Germany: Crypto Currency Generally Allowed as Part of Employee Remuneration

The German Federal Labour Court has ruled that an agreement whereby part of the employee’s remuneration is paid in crypto currency is generally permissible.

 

Background

The plaintiff was employed by a company dealing, inter alia, in crypto currencies. In addition to a monthly gross salary, the employment contract provided for a commission entitlement based on monthly transactions. According to the contract, the commission was to initially be calculated in Euros and converted into the crypto currency ETH at the “current exchange rate” on the due date. Until the end of the employment relationship on 31 December 2023, however, the crypto currency ETH was not transferred, and the commission claims were not settled despite the fact that the claimant had repeatedly requested the defendant to do so. It was only with the salary statement for December 2021 that the defendant paid the plaintiff a gross commission of EUR 15,166.16. In her action, the plaintiff claimed a commission of 19,194 ETH for the months February and March 2020.

The defendant argued that it fulfilled all its obligations with the payment in December 2021. In addition, the defendant was of the opinion that, in accordance with Section 107(1) of the German Trade, Commerce and Industry Regulation Act (Gewerbeordnung), remuneration for work must be paid exclusively in Euros.

 

Key Issues

Although a crypto currency is not “money” within the meaning of Section 107(1) of the German Trade, Commerce and Industry Regulation Act, the parties are in principle free to agree payments in kind as part of the remuneration pursuant to Section 107(2) sentence 1 of the German Trade, Commerce and Industry Regulation Act if this is in the employee’s interest. According to the court, such payment in kind also exists if the parties to the contract have agreed to transfer a crypto currency. The Federal Labour Court found that the classification as a payment in kind was also in the objective interest of the plaintiff due to the special circumstances of the individual case.

However, the value of agreed payments in kind may not exceed the sizeable part of the employee’s remuneration. At least the non-sizeable part of the employee’s remuneration must be paid in money. This is to ensure that employees do not first have to convert their payments in kind into euros or even apply for social benefits in order to cover their daily living expenses.

In the specific case at hand, the Federal Labour Court found that the lower court had incorrectly determined the seizure exemption limits applicable to the plaintiff. As a result, the Federal Labour Court was unable to decide whether the plaintiff was actually entitled to the transfer of ETH in the amount awarded. The Federal Labour Court, therefore, referred the case back to the lower court for this final determination.

Practical Points

• Employment contracts that provide for payments in kind as part of the employee’s remuneration must be objectively in the employee’s interest and must also comply with the seizure exemption limits. Violations of these provisions result in the partial invalidity of the agreement.
• If the payment in kind is divisible (as in the case of crypto currency), the remuneration can be paid in money up to the respective seizure exemption limits. The payment in kind must be reduced accordingly.