Company fine
Definition and explanation of the term
Die Company fine is an internal company measure for addressing minor breaches of duty by employees by the employer within the framework of the employment relationship. The term originates from employment law and refers to a fine or disciplinary penalty imposed within the company by the employer, or on the basis of a works agreement established with the works council, against employees. The company fine is clearly to be distinguished from other employment law sanctions, such as warnings or dismissals.
Legal foundations
Statutory foundations
German employment law does not provide a definitive statutory framework for company fines. The following laws and regulations may serve as legal bases in particular:
- Works Constitution Act (BetrVG): In particular, § 87 para. 1 no. 1 BetrVG regulates the co-determination rights of the works council regarding matters of workplace order and employee behavior in the company. This includes the design and application of disciplinary measures such as company fines.
- General principles of employment law: Company fines may not constitute a disproportionate burden and may not violate higher-ranking law.
Works agreement and employment contract
Company fines may only be lawfully imposed when their introduction rests on a valid legal basis. These are usually:
- An expressly agreed works agreement between employer and works council, which governs the type, scope, and procedure of the company fine.
- Such clauses are rarely found in the employment contract, where the mandatory co-determination rights of the works council must be observed.
Types and areas of application
Typical violations
Company fines are usually imposed for minor violations of company rules, for example for:
- Tardiness
- Disregard of company instructions
- Violation of smoking bans
- Non-compliance with accident prevention regulations
For serious breaches of duty, other employment law measures such as warnings or dismissal are provided.
Forms of company fines
The most common form is the so-called monetary fine (usually as a fixed sum), though other disciplinary measures are possible, such as:
- Temporary exclusion from certain company allowances
- Organizational measures (e.g., temporary withdrawal of certain employee perks)
Requirements for legality
For the effectiveness and admissibility of a company fine, certain requirements must strictly be observed:
a) Co-determination by the works council
A company fine can only be introduced and applied in companies with a works council if it is done through a works agreement and the works council has agreed to its design. The requirements of § 87 para. 1 no. 1 BetrVG must be strictly followed.
b) Certainty and transparency
The fines must be clearly and understandably stipulated in their type, scope, and triggering circumstances so that employees can recognize which conduct may result in a sanction.
c) Proportionality
Company fines may only be imposed to maintain workplace order and must be commensurate with the severity of the violation. Excessively high monetary fines or measures that unduly burden the employee are invalid.
d) Equal treatment
The measure must be executed in compliance with the principle of equal treatment; arbitrary or discriminatory fines are inadmissible.
Enforcement and withholding
The employer is generally not permitted to withhold a company fine directly from wages. According to § 850a no. 3 ZPO, remuneration is fundamentally exempt from attachment, as far as it concerns fines from the employment relationship. This means a company fine alone does not constitute an independent basis for a wage deduction. If the employee does not agree with the company fine, they may turn to the labor court.
Use and allocation of collected penalty amounts
The use of funds collected through company fines is also regulated by law: They may not flow to the employer. Rather, they must benefit a charitable purpose or the company itself, e.g., company funds, social funds, or company events.
Distinction from other sanctions
Difference from warning
While a warning is aimed at prompting a future change in behavior and serves as a necessary precondition for termination due to conduct, the company fine is an immediate sanction in the form of money or comparable measures.
Difference from contractual penalty and damages
A contractual penalty requires a corresponding agreement and is imposed for more serious breaches of duty, whereas a claim for damages requires a specifically proven loss. By contrast, the company fine serves the maintenance of company order and is independent of economic losses.
Legal consequences of invalidity
If a company fine is imposed without legal basis – for example, without the involvement of the works council or without sufficient regulation in a works agreement – the measure is invalid. Affected employees can demand repayment of amounts withheld without justification. Objections to company fines can – like other disputes arising from the employment relationship – be raised before the labor court.
Literature and case law
There is extensive employment law case law on company fines. Courts in particular impose strict requirements on the legality of withholding and the transparency and proportionality of sanctions.
