Global Compliance – Germany
Germany: Federal Labour Court Clarifies Overtime Pay on Part-time employees
Recently, the German Federal Labour Court (BAG) issued a significant ruling in Case No. 8 AZR 370/20, clarifying overtime pay obligations for the companies employing part-time employees. The judgment clarifies that part-time employees must receive overtime compensation once they exceed their contractually agreed hours, aligning with the principles of equal treatment and non-discrimination.
Background of the Case
The employer (the defendant), an outpatient dialysis provider with over 5,000 employees, employed the employee as a part-time nurse under a collective agreement. The employee (the plaintiff) worked approximately 40% of a full-time schedule (i.e. 7 hours and 42 minutes and an average of 38.5 hours per week). The employment relationship was governed by the general collective agreement (MTV) between the defendant and the trade union ver.di, as incorporated into the employment contract.
Under the terms of the collective agreement, the employer granted overtime bonuses at a rate of 30% of the regular hourly wage only when an employee’s total working hours exceeded the standard full-time threshold (i.e., 7 hours and 42 minutes per shift and 38.5 hours per week). As an alternative to payment of the bonus, a corresponding time credit is provided for in the working time account. The employees’ working time account showed a working time credit of 129 hours and 24 minutes. The defendant neither paid the employee overtime bonuses nor credited time to the working time account.
The employee argued that this policy was discriminatory, as it effectively excluded part-time employees from receiving overtime compensation, even when they worked beyond their contractual hours but below the full-time threshold.
The employer maintained that overtime bonuses should only be payable once an employee exceeded the full-time working hours. However, the employee, arguing that the denial of overtime pays constituted discrimination against part-time workers, violating the German Part-Time and Fixed-Term Employment Act (TzBfG) and the EU Directive on Part-Time Work (97/81/EC).
The Labour Court initially dismissed the employee’s claim. On appeal, the Regional Labour Court partially ruled in her favor by granting overtime credit but rejected her discrimination claim. The Federal Labour Court then referred the case to the CJEU for clarification on whether the employer’s practice violated EU law, leading to a final ruling in the employee’s favor.
Key Issues
The BAG considered whether a part-time employee is entitled to overtime compensation for hours worked beyond their contractual agreement, even if their total working time does not exceed the full-time threshold.
Discrimination Against Part-Time Employees: The court found that linking overtime bonuses to the working hours of full-time employees is discrimination against part-time employees. These provisions also violated section 4(1) of the TzBfG, as they treat part-time employees less favorably without objective justification.
Gender-Based Discrimination: Since part-time roles are predominantly held by women, the policy also indirectly resulted in gender-based discrimination, exposing the employer to compensation and liability under the General Act of Equal Treatment (AGG).
Final Judgment
The BAG ruled in favor of the employee, affirming that part-time workers must not be disadvantaged compared to full-time employees. The court held that any hours worked beyond a part-time employee’s contractual agreement must be compensated, even if the total working time does not exceed the full-time threshold.
This decision aligns with the European Court of Justice (ECJ) ruling of July 29, 2024 (C-184/22 and C-185/22), which reaffirmed the principle of non-discrimination under EU Directive 97/81/EC on part-time work.
The BAG established that part-time employees are entitled to overtime bonuses or time credits from the first hour of overtime, ensuring parity with full-time employees and preventing discrimination in overtime compensation.
The ECJ had previously determined that such collective agreements violate EU directives on part-time work and equal treatment, as they disproportionately impact women, who are more likely to hold part-time positions.
The BAG underscored that part-time employees must receive remuneration proportionate to their working hours relative to full-time employees. This ruling reinforces fair treatment, equal pay, and gender equality in the workplace, in line with EU legal principles.
Take Away- Employers must ensure that overtime pay policies are applied fairly to both full-time and part-time employees. Additionally, employers should revise their collective agreements and overtime policies to comply with this ruling.
