An employer had agreed with a key account manager on an annual bonus of up to 25% of the annual salary. The prerequisite for this was an annual performance agreement. It was precisely this agreement that was missing for the 2023/2024 fiscal year.

Although the employee had been reinstated under the terms of the contract as of June 9, 2023, following an invalid termination, no target agreement was concluded. An employer who promises variable compensation based on a target agreement is obligated to actually negotiate the targets and present the employee with achievable targets for the respective period. The employer had breached this obligation. The result: a claim for damages under Sections 280, 283, and 252 of the German Civil Code (BGB).

The Regional Labor Court (LAG) expressly relies on the Federal Labor Court (BAG) ruling of July 3, 2024 (10 AZR 171/23). Accordingly, the following applies:

If a target agreement is not concluded, or if it is concluded so late that achieving the targets is effectively no longer possible, a claim for damages arises in the amount as if the targets had been 100 % achieved. The court particularly clearly rejected the employer’s objection that there was no time left to conclude a target agreement after the employee’s return. In fact, the contract required that the target agreement be concluded no later than the end of the first quarter of the fiscal year. Since the employee returned on June 9, 2023, there were still 21 days remaining until June 30, 2023. Furthermore, a mutually agreed-upon extension of the deadline would have been possible.

The court also clearly states: If the employer is in default of acceptance as a result of an invalid termination, the original claim to compensation remains in effect (Section 615, sentence 1 of the German Civil Code (BGB)). This expressly includes variable and performance-based compensation components. And this remains unchanged even if the employee was working for another employer under a provisional employment relationship in the meantime.

Conclusion: Anyone who promises targets must also agree to them. Otherwise, a bonus can quickly turn into a damages claim.

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