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Case:
BAG NJW 1993, 1732 Great Senate 1/92 (issued on a reference by the 8th Senate of the BAG)
Date:
12 June 1992
Translated by:
Mr Raymond Youngs, Southampton Institute
Copyright:
Professor B. S. Markesinis

Facts:

The claimant, who runs on a building business, had to build a boundary wall around a house plot. Its foreman for this work was the defendant. Ditches 80 cm deep and 16 cm wide had to be dug with an excavator for the foundations. The claimant's director showed the defendant the site in the presence of a fellow employee. During the excavation, the excavator driver damaged a gas pipe. Gas escaped into the cellar rooms of the house and exploded. Damage amounting to 244,263 DM was done to the house. The claimant seeks compensation from the defendant for the part of the loss not covered by its business liability insurance. It claims that the defendant had been shown the location of the pipe from the gas main to the cellar and that the plan and the street excavation had shown where the house connection ran. The defendant had been advised that in this area the digging ought only to be by hand. Nevertheless, he had failed to instruct the excavator driver accordingly, and told him that he did not need to take care, as there were no pipes there.

The claim was unsuccessful at earlier instances. The LAG stated that there was no liability as the defendant was not grossly negligent. It considered that, contrary to the case law of the highest courts, this should also apply to non-dangerous work, as here. The claimant lodged an appeal in law. The 8th Senate of the BAG wished to depart from the view of the Great Senate, and apply the principles developed by the case law about limiting employee liability in the case of dangerous work to non-dangerous work as well, if it results from the business and is carried out on the basis of the employment relationship. It has therefore asked the Great Senate of the BAG to decide on this legal issue under § 45 (2) sentence 1 of the Labour Courts Act.

Reasons:

The Great Senate of the BAG agrees with the legal opinion of the 8th Senate to the effect that the limiting of employee liability is not conditional on the dangerous nature of the work. The limiting of employee liability should instead apply in all cases in which an employee causes harm in connection with work which is carried out for business reasons.

I.

1. The BAG since the decision of its Great Senate of the 25th September 1957 (references omitted) proceeds on the basis that, for harm which an employee has negligently caused in the carrying out of dangerous work, he is only liable to his employer in accordance with the following principles: In the case of gross negligence the employee has as a rule to bear the total loss alone. In the case of the slightest negligence he is not liable. For normal negligence the loss is as a rule to be divided between the employer and the employee proportionately and in this connection all the circumstances regarding the causing of the harm and its consequences are to be balanced against each other in a reasonable way in accordance with the principles of fairness (references omitted). But these principles alleviating liability which evolved by development of the law apply (according to the case law so far) only where dangerous work is concerned. The Great Senate considers it necessary no longer to limit the alleviation of liability to cases of dangerous work, because otherwise, under §§ 276 and 249 of the BGB, employees who do not carry on any dangerous activity would in principle have to bear the whole of the loss where there is a violation of duties of care and protection in the employment contract which leads to loss for the employer. To burden an employee with such a risk of liability is not justified, having regard to the possible extent of the harm (and also that present here) and the fact that compensation for it can lead to serious inroads into his lifestyle. It would contradict the principle of proportionality (reference omitted).

2. The Great Senate is authorised, according to Art 20 para 3 of the Basic Law and § 45 (2) of the Labour Courts Act, to adapt employee liability law to actual business conditions by developing it beyond the existing case law (reference omitted).

a) The provisions of the BGB do not contain a closed regime for employment contract law (reference omitted).

Even on the enactment of the BGB, a gap in the law was assumed in relation to employee liability. In the materials, a special statutory regime for employment contracts "inclusive of compensation law questions" was demanded "as soon as possible" (reference omitted). In addition to this, employees have been increasingly exposed to liability risks since the time when the BGB came into force. Formerly, harm caused by employees was kept within boundaries, but since those days it has become capable of leading to unreasonable levels of liability for employees because of the substantially higher value of the means of production used by employers. In this respect, because of the gap in the BGB's regime which was present from the outset, there is an obvious defective development which must not be accepted. Not just because of the special nature of work, but also because of the increase in value of means of production, the employee is exposed in the world of work today to a very much higher risk of harm, which in part threatens his very existence.

b) Until now, in spite of various plans, no statutory liability regime for employees has been enacted nor is this issue at present the subject of pending legislation...

II. The Great Senate of the BAG takes the view that as to all harm caused by employees in the employment relationship which arises in connection with activities which are business related, limitation of employee liability is required. This view is propounded in the academic literature almost unanimously, although on the basis of differing reasoning (references omitted).

