Overtime in labour law - clarity for employees and employers

Overtime in the employment relationship

Overtime is a frequent topic in labour law that concerns many employees and employers. The question often arises as to whether overtime worked in excess of regular working hours on the employer's instructions or with the employer's approval must be paid or whether it is covered by the agreed remuneration. In this article, we would like to give you an overview of the legal situation and present some important judgements of the Federal Labour Court (BAG) on this topic.

In principle, overtime worked in excess of regular working hours on the employer's instructions or with the employer's approval must be remunerated. This results from § Section 612 (1) BGB, according to which remuneration is deemed to be tacitly agreed if the service can only be expected in return for remuneration under the circumstances. The amount of remuneration can be determined by the employment contract, a collective labour agreement, a works agreement or a company practice. In the absence of such a provision, the remuneration is to be based on the usual remuneration for the same or a similar activity.

Flat-rate overtime pay

However, the employer can agree a lump-sum payment for overtime with the employee, i.e. the overtime is compensated with the basic salary or a supplement. However, such an agreement must be effective in order to exclude the employee's entitlement to remuneration. The effectiveness of a lump-sum compensation clause depends on various factors such as the form, content, transparency and appropriateness of the clause.

The form of a lump-sum compensation clause must be in writing in order to fulfil the requirements of the § Section 307 (1) sentence 2 BGB must be satisfied. This means that the clause must be contained in an employment contract, a collective agreement or a works agreement. A verbal agreement or a unilateral order by the employer is not sufficient.

The content of a compensation clause must be clear and comprehensible in order to fulfil the requirements of the § Section 307 (1) sentence 1 BGB must be satisfied. This means that the clause must clearly state which overtime hours are compensated, how much overtime is compensated, the amount of compensation and whether the compensation is capped. An unclear or incomprehensible clause is ineffective and results in the employee being entitled to overtime compensation after § Section 612 (1) BGB can demand compensation for his overtime.

A lump-sum compensation clause must be transparent in order to fulfil the requirements of the § Section 307 (2) No. 1 BGB must be satisfied. This means that the clause must not be hidden in the employer's General Terms and Conditions (GTC), but must be expressly brought to the employee's attention when the contract is concluded. A hidden or surprising clause is ineffective and results in the employee having to pay his overtime according to § Section 612 (1) BGB can demand.

A lump-sum compensation clause must be appropriate in order to fulfil the requirements of the § Section 307 (1) sentence 1 BGB must be satisfied. This means that the clause must not lead to an unreasonable disadvantage for the employee that is incompatible with the principles of good faith. An unreasonable disadvantage exists if the clause compensates for a disproportionately high number of overtime hours, provides for disproportionately low compensation or sets a disproportionately high upper limit for compensation. An unreasonable disadvantage is ineffective and results in the employee having to pay overtime in accordance with § Section 612 (1) BGB can demand.

No remuneration for special employee groups

However, there are groups of employees who, in the sense of § Section 612 (1) BGB should not expect to be paid for overtime. These are primarily employees who have a Very high remuneration or receive a leading position are employed. The Federal Labour Court (BAG) has ruled in several judgements that these employees are primarily judged on the fulfilment of their work tasks and not on the completion of a certain number of hours. Therefore, they do not have a justified expectation of remuneration for overtime, which is compensated with the agreed remuneration.

An example of such a ruling is the judgement handed down by the Federal Labour Court on 1 September 2010 (Ref. 5 AZR 517/09), which concerned a department head who received an annual salary of 120,000 euros. The BAG found that this employee was one of the so-called “higher earners” who could not demand remuneration for overtime. The BAG justified this by stating that the employee had a high level of personal responsibility, was largely able to determine his own working hours and his remuneration was significantly higher than the contribution assessment ceiling for statutory pension insurance.

The contribution assessment ceiling for statutory pension insurance in 2023 is €85,200 in the old federal states and €80,400 in the new federal states. This means that employees who earn more than these amounts cannot claim compensation for overtime unless there are special reasons to expect compensation.

Another example is the judgement handed down by the Federal Labour Court on 17 April 2013 (Ref. 5 AZR 122/12) which concerned a managing director of a GmbH who received an annual salary of 150,000 euros. The BAG ruled that this employee could not claim overtime pay either. The BAG stated that the employee held a managerial position that was associated with extensive decision-making powers and a high degree of independence from instructions. In addition, his remuneration was so high that it also adequately covered any overtime.

These judgements show that the question of the obligation to pay overtime depends not only on the contractual agreement, but also on the actual circumstances of the employment relationship. The amount of remuneration, the type of activity, the position in the company and the options for organising working hours all play a role here.

A lump-sum settlement of overtime with pay is one way of simplifying the settlement of overtime. However, such an agreement must fulfil certain requirements in order to be effective. A flat-rate compensation clause must be in writing, clear and understandable, transparent and reasonable. In addition, it must not violate the Working Hours Act, which stipulates a maximum working time of 48 hours per week.