Starting point: COVID-19 special payments and their personal relevance
In the course of the COVID-19 pandemic, numerous financial support measures for employees were introduced. These included in particular the so-called COVID-19 special payments, which were paid as tax-free allowances. The aim of these payments was to cushion the particular burdens associated with the pandemic. Particular attention was paid to whether and to what extent these payments are subject to attachment, especially for employees against whom enforcement measures have been taken. At the heart of the legal dispute was the question of whether the COVID-19 bonus falls under the protection regime for unseizable income.
BAG decision of 25.08.2022 – Headnotes and reasoning
Key considerations of the Federal Labor Court
On August 25, 2022, the Federal Labor Court (BAG), in its ruling (Case No.: 8 AZR 14/22, published on August 26, 2022), had to determine whether a COVID-19 special payment is part of the “unseizable earned income” as defined by the German Code of Civil Procedure (ZPO), or whether it is, in principle, subject to attachment. Specifically, it was about a special payment made by the employer with reference to the additional services necessitated by the pandemic. The designated purpose of this payment, as well as its character as a social benefit, was directly relevant for the assessment of its attachability.
In its decision, the court clarified that such a special payment is generally unseizable if it serves to compensate for additional expenses caused by the particular pandemic situation. This is derived from § 850a No. 3 ZPO, according to which allowances paid for special services are regularly protected from attachment. The intent of the employer as well as the nature of the payment—as a response to extraordinary burdens during the pandemic—were decisive factors.
Distinction from other payments
The BAG states that the purpose of the payment is decisive. If there is an exclusively social motivation that is intended to go beyond mere wages, this favors unseizability. The situation is different if a payment is made without reference to pandemic-related challenges and with no discernible connection to the COVID-19 crisis.
According to the judges, the one-time tax-free COVID-19 allowance does not constitute general earned income that is generally open to compulsory enforcement. Rather, it is a special payment similar to an allowance, whose purpose under labor law and the ZPO establishes protection of the employee from compulsory enforcement.
Systematic classification and practical impact
Significance for practice
The BAG’s decision is of far-reaching importance for employees who find themselves in financial distress and whose wage claims are subject to enforcement. For employers, it is important to note that the intended purpose and its documented implementation are decisive for the subsequent protection from seizure. For creditors, the established case law of the BAG sets a limit to the access to certain assets of debtors.
Limits of unseizability
Nevertheless, it must be taken into account that the unseizability always requires a case-by-case assessment. The explicit designation of the payment’s purpose and its allocation to pandemic-related increased burdens are essential. Abusive schemes, such as a mere relabeling of regular wages as a “special payment,” are not covered and remain attachable. The case law thus clearly distinguishes between real allowances and other wage components.
Tax and social security classification
From a tax perspective, these payments are exempt from taxation within the allowance pursuant to § 3 No. 11a of the German Income Tax Act (EStG). Under social security law, the bonuses are similarly privileged, which further increases their attractiveness from the perspective of employees. These aspects, however, had no direct influence on the decision regarding attachability, but are nevertheless of significant importance for assessment in labor law practice and for employers’ documentation of payments.
Legal outlook and courses of action
The judgment strengthens the protection mechanism for pandemic-related special payments and reduces the risk that essential relief measures are siphoned off through attached claims. The clear distinction between special benefits and regular components of remuneration enables companies to provide targeted support without always having to prioritize creditors’ interests. Nonetheless, careful documentation of the specific occasion and fulfillment of the requirements under the ZPO and EStG remain crucial to be able to realize these advantages in individual cases.
Conclusion
The Federal Labor Court has provided an important clarification on the unseizability of COVID-19 special payments and has clearly set out the labor and civil law standards for such allowances. This case law has practical effects for employers, employees, and creditors alike, and should be carefully considered—especially when structuring and disbursing comparable special payments.
Should any questions arise in operational practice in connection with the treatment of special payments, protection from seizure, or structuring options within the framework of contractual supplementary benefits, the attorneys of MTR Legal Rechtsanwalt are available for individual and competent advice.
