on the burden of producing evidence in case of signed overtime slips are convincing. It would simply be contradictory if employers were no longer bound by their previously given consent to the amount of overtime worked in the context of a trial relating to overtime.

Tips for use in practice

The appropriate works agreements remain permitted even after this Federal Labor Court decision. It is of existential importance for works agreements, however, that the rules on flat-rate overtime pay are unequivocally formulated and it is clear to what extent overtime can be demanded without incurring additional payment obligations.

The presumption that countersigned overtime records are correct, means employers should closely verify their correctness prior to signing them in the future. Otherwise, the burden of producing evidence and the burden of proof will shift in favor of employees.

On the obligation to record overtime and to ease the burden of producing evidence and the burden of proof in favor of employees in accordance with the latest ruling of the Court of Justice of the European Union of May 14, 2019, please refer to our May 2019 Newsletter.