Cut-off Date Provisions for Annual Bonuses.

 Companies Are Allowed to Link Annual Bonuses to a Cut-off Date.

Cut-off Date Provisions for Annual Bonuses.

In addition to a fixed monthly salary, employers have often agreed on flexible annual bonuses with their employees. It is often disputed whether there is a claim to these bonuses even if the employee has left the company.

The Case

The Regional Labour Court (Landesarbeitsgericht, LAG) Berlin-Brandenburg decided the following in its ruling dated January 29, 2020. The bonus payment in the case of a mixed character special payment can be made subject to the existence of an employment relationship in the reference area (Ref.: 4 Sa 1456/19).

In the underlying case, the plaintiff was employed by the defendant employer from February 2012 to November 2018. The plaintiff demanded the payment of an annual bonus for 2018. This was to be paid out in successful financial years according to the works agreement. However, according to the works agreement, payment of the bonus is also dependent on the employment relationship still existing on January 1 of the following fiscal year. Since the plaintiff had ended the employment relationship in November by way of resignation, the employer did not pay him an annual bonus.

Unsuccessful Legal Action by the Employee

The appeal against the judgment was unsuccessful. The LAG Berlin-Brandenburg decided that the bonus did not have to be paid. The claim to the annual bonus had been effectively linked to the existence of the employment relationship during the reference period. It did not constitute pure remuneration for services rendered. It is rather a special benefit of a mixed nature, the Court found.

No Loyalty – No Bonus

The bonus was initially designed to reward the work performed. According to the company agreement, the bonus was intended to be paid to increase the flexible portion of the income. In this way, the employees were to participate in the company’s success. When deciding contractual provisions ithin the scope of Article 75, Subsection 1-2, Works Constitution Act, the parties to the works agreement would have to bear in mind that genuine remuneration components which are solely dependent on the employee’s work performance could not be subsequently withdrawn, the LAG stated.

However, in the present case the bonus also served to reward the employees’ loyalty and to further integrate them into the company. This was already made clear by the cut-off date agreement: It created a motivation to not terminate the employment relationship in the ongoing fiscal year. As the bonus is designed to reward work performance on the one hand, and to reward company loyalty on the other, it is a special payment with a mixed character. This is why the bonus payment can be effectively connected to a cut-off date within the framework of a company agreement, the LAG stated.


The BAG had decided in 2013 that a special payment of a mixed nature as part of general business terms cannot normally be made dependent on the existence of the employment relationship at a cut-off date (ruling dated November 13, 2013, Ref.: 10 AZR 848/12). Yet, in the present case, the cut-off date provision is part of the discretionary power of the parties to the business relationship. Works agreements are to be interpreted in the same way as collective agreements and laws due to their normative character. According to the Berlin-Brandenburg Regional Labor Court, the cut-off date provision is intended to motivate employees to not exercise their right to freechoicee of occupation and to maintain the employment relationship until the cut-off date. The violation into the protective scope of Art. 12 Para. 1 of the German Constitution is justified by the goal of binding employees to the company, the Berlin-Brandenburg Regional Labor Court also continued. The revision is admitted.

The cut-off date provision within the framework of a works agreement is part of the discretionary power of the parties to the agreement. Anyone who gives notice before the cut-off date has no right to a bonus.