UPDATE: Germany – Claims Limitation in Employment Contracts

Overview

A recent Labour Court ruling (September 2018) has materially changed the rules on the enforceability of forfeiture clauses in German employment contracts that seek to limit the time in which an employee can bring a claim.

Law change

A claim limitation (or forfeiture) clause in an employment contract that does not explicitly exclude claims for statutory minimum wages, is invalid. The claim limitation will then revert to the statutory claim limitation period only. Depending on the type of claim this can be as much as three years from the claim arising.

Action required

You should review and adjust your template/standard and existing German employment contracts. The limitation/forfeiture clause must expressly exclude claims for the statutory minimum wage.

General comment

Forfeiture clauses are common practice in Germany employment contracts, often requiring claims to be brought within 3 months of the due date. To be valid they must be clear and understandable and not unfairly prejudice the employee. Now they must also expressly exclude claims for minimum wages.