Rules for paying overtime in employment contracts and company agreements
Overtime is on the agenda not only for many specialists, but especially for managers. But do employees receive compensation for their extra work?
The following or similar provisions are often found in many employment contracts:
“The above remuneration covers the employee’s necessary overtime.”
However, this raises a number of questions: Is such a regulation actually permissible and what exactly is meant by the term “overtime”.
The concept of overtime
Overtime occurs when the contractually agreed working hours are exceeded on the orders or with the approval of the employer.
The compensation for overtime
In principle, the following also applies according to the BAG's most recent decision: not every overtime hour has to be paid separately; flat-rate compensation is permitted.
However, the rules of the game must be adhered to, which the Federal Labor Court (BAG) has now supplemented in its ruling of June 26, 2019 (ref. 5 AZR 452/18) for a flat-rate compensation in company agreements.
Already in 2011, the BAG decided in its judgment of August 17, 2011, Ref. 5 AZR 406/10, that the employment contract regulation
“The above remuneration covers the employee’s necessary overtime.”
is not clear and understandable within the meaning of Section 307 Paragraph 1 Sentence 2 of the German Civil Code (BGB), since it is not clear from the employment contract for the employee which work services should be included in the gross monthly remuneration and to what extent.
In parallel to this assessment of the general terms and conditions, according to the latest case law from the BAG dated June 26, 2019, a flat-rate compensation for overtime must also be set out so clearly in company agreements that the employee knows what to expect. In addition, it must not violate equal treatment requirements.
In the case to be decided by the BAG, the plaintiff is employed by the defendant union ver.di as a union secretary with a weekly working time of 35 hours. The parties have agreed on “trusted working hours”, which means that the plaintiff himself decides when the working hours start and end. The “General Working Conditions for ver.di Employees” (AAB) concluded in the form of a general works agreement apply to the employment relationship. According to this, union secretaries who regularly do overtime receive nine working days off per calendar year as compensation. The other employees, on the other hand, are entitled to compensatory free time of one hour and eighteen minutes (= 30% overtime bonus) or to corresponding overtime pay for every overtime worked.
The plaintiff demanded overtime remuneration of EUR 9,345.84 gross for four months in which he worked on a project in addition to his other tasks. Ver.di has applied for the lawsuit to be dismissed and argued that all of the plaintiff's overtime was compensated with the nine compensatory days according to the AAB. While the lower courts dismissed the lawsuit, the plaintiff's appeal was successful.
The BAG decided that the AAB was partially ineffective insofar as it provided for flat-rate overtime pay for certain union secretaries.
The BAG sees two reasons for this:
Firstly, the scope of application of the regulation with the requirement of “regular overtime” violates the requirement of clarity in the norms because it is not sufficiently clear to employees in which cases this is to be assumed and in which cases it is not.
Secondly, the regulation does not comply with the principle of equal treatment under works constitution law. In the opinion of the BAG, a “regularity” of overtime, whatever it may be, is not a suitable differentiation criterion for whether the remuneration for overtime is paid at a flat rate or “according to” the overtime actually worked.
Conclusion
Provisions in company agreements according to which overtime is not paid separately are not invalid per se. However, in accordance with the employment contract regulations, they must comply with the transparency requirement of Section 307 Paragraph 1 Sentence 2 BGB and may not otherwise be unreasonable within the meaning of Section 307 Paragraph 1 Sentence 1 BGB.
In any case, employment contracts usually provide for specific or determinable compensation for overtime, often in the amount of 10 % - 25 % of working time, although the BAG has not commented on the permissible extent. This question therefore remains exciting!