Employee Has Payment Claim Resulting From the Principle of Company Practice Due To Changed Designation in Salary Statements

In its ruling of December 30, 2022 – 1 Sa 87/22, the Saxony State Labor Court (LAG Sachsen) ruled that an employee may attach legal significance to a change in the designation of additional payments by a company transferee in his regular salary statements. In the case in question, this meant that the employee was entitled to an additional payments on the basis of company practice even though it had not been contractually agreed to.

What Happened?

The complaint was filed by an employee who has been working as a paramedic in 12-hour shifts since 1996. The employment contract concluded at the time between the employee and the original employer provided for the inclusion of certain employment contract guidelines (the collective bargaining agreement applicable at the employer at the time) in the currently valid version. The employment relationship was later transferred to a new employer  as a result of a business transfer. From then on, the Plaintiff was paid an additional paymentof 65% of the applicable overtime rate for the eleventh and twelfth hour of each shift and this was shown in the salary statements as “Bereitschaft AVR” (Translated: On-call AVR) .

At the beginning of 2015, the employment relationship was transferred to a new employer again, this time to the Defendant. The Defendant initially continued to pay the bonuses, but under a different designation in the salary statements as “Bereitschaftszuschlag 65%” (Translation: On-call bonus 65%). In February 2021, the Defendant noticed that it was not contractually obligated to pay these bonuses and stopped making the payments.

The employee filed a complaint at court, demanding that the Defendant be ordered to continue paying the additional payments on the basis of the principle of company practice.

The Decision of the Saxony State Labor Court

The Saxony State Labor Court upheld the claim in its entirety. Their reasoning was that the Plaintiff had a contractual claim to payment of the requested bonuses in accordance with the principle of company practice.

According to the established case law of the Federal Labor Court (Bundesarbeitsgericht – BAG), a company practice is defined as the regular repetition of certain conduct by the employer from which the employees can conclude that they are to be granted a benefit or advantage (over and above statutory/contractual obligations) on a permanent basis. Future contractual claims of the employees shall arise from this conduct of the employer.. The only exception is if the employer mistakenly believed that it was obligated to pay on the basis of a norm or a contractual agreement and the employee recognized that the employer made a mistake.

Here, the Defendant was indeed mistaken about its obligation to pay the additional payments. In the opinion of the Saxony State Labor Court, however, this error was not apparent to the Plaintiff. Rather, the employee was entitled to assume that these additional payments were in fact voluntary benefits, because: The Defendant continued to pay the bonuses unchanged for several years. It did so even by changing the designation on the salary statement, from “On-call AVR” to “On-call bonus 65%”. From this change, the Plaintiff could reasonably conclude that the reference to the AVR on the part of his new employer had ceased to exist, but that due to the continuous granting of the supplements, this was now to be done on a voluntary basis.

In doing so, the Saxony State Labor Court emphasized the special significance of the salary statements. These serve to create transparency. The employee should be able to see why he is receiving the amount paid out and may trust that it is correct and complete. The change in the designation of the bonus, combined with the fact that it was granted on an ongoing basis, thus gives rise to a claim on the part of the employee based on the principle of company practice.

Practical Significance

In individual cases, the change of designations in salary statements can have a legally binding declaratory value and lead to a claim based on the principle of company practice. Following the ruling of the Saxony State Labor Court, this could also be construed for cases of the continuation of designations after transfers of business. Employers may therefore want to carefully check their salary statements, in particular after business transfers, in order to be able to exclude any (subsequent) payment claims.