Monthly Dose Employment Law 06/2025

Disproportionately long probationary period for fixed-term employment contracts – end of the ‘standardisation’ of fixed-term employment contracts for probationary purposes with an agreed probationary period 

In its judgement of 5 December 2024 (2 AZR 275/23), the German Federal Labour Court (Bundesarbeitsgericht, BAG) ruled that a probationary period may not cover the entire term of a fixed-term employment contract. Such a provision is generally disproportionate and therefore invalid.

Facts

• The parties are in dispute as to whether – and, if so, when – the employment relationship between them was terminated by the defendant's notice of termination.
• The plaintiff was employed as a service advisor/master mechanic by the defendant, which operates a car dealership, from 1 September 2022. The written employment contract dated 22 August 2022 provided for a fixed term until 28 February 2023, combined with a probationary period that was also to last until 28 February 2023. During the probationary period, a notice period of two weeks was to apply. The employment contract did not contain any further provisions on possible ordinary termination.
• The defendant terminated the employment relationship by letter dated 28 October 2022 with effect from 11 November 2022.
• The plaintiff considered the termination to be invalid. He argued that the probationary period provision was inadmissible because it covered the entire duration of the fixed-term employment relationship. In his opinion, there was also no valid agreement on the possibility of ordinary termination.
• In his action, he sought a declaration that the employment relationship had not ended on 11 November 2022 but continued beyond that date. Both first and second instance labour courts dismissed the action. The plaintiff lodged an appeal with the Federal Labour Court.

Reasons for the decision

• Invalidity of a probationary period agreement that runs parallel to the fixed term of the contract: The BAG recognised that a probationary period covering the entire duration of the fixed-term employment relationship generally violates Section 15 (3) of the German Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz, TzBfG) and is therefore invalid. Section 15 (3) TzBfG, which has been in force since 1 August 2022, implements EU legal requirements from EU Directive 2019/1152 (the “Transparency Directive”). According to this, the duration of the probationary period must be proportionate to the length of the fixed term and the nature of the work.
• Interpretation in conformity with EU law: The court confirmed that Article 8(2) of the Transparency Directive requires comparable proportionality. A probationary period that matches the full term of the contract contradicts this principle.
• Ordinary termination remains possible: The invalidity of the probationary period provision meant that the shortened notice period under Section 622 (3) of the German Civil Code (Bürgerliches Gesetzbuch, BGB) did not apply. Instead, the statutory rule of Section 622(1) BGB (four weeks to the 15th or end of the month) applies. Despite the invalidity of the probationary period clause in this clause, the Federal Labour Court found that the employment contract contained a recognisable provision, from the perspective of a reasonable employee, permitting ordinary termination under Section 15 (4) TzBfG, according to which the contractual clause contained a provision recognisable to the reasonable employee that the employment relationship could be terminated with ordinary notice in any case before the expiry of the fixed term.
• Consequence: The BAG considered the termination as of 11 November 2022 as ordinary termination at the earliest possible date pursuant to Section 622(1) BGB. The employment relationship therefore ended at the end of 30 November 2022.

Consequences for practice

With this decision, the BAG has finally put an end to the contractual practice of ‘aligning’ the duration of a fixed-term employment relationship for trial purposes (= with a maximum duration of six months to avoid the application of the German Unfair Dismissal Protection Act (Kündigungsschutzgesetz, KSchG) to the fixed-term employment relationship) with an agreed probationary period. Employers should carefully determine the duration of the probationary period in fixed-term employment contracts and ensure that it is proportionate to the term of the contract. For fixed-term employment relationships with a duration of up to 12 months, probationary period amounting to 50% of the contract term may serve as a suitable benchmark. In addition, it is advisable to always include an explicit provision on the possibility of ordinary termination, independent of the probationary period, in order to avoid legal uncertainties and ensure proper termination of the contract.

As a rule, no malicious failure to seek employment during a period of leave during the notice period 

In its jdugement of 12 February 2025 (5 AZR 127/24), the BAG ruled that an employee who has been granted leave of absence after termination of their employment relationship does not generally act maliciously within the meaning of Section 615 s. 2 BGB, if they do not take up new employment during the current notice period.

Facts

• The plaintiff had been employed by the defendant as a senior consultant since November 2019 and most recently received a gross monthly salary of EUR 6,440.
• In a letter dated 29 March 2023, the defendant terminated the employment relationship with due notice as of 30 June 2023 in compliance with the notice period. At the same time, it irrevocably released the plaintiff from his obligation to work, crediting him with eleven days of holiday.
• The letter of termination stated that any income earned during the period of release from work would be offset against the remuneration.
  - The plaintiff brought an action for unfair dismissal and also claimed remuneration for the month of June 2023.
• The defendant refused to pay, citing section 615 s. 2 BGB. It had sent the plaintiff a total of 43 job offers, but the plaintiff had only applied for seven of these, and that only at the end of June 2023.

