Forfeiture clauses in employment contracts - New guidance from the Federal Labor Court

Forfeiture clauses are commonly used in German employment agreements. While under statutory law, claims will only become time-barred three years after the end of the year of their due date, forfeiture clauses are popular to limit the ability to exercise claims, in most cases to three months after the due date. They are therefore essential for avoiding long periods of legal uncertainty for both parties. Oftentimes, changes in case law pertaining to forfeiture clauses go unnoticed by employers. If forfeiture clauses are not updated regularly, they are considered null and void, often causing significant financial risks for employers.