1. According to § 254 of the BGB, the duty to compensate as well as the amount of compensation to be provided depends on the circumstances and in particular on how far the harm has been caused mainly by the one or the other party. § 254 of the BGB is applied to circumstances beyond its wording (that the person harmed has himself contributed in the origin of the harm) when the person harmed is jointly responsible for the harm which has arisen on the basis of a property or business related danger for which he has to take responsibility. This will occur if he has been involved in the origin of the harm in a way that can be attributed to him. At the same time, it is recognised that a division of the harm can range from full liability of the tortfeasor and his complete exoneration, depending on assessment of the circumstances in the individual case (references omitted).

2. These legal principles also apply in the employment relationship in relation to employee liability. The BAG proceeds - admittedly with the further prerequisite of the presence of a dangerous activity - in constant case law (references omitted) on the basis that the business risk has to be considered from the employer's side. The employer cannot simply shift the loss which business risk brings with it on to the employee just because he has entrusted him with the execution of work to be carried out in the interests of the business. As the employer claims the results of the business activity for himself, he must assume liability for the risks associated with it. The business risk relates to the danger of e.g. the production plant, the production itself or the manufactured products and thereby encompasses only part of the sources of business related harm.

3. Over and above this, there is the ground of attributability, and therefore of liability or joint liability, of the employer within the framework of § 254 of the BGB arising from his actual organisational and staff authority and the legal formulation of the employee's personal dependence and responsibility to obey instructions. This justifies also imposing on the employer the organisation risk, as an element of the general risk of the undertaking. The employer puts at the disposal of the business the organisation predetermined by him. He can thereby direct the work process organisationally and technically. The employee is integrated into this business in order to realise, alone or together with the employees employed in the business, the technical work purpose of the business by activity which is directed by instructions. The employer can determine the technical work purpose of the business on his own responsibility, can formulate the business organisation in accordance with his plans and needs, and can exert influence over the employee's activity. The employee's pursuit of his job is directed by his integration into the business organisation and the actual conditions of the work process (e.g. the type of technical plant available (which is often particularly valuable) and the arrangement of the work organisation and of the production process, with qualitative and quantitative requirements in relation to the work products).

The employee cannot avoid these pre-determined conditions of work either factually or legally. The employer, on the basis of his right to give instructions, determines the performance of work owed under the employment contract in a concrete sense. He can decisively influence the conditions of the performance of work (e.g. by organisational or technical measures). He can also authoritatively shape the temporal components of the performance of work within the framework of the maximum permitted limits. And finally he can lay down the place of performance of work in accordance with the regime in the employment contract. The organisation of the business established by the employer thereby determines the risk of liability for the employee. By virtue of his power in the organisation, the employer can create, maintain or alter conditions for risks of harm e.g. he can take steps to prevent danger factors by alteration of the work process, better supervision, safety precautions or other planned risk protection, like effecting insurance. In a risk situation of this kind created by the employer, he himself must allow risks of harm to be attributed to him within the framework of § 254 of the BGB and cannot, or cannot only, offload them on his employee even if the employee is at fault in the causing of the harm.

III. The protective scope of the regime under § 254 of the BGB in the employment relationship is also influenced by constitutional law guarantees under Art 12 para 1 sentence 2 in combination with Art 2 para 1 of the Basic Law.

1. According to the constant case law of the Federal Constitutional Court, the basic right norms do not only contain subjective defensive rights of the individual against the state. They also embody at the same time an objective order of values which applies as a basic constitutional law decision for all areas of law and thus also for civil law, and gives directives and impulses for legislation and case law. No civil law provision may exist which contradicts the principles which are expressed in the basic rights. This applies primarily for those provisions of private law which contain compulsory law and therefore set limits to private autonomy (references omitted).

2. The statutory regime under § 254 of the BGB admittedly gives no indication that it intrudes into the basic rights contained in Art 2 para 1 and Art 12 para 1 of the Basic Law or that it secures basic right protection. However the scope of the protection which these basic rights are meant to secure can also be affected by provisions which have a close internal connection with the exercise of a vocation and display a tendency to regulate it (references omitted). These prerequisites are present here, because, depending on how employee liability law is formulated legally, there is a tendency for an intrusion into the employer's economic freedom of action and activity, the development of the personality of the employee and the exercise of the vocation of the employer and the employee. If the employee is liable for harm for which he is responsible, this has an effect on the development of his personality and affects the exercise of his vocation. If the employer is liable wholly or partly, this intrudes into his economic freedom of action and activity and the exercise of his vocation.

