Federal Labor Court on Commission Payments in Cryptocurrency

Case Facts

The plaintiff was employed by the defendant – a marketing company – since June 2019. In addition to the monthly salary of EUR 2,400.00 gross, the parties agreed on an entitlement of monthly commission payments based on the successful business transactions by the plaintiff in the respective month. The commission payments had to be calculated in Euro initially, but the “payment” was then to be made by transferring a value-corresponding amount of the cryptocurrency “Ether” (“ETH”). Despite this agreement, no ETH was transferred to the plaintiff at any time during the employment relationship and the commission claims were also never calculated by the defendant. The employment relationship ended on December 31, 2021.

With the last pay slip, the defendant paid EUR 15,166.16 gross to the plaintiff and declared that all commission claims where hereby fulfilled. ETH was not transferred at all. In the meantime, the value of ETH had risen sharply compared to the values at the due time. Given this, the plaintiff claimed that the defendant owed the transfer of ETH rather than payment in Euro, therefore filing a lawsuit at the Karlsruhe Labor Court, initially requesting (i. a.) the transfer of 64.315 ETH units.   

Besides the plea that all commission claims had been fulfilled by the payment of EUR 15,166.16 gross, the defendant argued that Sec. 107 (1) of the German Trade Regulation Act (“GewO”), according to which the payment of salary is required to be made in Euro, did not permit fulfillment in cryptocurrency and thus the commission agreement would be invalid.

The claim asserted by the plaintiff was upheld on the merits both before the Karlsruhe Labor Court and on appeal. The Regional Labor Court of Baden-Württemberg eventually ruled that the defendant was required to transfer 19.194 ETH units to the plaintiff.

Decision

With this decision, the BAG confirmed the general possibility of providing part of the remuneration by transferring cryptocurrency to an employee instead of payment in Euro.  

It first clarified that cryptocurrencies, such as ETH, are not “money” in terms of the law and therefore do not fall under Sec. 107 (1) GewO. However, cryptocurrencies are to be seen as non-cash benefits within the terms of Sec. 107 (2) Sentence 1 GewO, meaning that such could be agreed as part of the remuneration – provided this was in the interests of the employees. The court considered this requirement to be fulfilled here.

However, the BAG also stated the limits of such an agreement. Since Sec. 107 (2) Sentence 5 GewO stipulates that the value of an agreed non-cash benefits may not exceed “the amount of the garnishable part of the salary”, it is imperative that the remuneration at least up to the garnishment limit is paid in Euro.

The BAG acknowledged that the parties had agreed to grant the commission – as a non-cash benefit – in ETH. Thus, the commission claim could not be fulfilled by a payment of Euro-amount and had therefore not been settled yet. The BAG did not accept the defendant’s objection that a current allocation of ETH based on the value at the time would be much more valuable by today’s standards, as the price of ETH had risen sharply in the meantime. Although the value of the 19.194 ETH units awarded to the plaintiff corresponded to an amount between approx. EUR 2,500.00 – 4,000.00 at the due date, whereas at the end of the employment relationship it corresponded to an amount of approx. EUR 61,400.00 and thus more than fifteen times as much. But if the defendant had acted in accordance with the agreement and had transferred the ETH in a timely manner, the owed ETH units could have been purchased at significantly lower costs.

The BAG only reversed and referred the decision of the Higher Labor Court of Baden-Württemberg back there, because the court of appeal had incorrectly calculated the relevant garnishment limits and had also failed to make all determinations relevant to the decision, so that the BAG itself was unable to rule on the merits.

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