Late bonus targets: when there is no compensation

The case

Under his commission scheme, a head of department at a chemicals company was to be given a target value for his business unit each year in November, on which a substantial part of his variable remuneration was based. For 2021, this target was not set — it was only in March 2021 that the employer communicated a target value, which it corrected shortly afterwards from 18.2 to 60 million euros. In a first action, the claimant demanded that his remuneration be calculated on the basis of a lower target value more favourable to him — and lost: the Regional Labour Court (Landesarbeitsgericht) of Hamburg ruled with final effect that, despite the delay, the late setting at 60 million euros still corresponded to equitable discretion (billiges Ermessen).

The second attempt

The claimant tried again with a second action — this time not as a claim for performance but as a claim for damages: had the employer acted in accordance with its duties and in good time, it would have set a considerably lower target value in November 2020, he argued. The BAG (Federal Labour Court) also dismissed this action (judgment of 20.5.2026 – 10 AZR 88/25). It held that a claim for damages is in principle a separate subject matter of the dispute from the claim for performance already decided — the action had therefore been admissible. On the merits, however, the res judicata effect of the first judgment also bound the second action: since it had been established with final effect in the earlier proceedings that a target value of 60 million euros complied with § 315(1) BGB (German Civil Code), the claimant could no longer argue in the subsequent proceedings that a lower value would have been appropriate — even if the first court should have made an error of law in doing so.

Why res judicata blocks the claim

The judgment strikingly illustrates how sharply substantive res judicata (materielle Rechtskraft) operates: a fact decided with final effect as a preliminary question in earlier proceedings — here the appropriateness of the target value — has binding effect for any later dispute that builds on the same question, regardless of the legal basis of the claim. The principle that a late target can, in the event of a culpable breach of duty under § 280(1) BGB, in principle give rise to an obligation to pay damages remains unaffected — it did not help the claimant here only because he had already failed with final effect on precisely this question in the first attempt.

Consequences for practice

Above all, one thing follows for practice: anyone who wants to challenge a late or excessively low target should assert all conceivable legal bases — performance and, in the alternative, damages — together and in good time in the first proceedings. Anyone who initially restricts themselves to the claim for performance and saves the claim for damages for possible second proceedings risks the res judicata effect of the first decision barring the second attempt — even if the employer's delay was undisputed. For employers, the decision is a reminder nevertheless to set targets at the contractually stipulated time and to document them comprehensibly — a late target remains a breach of duty, even if it may have no consequences in an individual case.