The Cologne Regional Labor Court In its judgment of February 06.02.2024, 4 (Az: 390 Sa 23/XNUMX) decided on compensation for late target setting. According to this, a target that is only set at such a late point in time within the relevant financial year that it can no longer meaningfully fulfill its incentive function is to be treated as if it had not been set at all. In any case, such a late point in time can be assumed if the financial year is already more than three quarters over.
1. FACTS
The parties are in dispute over a claim for damages due to late delivery. The plaintiff worked for the defendant as Head of Advertising from June 18, 2016 to November 30, 2019. He was an employee with management responsibility. The employment contract stipulated an annual target salary of €95.000 with 100% target achievement. The target salary consisted of a gross fixed salary of €66.500 and a variable remuneration of €28.500 gross with 100% target achievement. The goals should initially be defined by the supervisor shortly after starting employment and then at the beginning of each calendar year.
According to a company agreement on the remuneration model concluded on March 12, 2019, the respective employee should receive a target to be discussed with them beforehand by March 1 of the calendar year. The plaintiff terminated the employment relationship on November 30, 2019. His last day of work was on November 21, 2019. The defendant paid him variable remuneration of €2019 for 15.586.
The plaintiff was of the opinion that the company's targets for 2019 were set late, formally ineffective and erroneous in discretion. He would still be entitled to €2019 for 16.035. At least as a result of operational practice in connection with the works agreement of March 12, 2019, the defendant would have been obliged to hand over the goals to the employees in writing in the tabular form of the MBO card on March 1st.
The defendant claimed that the relevant company figures had already been communicated on March 26, 2019 as part of a presentation in which the plaintiff took part. On April 16, 2019, these were communicated again at the Heads Meeting, which the plaintiff also took part in. The specified corporate goals were realistic and achievable ex ante.
The Cologne labor court dismissed the lawsuit. In response to the plaintiff's appeal, the Cologne Regional Court changed the decision and upheld the lawsuit. The appeal to the BAG was approved.
2. DECISION
According to the State Labor Court, the plaintiff has a claim against the defendant for damages in the requested amount due to failure to achieve the target for the 2019 financial year in accordance with. § 280 paragraph 1, paragraph 3, §§ 283, 252 BGB in conjunction with Section 4 of the employment contract in conjunction with. C III Paragraph 1 BV.
The defendant was obliged to give the plaintiff a target to be discussed with him beforehand by March 1, 2019. Regardless of the lack of prior discussion, the defendant generally did not meet a timely target.
According to the LAG, the claim made by the defendant that the plaintiff was informed of the sales and electronic targets in a presentation on March 26, 2019 and in the heads meeting on April 16, 2019 did not constitute a proper target C III Paragraph 1 Sentence 1 BV. Simply from the communication of these goals it was not clear to what extent they should be relevant as targets for the plaintiff's variable remuneration. The plaintiff was given neither a weighting of the goals nor a target range.
According to the LAG, the plaintiff could, in accordance with § 280 Paragraph 1, 3 BGB Demand compensation instead of performance because a one-sided target had become impossible due to the passage of time. Based on established case law, the BAG assumes that an agreement on goals is no longer possible at the latest after the expiry of the time for which an employer has to agree on goals with an employee. So far, however, the BAG has left open what applies if the employer is obliged to set a (unilateral) target but this does not occur within the target period and whether the impossibility giving rise to a claim for damages instead of the claim for performance could occur before the end of the target period, i.e. upon completion a target agreement only occurs towards the end of the target period or at a point in time when the purpose of increasing performance and motivation can no longer be achieved for other reasons.
According to the LAG, a breach of duty and culpable failure to set a target during the target period would trigger damages to the employer's detriment in the same way as the breach of duty and culpable failure to conclude a target agreement. If a target is only set at such a late point in time within the relevant financial year that it can no longer meaningfully fulfill its incentive function, it should be treated as if it had not been set at all.
If the financial year is already more than three-quarters over (according to the labor court, the targets are stated by autumn 2019 at the latest), such a late date can definitely be assumed. An incentive function is not excluded per se because the omitted target concerns company-related goals.
3. CONCLUSION
The decision of the Cologne Regional Labor Court illustrates the relevance of setting targets in a timely manner. The LAG Cologne does not determine exactly when the incentive function of the target can no longer be fulfilled, but it is a wake-up call for employers. Employers are therefore advised to communicate this annual target to their employees at an early stage in the case of variable remuneration agreements that depend on targets in order to prevent legal disputes. It will be eagerly awaited to see whether the BAG will agree with the statements made by the Cologne Regional Labor Court.
