Federal Labour Court (BAG), Judgment as of 3/24/2004
File number 5 AZR 303/03

Summary

The highest appellate Federal Labour Court (BAG) upheld the judgment entered by the trial court against the plaintiff. The plaintiff had unsuccessfully sued for back pay arguing among other things that the wage agreement had been unconscionable.

The plaintiff was employed from December 2000 to August 2001 as a temporary worker by the defendant, a company that hired out temporary workers. The defendant had concluded a collective bargaining agreement with the appropriate labour unions, which pursuant to the employment contract was also to apply to the employment relationship with the plaintiff. Pursuant to the contract, the plaintiff’s hourly wage was DM 10.89. The plaintiff was hired out to business establishments in a trade sector whose gross average wage during the period in question was DM 23.35. The plaintiff considered this to be a "striking incongruity" and therefore regarded the wage agreement as unconscionable. The plaintiff argued that the wage was also unconscionable because it violated the principle that wages must be higher than welfare benefits, his net wage having been EUR 828.44 whereas his entitlement to social welfare benefits would have been EUR 834.05.  This principle holds that wages worked for should be distinctly higher than the amount that someone would receive as social security benefits (e.g. unemployment benefits, welfare benefits). The final argument was that the wage agreement also violated Article 4 of the European Social Charter (ESC). According to this, wages paid should not fall below 68 percent of the average gross national wage, as determined by a committee of experts. The courts at the lower levels had dismissed the action.

The highest federal labour court, the BAG, commented on how a “striking incongruity” is to be determined. A “striking incongruity” is the prerequisite for a finding of wage usury both under civil law and under criminal law. The comparison to be made here is between the wage agreed to and the work performed. Such a comparison must be based on the objective value of the work performed, which is to be established by reference to the union wage in the particular trade sector in the region, because this is basically what an employer would have to pay for such work. It is only if a lower amount than this is customarily being paid in the trade sector or in the region will there be a presumption that this is the standard wage level in that branch.
The court stressed that the test of incongruity cannot be based on a predetermined difference between wage rates and social welfare benefits rates, because the rate for welfare benefits is determined pursuant to a set of concrete needs (maintenance payment obligations, rent, etc.) and therefore has nothing probative to say about the value of the work performed.

Up to this point in time, the decisions of the BAG contained no concrete threshold as to when a “striking incongruity” would be found to exist. In a criminal case involving wage usury, a 1997 judgment of the highest criminal court (BGH) had assumed that a “striking incongruity” exists when a wage is less than two thirds of a union wage (see the judgment of the BGH of 22 April 1997, court file no. 1 StR 701/96).

The BAG did not comment on this in this case because it had already decided that there was no unconscionability, the wage agreed to having been equal to the union wage paid by the defendant company. The union wage itself was also not considered unconscionable in the opinion of the court, because a freely agreed to union wage can only be classified as unconscionable if it, in light of all the circumstances in the individual case, amounts to a “starvation wage”.

The benchmark to be used for determining the value of the work performed by the plaintiff was the union wage of the company hiring out temporary workers and not that of the hirer of such temporary workers as argued by the plaintiff, because the plaintiff was employed by the defendant company and was therefore employed in the temporary employment sector. The court commented here on the special nature of the temporary employment sector, which, due to the special requirements imposed on employees and on employers, justifies special rules for collectively negotiated wages. The court found support for this in section 3 of the German Act on Temporary Employment (AÜG), which, although generally prescribing “equal pay” for temporary employees and permanent staff also allows for exceptions.

The court also held that the plaintiff could not enforce any claims based on Article 4 ESC, because no individual rights capable of being sued on by individual citizens can be derived from it.

On the whole, the BAG failed to see any "striking incongruity" in this case, which meant that the wage agreement was valid.

Decision in full text: