The provisions on administrative fines as set out in the German Minimum Wage Act [Mindestlohngesetz – MiLoG] do not result in liability to pay damages on the part managing directors of a German limited liability company (GmbH) pursuant to Sec. 823 of the German Civil Code [Bürgerliches Gesetzbuch – BGB].

Facts of the case

The two defendants were managing directors of the plaintiff’s insolvent employer, a German limited liability company (GmbH). The plaintiff brought claims against them personally in the amount of the legal minimum wage because he did not receive minimum wages for times outside the insolvency funding period. The negligent or intentional non-payment of the statutory minimum wage, he argues, constitutes an administrative offence pursuant to Sec. 21 Para. 1 No. 9 [since 1 July 2023: Sec. 21 Para. 1  No. 11 MiLoG] in conjunction with Sec. 20 MiLoG. The Plaintiff submitted that as legal representatives of the debtor, the defendants, pursuant to Sec. 9 of the Act on Breaches of Administrative Offences [Ordnungswidrigkeitsgesetz – OWiG], qualified as perpetrators of such administrative offence since they had realised the same at least negligently. He therefore had a “direct payment claim” against the defendants pursuant to Sec. 823 Para. 2 BGB. By contrast, the defendants took the view that they could not be held responsible for the debtor’s failure to pay the remuneration owed. Besides that, the administrative offences forming the basis for administrative fines under the MiLoG did not constitute protective legislation to the detriment of the GmbH managing directors in their relationship with employees of the company. The complaint was unsuccessful in all instances.

Decision by the Federal Labour Court [Bundesarbeitsgericht – BAG]

The BAG held that the German Limited Liability Company Act [GmbH-Gesetz – GmbHG] as a general rule limited the liability of managing directors to their relationship to the GmbH and that the GmbHG did not provide for any personal liability on the part of the managing directors to external third parties; furthermore, Sec. 13 Para. 2 GmbHG limited external liability for obligations of the company to the company assets. It was true that, in their capacity as company officers, GmbH managing directors had an obligation to properly manage the business (Sec. 43 Para. 1 GmbHG), which also included the obligation to act lawfully and to meet the statutory requirements. However, these obligations as a general rule existed only towards the company and did not serve the purpose of protecting creditors of the company from the consequences of the business being managed in a careless manner.

According to the BAG’s settled jurisprudence, any personal liability of a GmbH managing director for obligations of the GmbH departing from these principles would require a special grounds, which however were absent here. Irrespective of the responsibility existing on the part of managing directors in the individual case for breaches of the obligation to pay the minimum wage under the legal provisions governing administrative fines pursuant to Sec. 21 Para. 1 No. 9 MiLoG in conjunction with Sec. 9 Para. 1 No. 1 OWiG, such administrative offences forming the basis of administrative fines did not constitute protective legislation within the meaning of Sec. 823 Para. 2 BGB in favour of the employees of the GmbH in its relationship to its managing directors.

It was true that Sec. 21 Para. 1 No. 9 MiLoG clearly was intended to protect employees working in Germany from not being paid any minimum wage when due. Nonetheless, Sec. 21 Para. 1 No. 9, Sec. 20 MiLoG in conjunction with Sec. 9 Para. 1 No. 1 OWiG did not constitute protective legislation within the meaning of Sec. 823 Para. 2 BGB because these provisions did not make it sufficiently clear that the managing directors were to be personally liable in deviation from the other liability elements under civil law. If these provisions had protective character within the meaning of Sec. 823 Para. 2 BGB, that would mean that claims could be made against the managing directors for payment of damages in the amount of the statutory minimum wage even in cases where the elements of the offence subject to fine were realised only through slight negligence. In many cases, employees affected would have a further debtor in addition to their contractual employer. That, in turn, would leave the liability scheme of the GmbHG open to frequent challenges with regard to the amount of the minimum wage. For such a departure from the liability scheme of the GmbHG there would need to be specific indications arguing for a corresponding intent of the German legislator. Such intent was not apparent, nor was it supported by the legislative materials relating to the MiLoG. It was not possible to see any parallel to the criminal provisions of Sec. 266a Paras. 2 and 3 of the German Criminal Code [Strafgesetzbuch – StGB] (withholding and embezzlement of remuneration) that might be recognised as protective legislation in favour of the employees. These criminal provisions served the protective interests of the employees in parts of their income being managed in trust; however, no comparative fiduciary obligation on the part of the employer existed for the payment of the remuneration in the amount of the minimum wage.

Consequences in practice

The decision is consistent with the BAG’s case law on the liability of managing directors to employees of a GmbH as well as with the liability scheme of the GmbHG. Liability of the managing directors under the specific insolvency provisions of Sec. 15a of the German Insolvency Act [Insolvenzordnung – InsO] was not the subject matter of the case decided here. Employees should make sure that no wage arrears exceeding what is covered by insolvency funding provisions occur. Here, the amount in question – capped to the contribution assessment threshold for unemployment insurance currently amounting to € 7,300.00 gross (in former West Germany) or € 7,100.00 gross (in former East Germany) – is three months salary maximum.

(BAG Judgment of 30 March 2023, 8 AZR 120/2)