BAG: Late target setting no grounds for damages

The Federal Labor Court ruled that an employer’s delayed setting of performance targets for a bonus system does not automatically entitle the employee to compensation. The decision clarifies that delays alone do not create a claim unless contractual obligations are breached.

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No compensation for late bonus targets

The Federal Labor Court (BAG) rejected a manager’s claim for damages due to his employer’s late setting of bonus targets. The ruling means employees cannot demand compensation just because their employer finalized performance goals after the start of the business year—unless the contract explicitly requires earlier action.

The decision was issued on June 2, 2026 (case no. 10 AZR 88/25). The lower court (Hamburg Regional Labor Court, 1 SLa 24/24) had already dismissed the claim.

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What happened in this case

The Federal Labor Court has not yet issued its reasoning. The lower court had established the following facts:

The employee, a department head at a chemicals company, argued that his employer failed to set the 2021 bonus targets by November 2020 as required by their contract. Instead, the targets were only communicated in March 2021—after the business year had already begun. He claimed this delay cost him a higher bonus payout, as the later targets were significantly higher than they would have been earlier.

The company countered that the targets were adjusted based on updated financial forecasts and that the employee had already received his full contractual bonus. The lower court agreed, finding no breach of contract.