A new job comes with a new employment contract, and many employees sign shortly after receiving the offer. Yet pre-drafted contracts not infrequently contain clauses that disadvantage the employee or are invalid. This guide covers the most common pitfalls, from blanket overtime settlement to repayment clauses for training.
Why many clauses in employment contracts are invalid
Most employment contracts are drafted in advance by the employer and are legally treated as standard business terms (AGB). This means they are subject to the review of standard terms under §§ 305 et seq. BGB. Clauses that unreasonably disadvantage the employee or are worded non-transparently can be invalid.
Invalid clauses often look harmless. It is also not always wise to point them out to the employer before signing: an invalid clause can work to your advantage in a dispute, because the statutory rule takes its place.
The most common invalid clauses in employment contracts
1. Blanket settlement of overtime
Typical wording: “All overtime is covered by the salary.”
Problem: this clause is too vague. The Federal Labour Court requires the extent of the overtime covered to be clearly quantified. 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 another reasonable activity at any time.”
Problem: an overly broad transfer clause can be invalid if it gives the employer practically unlimited scope for action without taking the employee’s interests into account.
3. Confidentiality about salary
Typical wording: “The employee undertakes to keep the amount of his salary confidential.”
Problem: such clauses are generally invalid because they prevent employees from uncovering possible breaches of the principle of equal treatment or of the Pay Transparency Act.
4. Non-compete clause without compensation
Typical wording: “The employee undertakes not to work for a competitor within two years of the end of the employment relationship.”
Problem: a post-contractual non-compete clause is only valid if appropriate compensation of at least 50 % of the last remuneration received is agreed. Without it the prohibition is void.
5. Exclusion periods that are too short
Typical wording: “All claims arising from the employment relationship lapse if they are not asserted within four weeks.”
Problem: contractual exclusion periods must be at least three months to be valid. In addition, text form must suffice: a clause requiring written form for asserting claims is invalid in contracts concluded after 30 September 2016 (§ 309 no. 13(b) BGB; Art. 229 § 37 EGBGB).
6. Contractual penalties for failing to start work
Typical wording: “If the employee fails to start work, a contractual penalty amounting to three gross monthly salaries becomes payable.”
Problem: contractual penalties are permissible in principle in employment law, but their amount is limited. For failure to start work the penalty may generally not exceed the salary that would have accrued until the end of the notice period.
7. Repayment clauses for training
Typical wording: “In the case of resignation within five years of completing the training, the costs must be repaid in full.”
Problem: repayment clauses must contain a pro rata scale: the longer the employment relationship continues after the training, the less has to be repaid. A blanket repayment without such a scale is invalid.
| Duration of training | Permissible tie in period (guide value) |
|---|---|
| Up to 1 month | Up to 6 months |
| Up to 2 months | Up to 1 year |
| 3 to 4 months | Up to 2 years |
| 6 to 12 months | Up to 3 years |
| Over 2 years | Up to 5 years |
8. Reservations of voluntariness for special payments
Typical wording: “The payment of a Christmas bonus is made voluntarily and does not create any legal entitlement for the future.”
Problem: if reservations of voluntariness contradict other contractual clauses, for instance a specific promise of a Christmas bonus, the reservation may be invalid.
Further points to check: working hours, probation, holiday, notice period
| Part of the contract | What to watch for |
|---|---|
| Working hours | Is the agreed weekly working time correct? Are breaks regulated? |
| Probationary period | Maximum 6 months, must be expressly agreed |
| Notice periods | No shorter than the statutory minimum (§ 622 BGB) |
| Job description | Is your area of responsibility clearly defined? |
| Holiday entitlement | At least 20 days on a five day week (statutory minimum) |
| Salary components | Are bonuses, allowances or benefits in kind clearly regulated? |
| Secondary employment | Blanket bans are invalid; a requirement of consent is permitted |
When should you have the contract checked?
A legal review is particularly worthwhile in the following cases:
- For management positions or high salaries
- If the contract contains a post-contractual non-compete clause
- For fixed-term employment contracts (check the reason for the fixed term)
- If the contract provides for unusually long tie-in periods or repayment clauses
- If you are unsure what individual formulations mean
This article provides general information and does not replace individual legal advice. Every case is different. If you have specific questions, we recommend seeking legal support at an early stage.
