Crediting of omitted other earnings after leave of absence?
In a decision of significant practical relevance, the German Federal Labour Court (Bundesarbeitsgericht – BAG, 12.02.2025 – 5 AZR 127/24) has provided clarification on the issue of offsetting other income during a period of leave when notice has been given. It held that an employee who has been given notice of termination and is released from the requirement to work during the period of notice is not considered to be maliciously refraining from earning money elsewhere if he does not enter into another employment relationship before the end of the notice period and therefore does not have to account for potential earnings.
Facts of the case
The parties are in dispute over the offsetting of maliciously omitted other earnings against claims for unpaid wages. The plaintiff had been employed by the defendant as a senior consultant since November 2019. The defendant gave notice on by letter dated 29 March 2023 terminating the employment relationship with effect from 30 June 2023. The defendant also irrevocably released the plaintiff from the obligation to perform work, during that period, placing him on leave. After receiving notice, the plaintiff registered to find work with an employment agency at the beginning of April and received placement proposals from the agency for the first time at the beginning of July. During the months of May and June (when the plaintiff was on leave of absence), the defendant sent the plaintiff a total of 43 potentially suitable job offers posted online by job portals or companies. The plaintiff only applied for seven of these from the end of June 2023, after the defendant had stopped payment of his remuneration for June. In his claim, the plaintiff sought payment for the June remuneration. The defendant filed a motion to dismiss and argued that the plaintiff was obliged to apply promptly for the job offers he received during his period of leave. The defendant contended that as the plaintiff had failed to make any applications, the defendant could take into account fictitious potential earnings that the employee could have earned in June 2023 in accordance with Section 615 sentence 2 German Civil Code (BGB) in the amount of the salary he received from the defendant. The Labour Court dismissed the claim, while the Regional Labour Court upheld the plaintiff’s appeal and ordered the defendant to make the payment to the plaintiff.
Decision
The defendant’s appeal to the Federal Labour Court was unsuccessful. The Court initially confirmed that the defendant was in default due to the unilateral release of the plaintiff during the notice period, which had the consequence that the plaintiff was entitled to the agreed remuneration for the entire duration of the notice period, as stipulated by 615 sentence 1 BGB in connection with Section 611a (2) BGB. On the other hand, the plaintiff did not have to take into account any “omitted other earnings” pursuant to Section 615 sentence 2 BGB. Such offsetting of unearned income is only justified if the employee has remained inactive in bad faith”. Due to the equitable provision of Section 615 sentence 2 BGB, the extent of the employee’s obligation to earn money elsewhere cannot be assessed separately from the employer’s obligations. In this case, the defendant had not shown that it would have been unreasonable to continue to employ the plaintiff. Consequently, the plaintiff is not obliged to engage in another employment relationship prior to the conclusion of the notice period, with the aim of financially benefiting the defendant and generating revenue.
Practical tips for employers
In light of this ruling, the recent strict case law of the Federal Labour Court on the obligations of the employee after the notice period ends does not apply to a period of leave during that notice. The BAG has thus strengthened and secured the legal position of employees during a leave of absence.
