News from the Federal Labor Court on the recognition of interim earnings in the dismissal protection process

One of the employer's main financial risks in the dismissal protection process is the so-called delay in acceptance.
Default in acceptance refers to the remuneration that the employer has to pay to the employee because he did not accept the work owed by the employee. This case occurs regularly in dismissal protection proceedings when the ineffectiveness of the dismissal is determined after a lengthy process. The employment relationship then often continued for a long time after the actual notice period had expired, and the employer had to pay the entire remuneration, even though the employee did not perform any work during this period.
However, the employee must have the so-called interim earnings credited towards this remuneration entitlement. Intermediate earnings are, in particular, the remuneration that the employee acquires through other use of his or her labor, in other words, which has already been earned again in a subsequent employment relationship. This circumstance means that settlement negotiations in dismissal protection processes are often determined not only by the chances of success with regard to the effectiveness of the dismissal, but also by whether the employee has already entered into a new employment relationship. If this is the case, taking interim earnings into account significantly reduces the economic risk for the employer.
The Federal Labor Court has now made an important restrictive clarification regarding the crediting of interim earnings in a recently published judgment dated February 24, 2016 (ref.: 5 AZR 425/15). According to this, interim earnings are to be credited towards the remuneration claim due to delay in acceptance (only) to the extent that it corresponds to the ratio of the working hours lost with the employer to the working hours worked in the new employment relationship.
So what does this mean exactly?
In the case on which the Federal Labor Court's decision was based, the employment relationship was terminated by the employer on December 31, 2011. It was finally agreed that the employment relationship would not be terminated until December 31, 2013. In this case too, the so-called default in acceptance occurred for the period from January 1st, 2012 to December 31st, 2013, i.e. for two years. During these two years, the plaintiff had already entered into a new employment relationship. However, she had increased her working hours. In the old employment she only worked 12 hours a week, in the new one she worked 17 hours a week. That's why she earned more (in absolute terms) in her new employment relationship. The employer was therefore of the opinion that by taking into account interim earnings, he no longer owed the plaintiff any remuneration for the period from January 1, 2012 to December 31, 2013. However, the plaintiff was of the opinion that her interim earnings had to be converted to the contractual working hours with the original employer, so only 12/17 of her interim earnings could be taken into account. Due to the significantly lower hourly wage that the plaintiff earned in the new employment relationship, there was a claim for additional payment of more than €6,000 gross on this basis.
Both the labor court in the first instance and the state labor court in the second instance found the plaintiff right. The lower court decisions were also confirmed by the Federal Labor Court.
The Federal Labor Court stated that the calculation of interim earnings must not only be based on the amount of remuneration, but must also take into account the working hours owed. Only what the employee acquires through other use of the part of his labor that he was obliged to make available to the employer should be taken into account. The entitlement to remuneration for the time during which work was to be performed must therefore be compared with the earnings that the employee earned elsewhere during this time. Interim earnings should only be counted towards the remuneration claim due to delay in acceptance to the extent that it corresponds to the ratio of the working hours lost with the employer to those worked in the new employment relationship. In the present case, only 12/17 of the interim earnings achieved had to be taken into account. This resulted in the plaintiff claiming additional payment (although in absolute terms she actually earned more with her new employer than with her old employer during the period of default in acceptance from January 1st, 2012 to December 31st, 2013).
Employees are therefore well advised to critically question the employer's objection that, despite having won the dismissal protection case, he does not have to pay them any additional payment for late acceptance due to the crediting of interim earnings. In individual cases, a claim for additional payment may arise even in constellations in which one would not easily expect this.