Lapse of claim clauses (Ausschlussfristen) in employment contracts must meet stricter requirements under German employment law.

In its decision published 13 April 2021, the German Federal Labour Court (Bundesarbeitsgericht, BAG) has tightened the rules for the effectiveness of such commonly used lapse of claim clauses in employment contracts which enable a shortening of the limitation periods for claims down to usually 3 months

According to this ruling (BAG, 26 November 2020 - 8 AZR 58 20), such clauses must now expressly exclude claims arising from intentional breach of contract and from intentional tort. Previously, Germany's highest labour court had interpreted such lapse of claim clauses which did not explicitly provide for this exception accordingly and found them to be valid.

We recommend that employers update their template employment contracts accordingly and consider adapting existing employment contracts to meet these requirements. In doing so, employers can continue to protect themselves against employees claiming for several entitlements, such as bonuses or overtime compensation, for up to 3 years after the year in which they became due, and thus even years after they have left the company.

Settlement clauses in termination agreements should explicitly exclude such claims from now on as well.