The German Federal Labor Court: Effectiveness of bonuses as part of minimum wage

On November 8, 2017, the German Federal Labor Court (“BAG”) ruled (5 AZR 692/16) that bonuses are to be counted toward the statutory minimum wage entitlement if they fall under the concept of remuneration as per the minimum wage law. This shall be the case if they are to be regarded as remuneration payments made in exchange within the context of an employment agreement.

Facts of the case

The plaintiff has been employed as a driver by the defendant since February 15, 2010 for a monthly gross basic salary of EUR 1,605.00. He worked 9.6 hours per day, 5 days a week within the months of January and March to September 2015.He had 21 of such working days in May and August whereas 23 working days fell into July and 22 working days into the other months. The defendant paid the plaintiff a so-called “Immerda” (i.e. “always there”) bonus of EUR 95.00 per month in addition to the basic salary. The defendant used this bonus to reward employees who were continuously fit for work and were never absent without prior notification. In addition, the plaintiff received a bonus of EUR 50.00 for order and cleanliness as well as a “Leergut” (i.e. “empties”) bonus of another EUR 155.00 for correct handling of empties returned by customers.

The plaintiff was of the opinion that in the payment of the total amount of EUR 1,905.00, the defendant had not met his [the plaintiff’s] entitlement to the legal minimum wage, and claimed for payment of the allegedly missing difference of remuneration from the defendant. As justification, he claimed that the bonuses paid during the period in question were not to be taken counted towards the minimum wage. The defendant was of the opinion that the bonuses he had paid were remuneration made in exchange within the context of an employment agreement that satisfied the [plaintiff’s] entitlement to the statutory minimum wage to the same extent as the basic salary.

Reasons for the decision

The Labor Court of Halle (first instance) had found in favor of the plaintiff, but the latter was then granted only a part of the difference he sought by the court of the second instance, and his subsequent appeal for the remaining outstanding amount remained unsuccessful. From the perspective of the Fifth Senate of the BAG, the defendant had fully complied with the minimum wage requirement.

According to the Erfurt judges, there existed no entitlement to the difference in accordance with Section 3 of the German Minimum Wage Law (“MiLoG”) [] in this case. The employer meets the legal entitlement to minimum wage if the gross remuneration paid for a calendar month adds up to the amount that results from multiplying the number of hours actually worked in that month by – in the period under dispute – EUR 8.50. This is what has occurred in this case, because both - the basic salary and the additional bonuses paid must be regarded as effectively forming part of the minimum wage. Besides rewarding the employee’s presence, the “Immerda” bonus also rewarded his work performance. With the bonus for order and cleanliness, the defendant acknowledged that the transport vehicle was kept clean, which was part of the activity performed by the plaintiff and therefore part of his performance as well. Finally, the “Leergut” bonus is the consideration for proper handling of the empties returned by the customer and is thus linked to the plaintiff’s provision of services.

Note for the practice

The decision shows that not only the basic salary is eligible for complying with the minimum wage requirements. Bonuses granted by the employer (in this case, for continuous fitness for work, cleanliness and order) can also effectively be counted towards minimum wage. This applies to all payments made in exchange within the context of an employment agreement, with the exception of payments by the employer that have no connection to an actual work performance of the employee (e.g. Christmas or holiday pay) or that are based on a special legal purpose (e.g. supplements for night work, Section 6 (5) German Working Hours Act (ArbZG)).