Germany: Employer can be liable for financial damages caused to an employee due to delayed payment of salaries

The plaintiff’s employer did not pay her monthly salary for the months October, November and December 2017, until March 2018. The employee then took parental leave, during which she was entitled to parental allowance under German law. The parental allowance is a state subsidy and is intended to compensate parents’ loss of income as a result of staying home and raising their children.

The parental allowance amounts to 65% of the net monthly salary, with a minimum of EUR 300 and a maximum or EUR 1,800 per month. The exact amount of parental allowance that the employee is entitled to, is calculated on the basis of the average net monthly salary the employee received in the 12 calendar months before the birth of the child.

As the employee in the case at hand did not receive the salary payments for October, November and December 2017 until after the birth of the child, those three monthly salaries were not taken into account for the calculation of her parental allowance. The fact that the three monthly salaries were still paid to the employee, albeit later on, was no longer relevant regarding the amount of the parental allowance. Therefore, the employee received less parental allowance than she would have been entitled to if the employer had duly paid the salaries for October, November and December.

In light of this, the employee sued her employer for compensation in the amount of the monthly difference between the parental allowance she would have been entitled to in case of a timely salary payment and the actual parental allowance she received. The regional labour court of Düsseldorf ruled (mainly) in favour of the employee.

The court found that the employer generally owed compensation in the amount of the difference between the parental allowance received and the parental allowance to which the employee would have been entitled to in case of a timely salary payment, as the employer culpably failed to pay the owed salaries on time and this directly led to the lower parental allowance. In addition, the employer had to reimburse the employee the costs for a tax consultant, which the employee had to pay in order to determine her loss of parental allowance. However, the appeal to the Federal Labour Court was permitted, so the case could still develop further.

In any case, the current ruling shows that employers should monitor the timely payment of salaries, as employees might otherwise file damage claims, not only in the scenario of parental leave, but in any such case where a delayed salary payment leads to financial disadvantages for the employee.