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Germany: Releasing an employee from work with continued payment of remuneration only compensates existing claims for compensation of working time credited to a working time account, if this purpose of the release is made sufficiently clear by the employer at the time of the release

In the case at hand, the plaintiff worked for the defendant as a secretary. After the employer had terminated the employment relationship without notice, the parties reached a settlement in the court proceeding following the termination. The settlement provided that the employment relationship should end at a specified termination date, which was around six weeks after the date the settlement was concluded. It further provided that the employee shall be irrevocably released from the obligation to work under the continued payment of remuneration until this termination date, taking into account the employee’s remaining vacation entitlement. However, the settlement did not include a clause cancelling all further claims from the employment relationship. Later on, the former employee demanded compensation for the positive balance of 67 hours credited to her working time account.

The Federal German Labour Court has ruled in favour of the employee. If an employment relationship is terminated and, therefore, a positive balance on the employee’s working time account can no longer be compensated by time-off in lieu, the employer is obliged to financially compensate the positive balance.  The release of the employee included in the settlement did not lead to a different result, as it did not refer to the positive balance in the employee’s working time account, but only to outstanding vacation entitlements. In light of this, the court found that the settlement did not make it sufficiently clear for the employee that the release was also intended to fulfil claims of compensation from the working time account.

This case shows that clauses releasing an employee from work under continued payment of remuneration need to be worded carefully and should not only relate to the compensation of outstanding vacation entitlements through the release, but also to any other potential claims to time off in lieu. Furthermore, a clause excluding any further mutual claims arising from the employment relationship needs to be considered when concluding a court settlement or a settlement agreement.