Compensatory claim or company pension scheme?

An agreement whereby a commercial agent’s entitlement to a company-financed pension scheme ceases to exist as soon as the agent asserts his/her compensatory claim pursuant to Section 89b HGB (German Commercial Code) is effective. This also applies when it concerns pre-formulated clauses (GTC).

Background of the commercial agent’s claim

The commercial agent was active for a company in Germany. In addition to commission, the parties had agreed on a company-financed retirement provision (“loyalty allowance”) in favor of the commercial agent. Under the terms of the contract, however, the commercial agent's entitlement to the loyalty allowance is void if the agent asserts his/her compensatory claim in accordance with Section 89b HGB. Upon termination of the agency relationship, the commercial agent demanded payment of the compensation from the company, upholding his entitlement to the loyalty allowance. According to the commercial agent, exclusion of the loyalty allowance is ineffective. The company did not make the payment. By the action, the commercial agent only asserted his right to the loyalty allowance.

The action was initially successful. The company appealed against this ruling.

The judgement of the German Federal Supreme Court dated 15/12/2016, case reference: VII ZR 221/15

The appeal was successful. The present clause was ruled effective in accordance with consistent case law. This also applies when it concerns a contract with pre-formulated clauses for multiple use (GTC). The commercial agent’s rights are not adversely affected if he does not receive the company's loyalty allowance as a voluntarily paid bonus when the compensatory claim is asserted.

Without the agreement on the loyalty allowance, the commercial agent would have to finance the retirement provision from his current income (i.e. his commission, which was also agreed here at the customary rate). This also applies if the compensatory claim is futile or can for other reasons not be enforced. In principle, the calculation and enforcement of the compensatory claim falls under the commercial agent’s area of risk. The commercial agent may within the one-year deadline provided for by Section 89b (4) sentence 2 HGB decide which of the two claims he wishes to assert. In doing so, the commercial agent must clearly state whether he/she is pursuing the right to compensation or the right to the loyalty allowance. In the present case, there was no such clear statement.

Regarding the commercial agent’s compensatory claim

According to German law, the commercial agent's compensatory claim can be neither excluded nor limited. Circumvention is also prohibited; however, offsetting with a deferred redemption payment for existing customers or with a (real) advance payment on the compensatory claim may be permissible. However, this is subject to strict requirements. In particular, offsetting is only permissible with those benefits that are granted in addition to the commission if the commission would have also been agreed upon in the same amount without there being an offsetting agreement.

On the basis of these principles, the German Federal Supreme Court makes it clear that the agreement of a choice between voluntary old-age provision and a compensatory claim is effective. However, a different regulation may apply if the commercial agent’s claims for commission are lower than the usual rate and the difference is offset by a company-financed pension scheme alone. In such a case, the pension scheme does not constitute an additional, voluntary payment by the company (but rather merely a circumvention of the compulsory compensatory claim) and only leads to an appropriate remuneration of the commercial agent.

Since the European Commercial Agents Directive is the basis for the compensatory claim, it cannot be restricted even by the law of other EU Member States. This means that if the commercial agent’s activity takes place in the European Economic Area, the compensatory claim remains in force. Many legal systems outside Europe also make provision for such a claim. Companies should therefore prior to concluding a contract investigate which consequences could occur upon termination of the contract and whether offsetting against other payments would be advantageous for them.