Germany: Observation of employees and reimbursement of detective costs

Working time fraud constitutes a serious breach of employment contract obligations and may justify extraordinary termination in accordance with Section 626 (1) of the German Civil Code (BGB). The Cologne Labor Court (judgment of February 11, 2025, Ref. 7 Sa 635/23) had to decide whether an employer is entitled to monitor an employee by a private detective in this context and who has to bear the resulting detective costs.

The plaintiff – a ticket inspector employed by a transport company since 2009 – came under the scrutiny of his employer after employees of a security company reported irregularities in the recording of working hours. They noticed visits to the gym, the mosque, the hairdresser and private photo shoots during working hours.

The plaintiff's employer then hired a detective agency, which observed the plaintiff on five days in November 2022 and then continuously from December 2 to 16, 2022. The investigation revealed that the plaintiff had visited his girlfriend's address or bakeries and cafés several times during his working hours without documenting the corresponding breaks in the time recording system. On almost all days of observation, the detective agency found that the plaintiff did not record his working hours properly. The unrecorded break times sometimes amounted to several hours per day.

Based on these findings, the employer terminated the employment relationship without notice in a letter dated January 2, 2023, and also demanded reimbursement of the detective costs in the amount of EUR 21,608.90. The employee contested the termination and the cost claim with an action for unfair dismissal on January 11, 2023.

Working time fraud as good cause and breach of trust

The Cologne Labor Court confirmed the legality of the extraordinary termination. The intentional false recording of working hours constituted a serious breach of the obligations under the employment contract, in particular the duty of consideration (Section 241 (2) of the German Civil Code (BGB)) and was likely to permanently destroy the trust necessary for the continuation of the employment relationship.

The employment relationship can be terminated for good cause pursuant to Section 626 (1) BGB if there are facts on the basis of which, taking into account all circumstances of the individual case and weighing the interests of both parties to the contract, the terminating party cannot reasonably be expected to continue the employment relationship until the end of the notice period or until the agreed termination of the employment relationship.

In the present case, such good cause existed. The court stated that the plaintiff had deliberately failed to record significant break times on at least December 9, 12, 13, and 16, 2022. For example, on December 9, 2022, he spent time at his girlfriend's apartment between 3:18 p.m. and 3:59 p.m. without documenting this as a break. On several days, he spent between 30 and 50 minutes in bakeries without performing any work or recording the time as a break. In doing so, he deceived his employer about the work he had performed and fraudulently obtained remuneration for work not performed.

Detective surveillance was permissible – no exclusion of evidence

The court deemed the surveillance by the detective agency to be permissible under Section 26 (1) sentence 2 BDSG and denied an exclusion of evidence. Although the surveillance of the plaintiff by private detectives, who observed, photographed, and documented him, as well as the installation of a GPS transmitter on his company car, constituted an infringement of the plaintiff's personal rights and right to informational self-determination, the court assessed the intensity of the infringement as low: The surveillance was limited to shift times, took place exclusively in public spaces, and lasted only a few days. Only information that would have been visible to any passerby was recorded.

According to the court, evidence may only be excluded if its consideration is imperatively required due to an unjustified infringement of a constitutionally protected legal position, in particular personal rights. In the opinion of the Cologne Labor Court, there was no “Orwellian surveillance” – i.e., extreme control, constant monitoring, and lack of privacy – which is why the findings obtained were admissible.

Employee must reimburse over EUR 21.000 in detective costs

The court ordered the employee to reimburse the detective costs in the amount of EUR 21,608.90 for breach of employment contract obligations (Section 280 (1) BGB). According to the case law of the Federal Labor Court (BAG), the employee must reimburse the necessary costs incurred by the detective's activities if the employer assigns the surveillance on the basis of a concrete suspicion of wrongdoing and the employee is found guilty of an intentional breach of contractual obligations. However, reimbursement claims only exist for measures that a reasonable, economically minded employer would consider not only appropriate but also necessary under the circumstances of the individual case in order to eliminate the disturbance or prevent damage.

The employer was entitled to hire a detective agency because, based on statements made by employees of the security company, there was suspicion of working time fraud. The plaintiff was found guilty of intentional breach of contract, which led to the extraordinary (disciplinary) termination of his employment.

Significance for practice

Employers must be able to rely on the correct documentation of their employees' working hours. If an employee knowingly and intentionally fills out the time recording systems provided incorrectly, this generally constitutes a serious breach of trust.

The decision clearly shows that working time fraud is not tolerated by the courts and can justify extraordinary termination pursuant to Section 626 of the German Civil Code (BGB) even in the case of long-term employment. In addition, employers are not only allowed to hire private investigators in cases of concrete suspicion, but the costs incurred as a result can also be imposed on the convicted employee in individual cases.