Higher Salaries for Permanent Employees on the Horizon?
In a landmark ruling, the Cologne Labour Court has set a precedent for future cases regarding voluntary wage increases for non-union employees. The case, involving an insurance company and a non-union employee who sued their employer over the non-payment of a full wage increase, has highlighted the need for clear and explicit agreements regarding salary adjustments in employment contracts.
The employee in question had previously received the full collective wage increase for their entire salary. However, the new employer only passed on the collectively agreed portion of the wage increase. The court ruled that there was not enough evidence that the employer intended to permanently subject itself to the rules of collective agreements.
The ruling by the Cologne Labour Court does not apply to this specific insurance company or any other specific employer. It emphasises that an employer's obligation to pass on full wage increases depends on whether there is a legally binding agreement or statutory requirement that fixes pay, or whether a continuing employer practice has acquired the force of a contractual term under applicable law.
In some jurisdictions, repeated employer conduct can be treated as an implied contractual term or an established employment custom and practice that the employer may be required to continue to honour. However, an established practice requires objective recognisability of the employer's intent to bind itself legally in the long term. In this case, the court saw insufficient evidence for the existence of an established practice.
Some employers may voluntarily align with wage increases in collective bargaining agreements, even for employees not bound by these agreements. However, this does not grant non-union employees the right to receive full wage increases indefinitely. The employee in this case argued that the employer broke an established practice, but the court did not find sufficient evidence to support this claim.
The German Bar Association (DAV) reported on the ruling by the Cologne Labour Court. It is important to note that the employment contract in this case did not explicitly state that the employee's salary should be dynamically aligned with the collective agreement. This case does not set a precedent for cases where the employment contract explicitly states that the employee's salary should be dynamically aligned with the collective agreement.
Employees who believe they have been improperly denied a wage increase that has become an enforceable right (by contract, established practice, or successor employer obligations) may consider filing a complaint with the labour board or wage-and-hour authority, or filing a civil claim for breach of contract or unpaid wages. Documenting the prior practice (pay stubs, communications, policies, collective agreement language, witness statements) and the new employer's pay calculations can strengthen these claims.
This ruling serves as a reminder for both employers and employees to clearly outline salary adjustment terms in employment contracts to avoid misunderstandings and potential disputes.
- In the context of this ruling, an employer's obligation to align business practices with finance-related matters, such as wage increases, may be influenced by the existence of a legally binding agreement, statutory requirement, or an established practice that has acquired the force of a contractual term.
- Employers offering services and involving themselves in business deals should be mindful of the need for clear and explicit agreements regarding salary adjustments when entering into employment contracts, particularly when aligning with collective bargaining agreements, to avoid potential disputes and misunderstandings.
