Clarification by the Federal Labour Court – no obligation to actively apply for other jobs during the notice period

In its ruling dated 12 February 2025 (docket number 5 AZR 127/24), the Federal Labour Court (Bundesarbeitsgericht) clarified that employees are not required to actively apply for or accept other positions during the notice period. Salary reductions due to other income not earned during this period are generally impermissible. This is because the employer remains obligated to employ and remunerate the employee until the conclusion of the notice period, even if the employee is irrevocably released from work (ie being placed on garden leave).

 

Facts of the case

The parties were in dispute regarding the payment of salary for a period during which the employee had been irrevocably released from his duties following the employer's dismissal. The employer ceased salary payments after the employee failed to apply to 43 job offers in due time, which had been sent to him by the employer. The employer was of the opinion that the employee had been obligated to promptly apply for the job offers provided. By failing to do so, the employer argued, he had maliciously failed to earn other income. This unearned income should therefore be deducted from his salary.

The dismissed employee had registered as a jobseeker immediately upon receiving the notice of termination and applied for seven of the job offers provided by the employer, albeit not immediately but shortly before the end of the notice period. Placement proposals from the Federal Employment Agency (Bundesagentur für Arbeit) were issued only after the notice period had expired. At first instance, the Labour Court (Arbeitsgericht) upheld the employee's claim, a decision subsequently affirmed by the Regional Labour Court (Landesarbeitsgericht).

 

Decision of the Federal Labour Court

The employer's appeal was unsuccessful. The Federal Labour Court held that the employer was obligated to employ the employee until the end of the notice period. The unilateral and irrevocable release of the employee following the termination notice did not absolve the employer from the duty to continue to pay the salary of the employee. Consequently, the employee was not required to allow for any other income which he had not earned during this period to be deducted. Deduction of other income not earned is only permissible if the employee has acted in bad faith, which must be determined in consideration of all circumstances. Whether or not such bad-faith conduct is present must be determined by taking into consideration all of the circumstances of the individual case. It must also be taken into account that the employer is generally obligated to provide employment during the notice period. While continued employment may be unreasonable for the employer, the employer had not provided sufficient evidence of this in case at hand. The employee was therefore not obligated to enter into another employment relationship or actively seek such a relationship before the end of the notice period.

 

Practical Note

The long-debated question of whether employers may reduce salary payments of employees under notice who have failed to apply for another occupation is now increasingly being clarified by the Federal Labor Court:

•  The Federal Labor Court ruled a year ago (ruling dated 7 February 2024 – docket number 5 AZR 177/23) that, in principle, any other income deliberately not earned after the end of the notice period may be deducted – at east if the other occupation is not unreasonable.

•    With the decision at hand, the Federal Labor Court now clarifies that during the notice period a deduction of other income not earned is possible only in exceptional cases.

Despite this decision, it may be advisable to provide employees under notice with (suitable) job offers in a timely manner. If the employee then refrains from applying for jobs, it is still possible to offset the income not earned, at least after the notice period has expired. If there are indications that continued employment is unreasonable for the employer, a deducted may also be possible during the notice period. In this case, the reasons for the continued employment being unreasonable must be documented to be presentable in case of a legal dispute. In which cases the courts will find the continued employment to be unreasonable remains to be seen. So far, the Federal Labor Court has been able to leave this question open.