News - Germany

Germany - February 2012

Entitlement to a bonus following notice of termination

The entitlement to a bonus may be made dependent on an employee not being under notice at the time of payment, irrespective of who terminated the employment.

The plaintiff claimed payment of a Christmas bonus, which should have been paid with her remuneration in November 2009.  According to the contract of employment, the entitlement to a Christmas bonus would be lost if the employment was under notice at the time of payment.  The defendant gave written notice on 23 November 2009 which was effective from 31 December 2009.

While the lower courts found in favour of the plaintiff, on appeal the German Federal Labour Court revoked the lower court’s judgment and remanded the case to the Higher Labour Court.

The Federal Labour Court held that the validity of a clause setting out the conditions under which a bonus will be paid if the employee is not under notice at the time of payment depends on the purpose of the bonus payment.  If the condition relates only to continued employment, as in this case, the clause may be legally valid.

The plaintiff claimed that she was given notice because she had not agreed to waive her Christmas bonus.  The Higher Labour Court will have to consider whether the plaintiff’s employment was terminated in bad faith.  If the Higher Labour Court decide that the plaintiff’s employment was terminated in bad faith then the plaintiff would be entitled to her 2009 Christmas bonus, notwithstanding the fact that the clause was legally valid.

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German Higher Labour Court, judgment dated 18 January 2012 - 10 AZR 667/10

German Higher Labour Court

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