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Entitlement to remuneration in the case of corona-related closure of a company and possible recourse – Latest German jurisprudence

01 April 2021
The corona pandemic has led to a large number of unresolved labour law issues. In particular, it was unclear if employees can claim remuneration from their employer in the event of a company closure ordered by the authorities due to the corona pandemic, i.e. whether the employer has to keep paying wages despite no longer being able to occupy the employee with work.

In this regard, there are now the first significant rulings in Germany.

I. The Issue

The corona pandemic has led to a large number of unresolved labour law issues. In particular, it was unclear if employees can claim remuneration from their employer in the event of a company closure ordered by the authorities due to the corona pandemic, i.e. whether the employer has to keep paying wages despite no longer being able to occupy the employee with work.

In principle, section 615 German Civil Code (BGB) provides that the employer must continue to pay remuneration to the employee who is willing to perform work in the case of a so-called default of acceptance. The same applies according to section 615 (3) BGB if the employer bears the operational risk. This includes situations where neither the employee nor the employer is responsible for the disruption, in particular also cases of force majeure. However, according to a widely held view, the risk must still be related to the business itself and not just involve a general, non-business-specific life risk. The Düsseldorf Higher Labour Court (LAG Düsseldorf) now had to clarify whether this also covers cases of officially ordered (corona-related) business closures.

This issue is particularly relevant because an obligation of continued payment would further burden employers financially in the event of closures (unless short-time work was agreed). Claims for compensation under section 56 of the Infection Control Act (IfSG) would be futile in this scenario because they require a loss of earnings on the part of the employee. 

In this respect, the employer bears the financial risk unilaterally; neither the state nor the employee are burdened by it

II. The Decision of the Düsseldorf Higher Labour Court

In its ruling of 30 March 2021, the LAG Düsseldorf (Case No.: 8 Sa 674/20) confirmed this very strict view from the employer's perspective.

The court refers to section 615 (1) and (3) BGB and emphasises:

"According to the legal interpretation of section 615 (3) BGB, the employer bears the operational risk. Such risks are external causes that affect the business and prevent the continuation of business operations." This also includes cases of force majeure. The LAG Düsseldorf held that the COVID-19 pandemic is such an event. 

According to this view, a business closure caused by a pandemic also constitutes an operational risk within the meaning of section 615  (3) BGB. In the view of the labour court, it is irrelevant whether the closure affects an entire sector (e.g. restaurants) or only individual businesses in a sector. It is equally irrelevant that the government imposed the closure by order. According to the clear ruling of the Court, the employer always bears the risk.

For the court, an exception to this rule only applies when the affected employees can no longer work, because there are no opportunities at all to perform their duties (this is conceivable at most in the case of a very strict lockdown).

According to the labour court, the officially ordered business closure (which affects the entire sector) is a risk that the employer must bear (similar to the risk of natural disasters, etc.). The Court thus takes a rather strict position, which means that employers bear a risk for which they are ultimately not responsible and which they cannot influence.

However, the decision states nothing on possible claims for recourse of the business against the state, as the specific dispute only concerned to the payment of the employee's remuneration.

III. Consequences and Instructions for Action

At the outset, the LAG Düsseldorf's ruling is not yet legally binding. Therefore, the German Federal Labour Court may take a different position on points of law. However, from a business perspective, it is inadvisable to rely on the mere possibility of a different outcome on appeal.

The application of section 615 (3) BGB can be prevented by expressly agreeing otherwise in individual contracts. We strongly recommended such a provision in standard contracts.

However, if section 615 BGB is not contractually excluded and there is an official closure of business, the following is urgently recommended - in order to avoid costs:

  • Agreement of short-time work, with the consequence that there is no longer an obligation to pay remuneration (and currently also to pay social security contributions)
  • If necessary, consensual agreements with the employee or - as ultima ratio - dismissals for operational reasons can be considered as an alternative to limit the costs incurred.

However, if wage costs have already been incurred and work was not possible due to a factory closure ordered by the authorities, recourse claims against the federal and state governments should be assessed. In our view, there are good reasons for these to be successful, since the (forced) closure of business serves the general public interest and the costs for this cannot be imposed on the individual employers, but must logically be borne by the general public. This is particularly evident from the fact that it is not in the hands of the employer to avert the closure of a business if it affects an entire sector. However, there is no case law from the highest courts on this issue.

On the other hand, the case addressed by the Düsseldorf Higher Labour Court, i.e. that there is no opportunity at all to utilize work by the employee, appears to be of no practical relevance. This would only apply in a complete lockdown and shutdown of public life. To date, however, the German government has never introduced measures that strict.

We hope to give you a good overview of the current developments with these explanations. If you have any questions on the above-mentioned topic and on concrete effects and questions of organisation, please do not hesitate to contact our colleagues in our offices in Berlin, Düsseldorf, Munich and Cologne by telephone or e-mail.

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