3. Art 2 para 1 of the Basic Law guarantees the general freedom of action in the full sense (reference omitted). It includes on the one hand the freedom of economic activity as an employer and at the same time gives with this an appropriate amount of space for development of entrepreneurial initiative (reference omitted). On the other hand this basic right protects the general right of personality (reference omitted) and thereby the development of the personality of the employee. This increases in importance specifically in view of modern developments in working life and the new dangers to the human personality associated with this. The vocational activity for which Art 12 para 1 sentence 2 of the Basic Law guarantees the necessary scope for the employer as well as for the employee does not only serve the personal development of the working man in society. It also guarantees citizens who have to rely on the use of their capacity to work the possibility to make for themselves an economic basis for existence (references omitted). In the framework of employment law, this typically occurs through contracts in which the employer and the employee reciprocally limit their vocational freedom of action in the exchange of stipulated counter obligations. Vocational freedom under Art 12 para 1 sentence 2 of the Basic Law thereby protects the exercise of the vocation of the employer as well as that of the employee with a view to the free development of their individual capacity to earn a living and provide services (reference omitted).

4. Proceeding from this constitutional law basis, an unlimited liability for harm on the part of the employee represents a disproportionate intrusion into the employee's right to the free development of his personality (Art 2 para 1 of the Basic Law) and into his right to free exercise of his vocation (Art 12 para 1 sentence 2 of the Basic Law).

a) The duty of protection under Art 12 para 1 sentence 2 of the Basic Law to guarantee the exercise of vocation represents a substantial part of the realisation of the right of personality (reference omitted) and, in combination with the social state principle in Art 20 para 1 of the Basic Law, secures the general requirements for life and the minimum for existence (reference omitted) as the lowest prerequisite for an existence consistent with human dignity. On the basis of the value order of these interests protected by the basic rights, a disproportionate interference with the exercise of the right of vocation must be assumed if, in an employment relationship, unreasonable financial burdens or even danger to the economic existence of the employee can arise through general risks of harm associated with business. This would be so in an employment relationship if the employee had to assume unlimited liability for all negligently caused harm, even where the negligence was only slight. The employer is by the organisation of the work, with regard to the actual and legal arrangement of the activity as well as through integration into the business organisation, exposed to risks which he cannot avoid. These conditions created by the employer and the value of the means of production used by the employer determine the extent and scope of the employee's risks of liability (see, on this issue, II 3 above). With such an extensive determination of the work by another party, the employee's interests protected by the basic rights are violated if the income from the work is substantially disproportionate to the level of the harm to be compensated for, or if the employee's duty to compensate leads to his economic existence being endangered. Such an excessive and therefore disproportionate financial burden for the employee represents an unacceptable disturbance of the relationship of equivalence between salary and harm to be compensated for. It compels the employee and his family to live with the minimum for existence which is determined by the limits to enforcement proceedings for a lengthy or even unforeseeable period. This can have the ultimate consequence of leading to every incentive for a further exercise of the employee's vocation being taken away from him, because it seems to him to be useless.

b) Over against this, the basic right position of the employer is not unreasonably affected by the imposition of risks of liability in the scope in question here. The employer must put up with limitations of his freedom of economic action and activity (Art 2 para 1 of the Basic Law) and exercise of his vocation (Art 12 para 1 sentence 2 of the Basic Law) as protected by the basic rights, because he sets the conditions of work and business himself on his own responsibility and is thereby jointly responsible for the employee's risks of harm (see II 3). In these factual and legal conditions, there is no equality of power between the parties to an employment contract, so through the regime of § 254 of the BGB, a proper balancing of interests by limitation of the employer's freedom of exercise of vocation should be allowed. The possession and use of assets available in the business must take second place to the employee's ability to work and perform services if this is necessary for the protection of his existence. Therefore the attribution of the risk situation created by the employer on his own responsibility should be seen as a socially adequate formulation of the employer's freedom of economic action and activity and exercise of vocation.

c) Such an attribution is not unreasonable, having regard to the legal position in favour of the employer which is at issue in constitutional law. The question of whether and, if appropriate, in what sum the harm is to be attributed to the employer should be governed by the circumstances of the individual case as a whole having regard to the causes of the harm and its consequences. Besides this, the points of view mentioned in the case law so far (references omitted), insofar as they are based on the work relationship, are to be considered within the framework of § 254 of the BGB, on weighing up the circumstances of the individual case. This includes, for example, the danger involved in an activity, a risk which can be taken into account by the employer and covered by insurance, the position of the employee in the business, the level of salary, the personal circumstances of the employee, as for instance how long he has been part of the business, his age, his family circumstances as well as the employee's conduct so far under his contract of employment.

5. So as not to burden the employer with the general risks in life of the employee, the activity which has led to the harm must be caused in connection with the business and based on the employment relationship. Activities caused in connection with the business are those activities of the employee which have been entrusted to him for business purposes or which he carries out in the interests of the business, which are in close relationship with the business and his area of operation in the business and which in this sense are caused in connection with the business (references omitted)...

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