Reasons for the decision

• The BAG confirmed the decisions of the lower courts and upheld the action. It found that the employer was in default of acceptance because the employment relationship continued despite the leave of absence, and the plaintiff was no longer able to perform his work. The defendant therefore owed the plaintiff the agreed remuneration in accordance with Section 615 s . 1 in conjunction with Section 611a (2) BGB.
• Neither the employment contract nor statutory provisions imposed an obligation on the plaintiff to take up new employment during the notice period in order to relieve the defendant of financial burden.
• A malicious omission within the meaning of Section 615 s. 2 BGB requires that the employee intentionally fails to take up reasonable work even though he is aware of all the relevant circumstances. In the opinion of the court, these conditions were not met.
• Both the letter of termination and the employment contract only provided for the offsetting of income actually earned, but not hypothetical or merely potential income. This does not give rise to an obligation to apply for jobs that have been offered, as Section 615 BGB is of a dispositive nature and can therefore be waived by the parties to the employment contract, even implicitly.
• In addition, the defendant was unable to sufficiently demonstrate that the plaintiff could actually have earned income by accepting one of the jobs offered. Furthermore, the contractual non-competition clause, which continued to apply during the period of leave, would have made it difficult for the plaintiff to take up new employment.
• In the court's view, it would be incompatible with the principle of good faith (Section 242 BGB) to require an employee to take up new employment during an existing employment relationship simply because he was unilaterally granted leave.

Consequences for practice

If the employer wishes to reserve the right to offset earnings obtained elsewhere during the employee's leave of absence during the notice period after termination, or to refrain from doing so, it must stipulate this transparently in the employment contract in order to comply with this restrictive judgement of the BAG on the dispositive nature of Section 615 BGB.
The relevant provision in the employment contract – and also in the corresponding statement after termination – should clearly state whether and to what extent other earnings will be offset against the remuneration. If the employment contract contains such a transparent provision, the employer bears the burden of proof for the specific amount of earnings when asserting the omission of the relevant other earnings. To this end, the employer should keep a documented record (‘paper trail’) in the relevant case.

No evidential value of automated break time deductions – burden of proof in legal disputes concerning overtime pay

In its judgement of 12 February 2025 (5 AZR 51/24), the BAG ruled that an automatic deduction of break times in the time recording system used does not prove that these were actually taken and that the employer must specifically demonstrate when and how breaks were actually granted or made possible.

Facts

• The parties are in dispute over the remuneration of overtime, in particular whether the plaintiff took breaks.

• From September 2017 to August 2019, the plaintiff was employed by the defendant as a part-time assistant doctor at a clinic operated by the defendant, working 30 hours per week (= 75% of a full-time position), with the hours distributed over six hours each day from Monday to Friday between 7:30 a.m. and 1:30 p.m.

• The collective agreement (Tarifvertrag) for doctors at municipal hospitals dated 17 August 2006 (TV-Ärzte/VKA) applied to the employment relationship. The TV-Ärzte/VKA differentiates between full-time and part-time employees in terms of remuneration for overtime, Accordingly, overtime worked by part-time employees is remunerated at the proportionate regular rate and overtime exceeding the working hours of a full-time employment relationship is remunerated (only) at the proportionate regular rate plus an overtime allowance of 15%.

• Working hours are documented by an electronic system based on a works agreement (Betriebsvereinbarung) on flexible working hours (BV Arbeitszeit), which was terminated at the end of 2018 and was not replaced. If breaks were not documented or the minimum duration was not met, an automatic deduction from working hours was made in accordance with the BV Arbeitszeit. Breaks that were actually taken and breaks that were automatically deducted breaks were marked differently.

• In view of the plaintiff's part-time work with a regular daily working time of 6 hours, no break was required under the German Working Hours Act (Arbeitszeitgesetz). A break was only mandatory if the regular working time of six hours was exceeded – at that point, the scheduled fixed break (12:00–12:30) had usually already elapsed.

• From September 2018 to August 2019, the plaintiff regularly worked beyond her scheduled working hours. Over 59 hours were automatically deducted as breaks in the time recording system.

• The plaintiff asserted that she had worked continuously and had not taken any breaks, which the employer had tolerated. She referred, among other things, to Section 14 of the TV-Ärzte/VKA, which, in her opinion, established a graduated duty of explanation. Section 14 TV-Ärzte/VKA stipulates that ‘[the working hours of doctors must be recorded by electronic means or by other means with the same degree of accuracy in such a way that their entire presence at the workplace is documented. The entire presence of doctors, less any breaks actually granted, shall be deemed working time.’ (translated quotation by authors)

• The defendant argued that the plaintiff had not demonstrated any overtime; the breaks had been effectively granted. The action was dismissed, as was the appeal against the first-instance judgment. The BAG overturned these decisions.

