BAG: A disclaimer in an employment contract forfeiting all claims is invalid

Judgment of the Federal Labour Court of 26 November 2020 in Case No 8 AZR 58/20

A clause in an employment contract which provides that all claims arising out of the employment relationship will be forfeited, is invalid. Both the employer, which provided the standard form employment contract containing the clause, and the employee can invoke this invalidity.

Facts of the case

The dispute before the Federal Labour Court (BAG) concerned a claim for damages by the employer for EUR 101,372.72, which was brought as a counterclaim to an action against unfair dismissal. The employee was employed as a commercial clerk. The employment contract contained the following exclusionary clause:

“§ 13 Time limits: All claims arising out of this employment agreement must be submitted in writing within 2 months of maturity and, in the case of the rejection of the claim by the other party, an action for the claim must be brought within a time limit of one month.”

The employee’s husband was a limited partner and director of the company. He repeatedly used company funds to pay private invoices. The transfers were booked by the employee, who was responsible for financial and payroll accounting. The company terminated the employment relationship. In response to the resulting action against unfair dismissal, the company brought a counterclaim for damages.

The judgment

The BAG reversed the decision of the lower Court (Regional Labour Court of Rhineland-Palatinate of 18 July 2019 in Case No. 5 Sa 169/18). The Regional Labour Court held that the claims of the company had not lapsed in accordance with § 13 of the employment contract. Instead, following § 202 (1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB), the limitation period in the case of liability for intent may not be relaxed in advance by legal transaction. Interpreting the clause in light of its spirit and purpose provides that the counterclaim for damages, in this case, is not covered by this clause.

The BAG did not agree with the lower court’s interpretation in this case. The Court stated that a disclaimer in preformulated contract terms within the meaning of §310 (3) No. 2 BGB covers all claims that arise in relation to the employment relationship, without exception. As a basic principle, such clauses cover all reciprocal statutory and contractual claims that the parties have against each other based on their legal positions as established by their contractual relationship and thus also to claims for damages from an intentional breach of contract and intentional unlawful acts.

However, as the exclusion of liability for intention constitutes an infringement of § 202 (1) BGB, the BAG held that the disclaimer clause in this specific case is invalid under § 134 BGB (infringement of a statutory prohibition). Even the employer, as the party that provided the clause, can successfully invoke the invalidity of the clause.

Consequences for practice

The BAG changed its case law. Until now, claims for intentional breach of contract and intentional unlawful acts were not covered by disclaimer clauses found in general terms and conditions. This will now be the case. Not just employees but employers too can invoke the invalidity of a disclaimer pursuant to § 202 (1) BGB in combination with § 134 BGB, even where the employer uses standard form contractual provisions.

Practical tip

Employers should keep this judgment in mind when using standard form employment contracts and should expressly exclude liability for intentional breach of contract and intentional unlawful acts from disclaimers. There is otherwise a risk that the disclaimer will be invalid, which, where a dispute arises about back pay, for example, could place you at a legal disadvantage.

Martin Fink