And again: attachment of Corona bonus

Judgment of the Federal Labour Court of 25 August 2022 in Case No. 8 AZR 14/22

Voluntary corona bonuses paid by an employer to its workers to compensate the employees for the strains of performing their work during the pandemic are “hardship pay” and, as such, are exempt from attachment in accordance with § 850a No. 3 of the Code of Civil Procedure (Zivilprozessordnung, ZPO).

Facts of the case

The employee worked as a kitchen assistant and barkeeper for a restaurant. The employer paid a voluntary corona bonus of EUR 400. As the employee was in the middle of an ongoing insolvency proceeding, the insolvency administrator asked the employer to pay the administrator the corona bonus, which the administrator viewed as an attachable emolument. When the employer refused, the insolvency administrator brought an action against the employer. At first instance before the Labour Court in Braunschweig and on appeal to the Regional Labour Court of Lower Saxony, the claim was dismissed. The Courts held that the term “hardship” in § 850a No. 3 of the ZPO refers to the particular pressures faced by employees when performing their duties. This includes circumstances that are detrimental to the employee’s health and measures necessary for their protection. As a barkeeper, the employee had to comply with social distancing rules and hygiene measures and was required to wear a mask. The employee also had an increased risk of infection through contact with guests of the restaurant and endured significant psychological stress. The sense and purpose of the protection from attachment in § 850a No. 3 of the ZPO are to ensure the economic livelihood of the debtor (in this case the employee). That’s why it’s advisable to keep bonuses away from creditors where those bonuses are designed to compensate for adverse and particularly onerous working conditions. It would miss the purpose of the corona bonuses – recognition for the performance of work under the special conditions of the pandemic – if these bonuses would not be protected from attachment. A corona premium should therefore benefit the employee without restriction so that they get the additional pay for the dangers faced through their job.

Section 850a No. 3 of the ZPO grants protection from attachment only to the extent that the relevant bonus does not exceed the “normal framework”. This requirement is also fulfilled here. In this respect, § 3 No. 11a of the Income Tax Act (Einkommensteuergesetz) provides that corona premiums will be tax exempt up to an amount of EUR 1,500. Bonuses that are lower than this amount will not exceed the “normal framework”.

The insolvency administrator appealed to the Federal Labour Court (Bundesarbeitsgericht, BAG).

The judgment

Without success: the BAG agreed with the lower courts and rejected the insolvency administrator’s claim. In granting the bonus, the employee sought to compensate the employee for the hardship they suffered in performing their work. Accordingly, this is an unattachable bonus under § 850a No. 3 of the ZPO. The amount of the bonus also did not exceed normal levels.

Consequences for practice

The judgment is right. The voluntary corona bonuses were intended to honour the particular burdens that made performing work during the pandemic more difficult, and these premiums should be protected from attachment by creditors. It is not clear from the brief press release of the BAG whether the BAG has followed the strict line taken by the LAG Berlin-Brandenburg (judgment of 23 February 2022 in Case No. 23 Sa 1254/21, see ADVANT Beiten Labour Law Newsletter, June 2022, page 11), according to which the protection against attachment will depend on whether a premium rule was applied indiscriminately to all employees (then it can be attached) or whether it depends on the specific hardship faced by the individual employee (then unattachable). We will have to wait for the reasoning of the Court to be published.

Practical tip

This judgment clarifies that any corona bonus should be protected against attachment where the employee faced additional burdens in performing their work due to the pandemic and the tax-free level of EUR 1,500 was not exceeded. In such cases, an attempt by the employee’s creditors to garnish the bonus can be rejected and the bonus can be paid to the employee. In contrast, care should be taken where corona bonuses were paid without any distinction based on the hardship actually faced by the employees. In such cases, it is recommended that one wait until the full judgment is available and not pay any bonus to either the employee or their creditors. Instead, in such cases, employers try to agree on temporarily withholding the payment or, where it is not possible to reach an agreement, deposit the amount of the bonus with the court.

Dr Michael Matthiessen