Further sources
- Works Constitution Act (BetrVG)
- Code of Civil Procedure (ZPO)
- Commentary: Richardi, Betriebsverfassungsgesetz
- BAG, judgment of 23.08.1995, Az. 10 AZR 221/94
Summary
The company fine is an employment law instrument for sanctioning minor violations of company regulations. Its effectiveness, in particular, requires a valid works agreement, proportionality, and compliance with the principle of equal treatment. Company fines may not be withheld directly from wages and must be transparently regulated. Their main role is to maintain discipline and order in the company, while always ensuring compliance with employment law safeguards.
Frequently asked questions
Who is authorized to impose a company fine in the company?
The right to impose a company fine primarily arises from concluded works agreements or collective agreements that establish company disciplinary rules. As a rule, it is the employer, or authorized company supervisors, who are empowered to impose such a sanction. Exercising this right presupposes the existence of an explicit legal basis, for example, in the form of a specific works agreement. The works council is generally to be involved under § 87 para. 1 no. 1 BetrVG if the measures concern conduct at work. Additionally, it is necessary to make an individual assessment in each case. It must also be noted that the power to impose a company fine must not be exercised arbitrarily, but is subject to the principle of proportionality and the requirement of equal treatment.
In which cases may a company fine be imposed?
A company fine may only be imposed for violations of company regulations, provided such violations are expressly defined in a works agreement or other collective agreements as fineable administrative offences. Typical cases involve tardiness, violations of smoking bans, failure to wear mandatory protective clothing, or negligence in handling company property. Prior explicit regulation in the collective agreement is mandatory. The company fine is excluded in cases of more serious violations, such as theft or assault, since other individual contractual employment law sanctions (warning, dismissal) take precedence.
What legal limits exist regarding the amount and nature of company fines?
The design of the company fine is subject to the principle of proportionality. The amount and type of sanctions may not exceed what is necessary and must be reasonable in relation to the severity of the breach of duty. Collective agreements or works agreements often set maximum amounts, for example, a fixed daily rate or a certain percentage of the monthly salary. Furthermore, the works council has a mandatory co-determination right according to § 87 para. 1 no. 1 BetrVG when introducing and designing such regulations. Humiliating, degrading, or existentially threatening measures are not permitted; company fines must not have a punitive character or exert disproportionate pressure on the employee due to their amount. The designated use of collected amounts (e.g., for charitable purposes within the company) is also regularly prescribed.
Can legal action be taken against the imposition of a company fine?
Yes, the affected employee has the right to take legal action against an imposed company fine. A precondition is that the fine was formally imposed and that a corresponding legal basis, such as a works agreement, exists. The employee may file a claim with the competent labor court within three weeks after receipt of the fine, pursuant to § 4 KSchG or § 611a BGB in conjunction with employment law principles. During court proceedings, in particular, the legal basis, compliance with procedural rules, and the appropriateness of the sanction will be reviewed. Often there is also a parallel review by the works council, which may intervene in cases of unlawful sanctions.
Is a company fine recorded in the personnel file?
Whether a company fine is recorded in the personnel file depends on the design of the sanction and the underlying works agreements. As a rule, properly imposed company fines are documented in the personnel file, noting the reason, scope, and legal basis of the measure. For the employee, this entry is particularly relevant for later decisions regarding promotion or other personnel measures. However, such entries may not be retained indefinitely; after an appropriate period or a change in conduct by the employee, erasure from the personnel file is legally required, provided no further negative developments have occurred.
Is the works council’s consent required for the imposition of a company fine?
Yes, the works council has a mandatory co-determination right in all matters concerning company order pursuant to § 87 para. 1 no. 1 BetrVG. This applies both to the introduction and to the concrete design of company fine regulations, and in individual cases often to the imposition of specific measures. Without the involvement and due approval of the works council, the company fine is generally invalid. Proper co-determination includes both prior agreement on the specific penalty catalog and case-by-case review within the applied procedures.
How are the collected amounts from company fines used?
The use of monies collected through company fines is not conclusively regulated by law, but in practice is subject to the rules of the underlying works agreement. It is often stipulated that these funds may be used exclusively for charitable or social purposes within the company, for example, for the support of colleagues in need, joint company events, or improving working conditions. Revenue from company fines must under no circumstances serve the direct economic enrichment of the company or flow directly to the employer. The exact rules of use usually require the approval of the works council and should be documented transparently.
