Check employment contract - recognise ineffective clauses

A new job, a new employment contract — the joy of getting the job is immense, and many employees sign on the dotted line without a second thought. However, employment contracts often contain clauses that put you at a disadvantage or are even invalid. In this guide, you’ll find out what to look out for and what pitfalls are commonly encountered.

Why is it worth checking your employment contract?

Most employment contracts are drafted by the employer and treated as so-called General Terms and Conditions (GTC). This means they are subject to GTC scrutiny under Sections 305 et seq. of the German Civil Code (BGB). Clauses that unreasonably disadvantage the employee or lack transparency may be invalid.

The tricky part is that invalid clauses often look harmless at first glance. And it is not always wise to point this out to the employer — because an invalid clause can work in your favour in the event of a dispute.

The most common invalid clauses in employment contracts

1. Flat-rate overtime compensation

Typical wording: “All overtime is compensated through the salary.”

Problem: This clause is too vague. The Federal Labour Court requires that the amount of overtime covered be clearly specified. Only wording such as “Up to 10 hours of overtime per month are covered by the salary” can be valid.

2. Transfer clause without limits

Typical wording: “The employer is entitled to assign the employee to another reasonable role at any time.”

Problem: A transfer clause that is too broad may be invalid if it grants the employer virtually unlimited scope for action without taking the employee’s interests into account.

3. Salary confidentiality

Typical wording: “The employee undertakes to maintain confidentiality regarding the amount of their salary.”

Problem: Such clauses are generally invalid, as they prevent employees from uncovering potential breaches of the principle of equal treatment or the Pay Transparency Act.

4. Non-competition clause without compensation

Typical wording: “The employee undertakes not to work for a competing company for a period of two years following the termination of the employment relationship.”

Problem: A post-contractual non-competition clause is only valid if adequate compensation of at least 50% of the last salary received is agreed. If this is missing, the clause is void.

5. Too short limitation periods

Typical wording: “All claims arising from the employment relationship lapse if they are not asserted within four weeks.”

Problem: Limitation periods in employment contracts must be at least three months to be valid. Furthermore, the text form must suffice — a clause requiring the written form has also been problematic since the change in case law.

6. Contractual penalties for failure to commence employment

Typical wording: “If the employee fails to take up the post, a contractual penalty amounting to three months’ gross salary shall be payable.”

Problem: In employment law, contractual penalties are generally permissible, but the amount is limited. In the event of failure to commence employment, the penalty may not, as a rule, exceed the salary that would have accrued until the end of the notice period.

7. Repayment clauses for further training

Typical wording: “If the employee resigns within five years of completing the training, the costs must be repaid in full.”

Problem: Repayment clauses must include a pro-rata scale — the longer the employment relationship continues after the training, the less must be repaid. A flat-rate repayment without a pro-rata scale is invalid.

8. Reservations regarding the voluntary nature of special payments

Typical wording: “The payment of a Christmas bonus is voluntary and does not establish a legal entitlement for the future.”

Problem: If discretionary clauses conflict with other contractual provisions — such as a specific commitment to pay a Christmas bonus — the clause may be invalid. Transparency is crucial.

What else you should look out for

When should you have the contract reviewed?

A legal review is particularly worthwhile in the following cases:

• For management positions or high salaries
• If the contract contains a post-contractual non-competition clause
• For fixed-term employment contracts (check the reason for the fixed term)
• If the contract provides for unusually long commitment periods or repayment clauses
• If you are unsure what specific wording means

Frequently Asked Questions (FAQ)

Can I negotiate the employment contract before signing it?

Yes. It is perfectly normal to discuss individual clauses and suggest changes. Salary, working hours, holiday entitlement and notice periods are particularly common areas for negotiation.

What happens if a clause is invalid?

The invalid clause is replaced by the relevant statutory provision. The rest of the contract remains valid. In many cases, this works in the employee’s favour — for example, if an invalid overtime clause means that overtime must be paid in accordance with the law.

Can my employer prohibit me from taking on secondary employment?

A blanket ban is invalid. However, the employer may agree to a requirement for prior permission — meaning you must notify them of any secondary employment. Permission may only be refused for valid reasons.

How can I tell if my employment contract consists of standard terms and conditions?

If the contract is used for several employees or if the employer has drafted the contract in advance, it is generally a standard form contract. The standard form contract review under Sections 305 et seq. of the German Civil Code (BGB) then applies.

Should I point out invalid clauses to my employer?

That depends on the individual case. In some instances, it may be strategically wiser not to raise an invalid clause — it may then work in your favour in the event of a dispute. A specialist solicitor can advise you on this.

This article is for general information purposes only and does not replace individual legal advice. Every case is different — if you have specific questions, we recommend seeking legal assistance at an early stage.