Reasons for the decision

• No evidential value of automatic break deductions by the system: The automatic deduction in the time recording system does not include proof that the break was actually taken. The employer must specifically demonstrate when and how breaks were granted or made possible.

• Burden of proof: In overtime compensation proceedings, employees must demonstrate on which days and at what times they worked or were available at the employer's request. The employer must then substantiate which work was assigned, when the employee did not actually work and whether breaks were made possible. It is not permissible to dispute this on the basis of lack of knowledge..

• Employer-initiated overtime: Overtime must also have been ordered, approved, tolerated or necessary for the completion of the work. The plaintiff has sufficiently demonstrated the operational necessity – now the defendant must specifically refute that breaks would have been possible.

• Part-time-related special feature: The fixed break rule did not apply to the plaintiff because she only worked 6 hours according to her schedule. The employer did not order breaks, even though employees regularly worked beyond the scheduled working hours. The defendant's behaviour indicates approval of the overtime.

• No reversal of the burden of proof or the burden of demonstration under Section 14 of the TV-Ärzte/VKA: Section 14 exclusively regulates the obligation to document working hours from an occupational health and safety perspective. Time recording is not used to monitor remuneration, but for occupational health and safety purposes.

Consequences for practice

The judgement raises awareness among employers using electronic time recording systems of the need to apply comprehensible and practical rules and documentation regarding breaks and working hours within their companies. Time recording systems cannot be used as a substitute for actual supervision of breaks.

If breaks automatically deducted by the time recording system are not actually taken by the respective employee, this can lead to remunerable working time if the employer tolerates this practice or does not take steps to prevent it.

The BAG overturned the decisions of the lower courts and referred to the LAG for further clarification of the facts. The BAG instructs the LAG to examine in further proceedings whether the differentiation between overtime (without a surcharge) and extra hours (with a 15% surcharge) constitutes impermissible discrimination against part-time employees (Section 4 (1) TzBfG).

Late targets for variable remuneration as a liability risk for employers

In its judgement of 19 February 2025 (10 AZR 57/24), the BAG held that employees may be entitled to damages from their employer if the latter culpably breaches its contractual obligation to set targets for the employee in good time for a target period, the achievement of which is linked to the payment of variable remuneration, and if the subsequent setting of targets can no longer fulfil its motivational and incentive function.

Facts

• The plaintiff had been employed by the defendant as Head of Advertising since July 2016. According to his employment contract, he was entitled to an annual target salary of EUR 95,000 gross, consisting of a fixed salary of EUR 66,500 gross and a variable bonus component of EUR 28,500 gross. The variable targets were to be set annually by the line manager as part of an unilateral target-setting process.

• On 12 March 2019, a works agreement came into force which retroactively revised the remuneration model with effect from 1 January 2019. For managers such as the plaintiff, 70% of the variable remuneration consisted of company targets (e.g. EBITDA, turnover) and 30% of individual targets. According to the BV, the targets were to be set by 1 March of each year and discussed with the employee in advance.

• No individual targets were set for 2019. The company targets were first communicated to the plaintiff on 15 October 2019, with weightings and target ranges, i.e. after approximately three quarters of the target period had already elapsed.

• The defendant applied a flat rate of 142% (individual targets) and 37% (company targets) as the basis for determining the degree of target achievement and granted the plaintiff a bonus payment of EUR 15,586.55 gross. The plaintiff resigned on 30 November 2019 and claimed damages in the amount of EUR 16,035.94 gross, based on an estimated target achievement of 112.6% overall. He argued that the defendant was obliged to set the targets in a timely and proper manner. The defendant refused to pay on the grounds that the targets had been set in good time and were also in line with the principles of fairness, which is why a claim for damages due to late setting of targets was excluded. In particular, the plaintiff was aware of the relevant company figures from the presentation on 26 March 2019 and had been informed of the sales targets and EBITDA target on 16 April 2019.

• The BAG upheld the claim for damages in the amount requested by the plaintiff.

Reasons for the decision

• Legal obligation to set targets: The BAG clarified that variable remuneration is a single entitlement that requires the employer to set effective targets in a timely manner. The defendant had culpably breached this obligation by failing to set individual targets and by communicating the company targets late.

• Impossibility of setting targets at a later date: Subsequent determination of performance (Section 315 (3) s. 2 BGB) is excluded if a target can no longer fulfil its incentive purpose. Such impossibility (Section 275 BGB) exists in any case if, as here, a significant part of the target period (75%) has already passed.

• Fault and contributory fault: The defendant was unable to refute the legally presumed breach of duty (Section 280 (1) sentence 2 BGB). The plaintiff was not at fault (Section 254 BGB); he was not obliged to point out the target or to demand that it be set. The responsibility to take the initiative lies solely with the employer.

• Damages assessment pursuant to Section 287 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO): The BAG confirmed the assessment of the LAG, which had arrived at a total target achievement of 112.6% based on the average target achievement rate of 142% (individual targets) and a hypothetical 100% achievement of corporate targets. This resulted in a claim for EUR 31,622.49 gross, taking into account the bonus target remuneration of EUR 28,500 gross, of which the defendant still has to pay a sum of EUR 16,035.94 gross, after deducting the already paid EUR 15,586.55.

Consequences for practice

The BAG's decision is in line with its recent case law on employees' claims for damages in the event of late target setting in bonus systems linked to target agreements (see also our recent case law reviews in Monthly Dose 10/2024).

In systems of variable remuneration with performance targets, employers must ensure that targets are set in a timely, specific, and documented manner and communicated to the employee – especially if the targets are set unilaterally by the employer. Failure to do so may result in liability for damages. It is irrelevant whether the employee would have achieved the omitted targets in retrospect – the only decisive factor is the breach of the obligation to set targets. The duty to act lies exclusively with the employer; substitute targets (e.g. average values) are not permitted without a contractual basis. Subsequent judicial determination of targets is also excluded if the incentive effect is no longer achievable.

It is advisable to have clear and binding contractual provisions regarding the responsibility, timing, and form of target setting – and to ensure their proper implementation.

Interpretation of collective bargaining agreements – No entitlement to pro-rata annual bonus payments upon leaving the company before November

In its judgement of 28 January 2025 (5 SLa 115/24), the Reginal Labour Court (Landesarbeitsgericht, LAG) of Mecklenburg-Vorpommern ruled that an employee who leaves employment prior to the November cut-off date is generally not entitled to a (pro-rata) special annual payment under the collective agreement.

Facts

• The plaintiff was employed by the defendant, which operated a railway maintenance workshop, as a skilled worker following completion of his training.

• Pursuant to a collective agreement binding on both parties, a company-wide collective agreement (MTV) applies to the parties' employment relationship.

• Pursuant to Section 15 MTV, employees receive an annual bonus ‘with their November remuneration’. A pro-rata payment is stipulated for the year of entry, but no such provision exists for the year of departure.

• The plaintiff terminated the employment relationship on 31 August 2023 and claimed a (pro-rata) special payment for 2023 in the amount of EUR 1,625.36 gross

• The defendant refused to pay, citing the absence of any provision for employees leaving during the year. She argued that the explicit regulation for the year of entry implied the exclusion of any pro-rata entitlement in the year of departure.

• The labour court dismissed the claim; the plaintiff appealed. The LAG Mecklenburg-Vorpommern dismissed the appeal as well.

Reasons for the decision

• The wording of Section 15 MTV ‘with the November remuneration’ does not merely constitute a due date, but a cut-off date requirement. The special payment therefore presupposes an existing employment relationship in November.

• The collective agreement does not provide for a pro rata payment in the year of departure, unlike in the year of entry. The differentiation is objectively justified and serves to reward loyalty to the company.

• Furthermore, there is no violation of the principle of equal treatment (Art. 3 (1) of the German Federal Constitution (Grundgesetz, GG), as the purpose of the annual special payment is to reward loyalty to the company and motivate employees to increase their commitment. This purpose can no longer be achieved once an employee has already left the company.

• The court emphasized that the collective agreement contains no legal basis for granting a full or pro-rata special payment to former employees. Such an interpretation would result in an unjustified advantage for employees who have already left, compared to new or long-standing employees.

• This interpretation aligns with the case law of the BAG (most recently, for example, judgment of 8 September 2021, 10 AZR 322/19) on the admissibility of collective agreement cut-off date clauses if a legitimate purpose – in this case, loyalty to the company – is pursued.

• Practical considerations (e.g. accounting costs) would also argue against payment after departure; a more generous arrangement would have had to be expressly agreed.

Consequences for practice

The decision underlines the importance of precise wording and interpretation of collective agreement entitlement requirements – particularly regarding eligibility for special payments. Where a benefit is linked to payment ‘with the November remuneration,’ this may not merely refer to the due date but constitute a cut-off date clause. In cases where the agreement does not explicitly address early termination (e.g. the year of departure), employees who leave before November will generally not be entitled to full or proportional benefits.