Overtime compensation – are 9 days vacation enough?

The problem

Over time, a complex matter often leads to disputes, sometimes even trials between employers and employees. The question whether employers may arrange overtime, but also how to reimburse it is one such highly controversial issue.

On June, 26 2019 (docket number: 5 AZR 452/18) the Federal Labour Court (BAG) had to decide whether the plant-level agreement of “ver.di” (a large German service trade union) with its works council on overtime compensation meets the provisions of German law. The plaintiff, an employee of ver.di working as union secretary, wanted compensation amounting to EUR 9,345.84 for working overtime in the year 2016.

The trade union’s regulation differentiated between those employees who work overtime frequently and those whose working time is mostly regular. Since the plaintiff frequently worked overtime, he was granted a lump sum of 9 additional days’ leave per year. In contrast, those employees who mainly worked regularly were paid separately for each hour of overtime; in addition they received a bonus of 30% for each hour, so they could demand 1 hour and 18 minutes time off in lieu for each hour of overtime.

The plaintiff asserted discrimination. The distinction that – in contrast to him – other trade union secretaries were paid separately for each overtime hour would not be justified. He would therefore also be entitled to full overtime compensation, including the bonus.

The decision

The BAG decided that the union’s regulation was in fact invalid. As the union’s plant-level agreement differed between employees only on the basis of working overtime frequently or not, it was unclear, for which union secretaries which provision should be applicable.

In addition, according to the court, the principle of equal treatment in the company was violated by the union’s plant-level agreement. If such an agreement applies to all employees of a company, the equal treatment principle must be observed and any deviation must therefore be justified by a plausible reason. However, in the underlying case, the differentiation in overtime pay could not be justified by the fact that trade union secretaries regularly have to work overtime more frequently.

A breach of the principle of equal treatment may result in certain provisions of the company’s overtime pay scheme becoming ineffective. However, it may not result in employees no longer receiving any overtime compensation at all, so the invalidity of the 9-day lump-sum clause means that the plaintiff has the same rights as the other employees. Therefore, he could claim compensation for all overtime, including the 30% bonus.

The impact

The BAG drew attention to the importance of the principle of equal treatment within the company. However, this does not mean that employers cannot negotiate different employment contracts with their employees, rather that they need a plausible reason for distinguishing between employees in plant-level agreements. Employers should therefore ensure that all their company agreements are clear and understandable and that unequal treatment is always based on a comprehensible factual reason.