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Forfeiture of Compensation Claims when Using Double Hold-harmless Clauses

Forfeiture of Compensation Claims when Using Double Hold-harmless Clauses

(Federal Labor Court, decision dated September 24, 2014 – 5 AZR 593/12)

Many labor and collective bargaining agreements contain so-called double hold-harmless clauses that initially provide, within certain dates, the extra-judicial enforcement of alleged claims under the employment relationship and then demand their judicial follow-up within a further period, insofar as the claims are not recognized by the other contracting parties. Not infrequently it deals with claims for employee compensation due to a delay in acceptance by the employer following the declaration of a contentious termination by the employer of the employment relationship between the parties. Should in such a situation the employee bring in good time an unfair termination claim before the labor court, without at the same time submitting a claim for a concrete compensation, citing figures, the question arises as to whether the contractually agreed deadline is at the same time met.

The answer was given by the Federal Labor Court in a recent decision. By filing a claim for unfair termination, the employee maintained, without needing to submit a quantified claim, the first stage of a double hold-harmless clause for all claims dependent on the outcome of this litigation. With such a suit the employee was striving not only to keep his job, but was moreover aiming to preserve his compensation claims due to delay in acceptance. The claims need not be expressly designated or quantified. At the same time, an employee can also assert in court, with a suit for unfair termination, the claims dependent on the outcome of this litigation, in the sense of the second stage of the hold-harmless clause. Contractual and collective bargaining cutoff periods that provide for a timely judicial enforcement are to be interpreted as constitutional, as the claims relying on the success of a grandfathering dispute have already been asserted with the claim in the continuing service/ employment tenure disputes.

Practical recommendations:

Even when using a two-stage hold-harmless clause, the employer should make appropriate provisions for a contested compensation of unpaid wages if the employee has not quantitatively or expressly claimed this wage or filed a lawsuit for unfair termination at the same time. A lapse of such claims can only be assumed if the employee has remained completely inactive within the contractually agreed periods. If the employee has effectively brought a claim for unfair termination within the time limits provided in the double hold-harmless clause and that customarily amount to two weeks for asserting a claim against the employer and then for the judicial enforcement, the legally valid cessation of the legal proceedings should first be awaited. Only after a final dismissal of the claim for unfair termination can the claim for compensation of unpaid wages for the period following the effective date of termination be excluded.

By Thomas Geissler

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