An employment contract pre-formulated by the employer constitutes general terms and conditions and is subject to a legal review pursuant to the corresponding statutory provisions. This applies even in cases where the parties have chosen the laws of a different jurisdiction in the contract, if German law would be applicable without the choice of law.
Background
The defendant is an Irish airline that operates international flights under an Irish flight license. The plaintiff is a German national who was based at Berlin-Schönefeld Airport throughout his employment and was also covered by social insurance in Germany. The employment contract concluded in April 2016 and included a repayment agreement regarding training costs covered by the employer in the event of a termination of employment by the employee. The contract stipulated that Irish law would be applicable. In March 2018, the employee terminated the employment relationship, resulting in a dispute over the repayment of training costs.
Key Issues
In particular, the Federal Labour Court was required to determine whether the standard form employment contract containing the disputed repayment obligation should be subject to a review under the provisions on general terms and conditions in the German Civil Code, even though the parties had chosen Irish law to be applicable pursuant to the contract.
The Federal Labour Court affirmed that this is the case due to the fact that German law would be applicable in the absence of a choice of law, as the employee had performed his work in Germany. Therefore, the court reviewed the disputed repayment clause according to the German statutory provisions on general terms and conditions and found that the clause was invalid as it unreasonably disadvantaged the employee. It is not appropriate to link the repayment obligation to the employee's termination of employment within the agreed-upon period. If a clause obliges the employee to reimburse training costs even in cases where the reason for the employee's own termination of employment originates from the employer's sphere, it unreasonably disadvantages the employee contrary to the requirements of good faith. As the clause in question did not limit the repayment obligation to a termination declared by the employee that was not based on reasons originating from the employer's sphere, it was deemed invalid.
If a contractual clause is deemed ineffective following the review under the statutory provisions on general terms and conditions, the otherwise necessary comparison of favourability between the chosen law and the otherwise applicable law is unnecessary. Consequently, the court found that the German statutory provisions on general terms and conditions in Sec. 305 et. seq. of the German Civil Code constitutes mandatory law within the meaning of Art. 8 para. 1 sentence 2 Rome I Regulation and, hence, establish a baseline level of protection for employees, which cannot be diminished. Ultimately, the employee was, therefore, not obligated to repay the training costs that had been covered by the employer.
Practical Points
- Under German law, employment contracts usually constitute general terms and conditions, as they are typically pre-formulated by the employer. There is a large variety of case law on the validity of contractual clauses under the statutory provisions on general terms and conditions. Clauses that are not sufficiently transparent or unreasonably disadvantage the employee are invalid, as this was the case for the repayment clause.
- The Federal Labour Court clarified that the parties cannot circumvent these restrictions by a deviating choice of law in the employment contract. Therefore, foreign employers employing staff in Germany have to be prepared in case the provisions of their employment contracts are subjected to the German statutory requirements for general terms and conditions if challenged.
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