Are workers in minor employment entitled to occupational pensions?

In an interesting appeal to the Federal Labour Court (docket number 3 AZR 83/16) the services trade union ver.di had been called upon by a female employee – who had originally been employed by the union Deutsche Postgewerkschaft since 1991 and had been working for the defendant since its merger with ver.di in 2001 – to obtain a pension. Since 2004, the applicant had been working in minor employment (a so called mini job or marginal employment with a maximum monthly income of Euro 450). The provisions of the 1995 pension scheme, which applied to the defendant, provide that all employees are to be registered with the unions’ support fund and that they are to be provided with a pension according to the applicable guidelines. However, individuals in minor employment are exempt.

Before 1 January 2013, as was the case with the appellant, contracts for mini jobs were not subject to compulsory pension insurance as a rule. This was later changed. As a result these individuals are now subject to compulsory insurance in the statutory pension insurance system as a rule. They have, however, the option to have themselves exempted on application from the obligation to pay contributions to the statutory pension system.
The employee alleged discrimination against part-time employment according to Sec. 4 para. 1 of the German Part-Time and Temporary Employment Act (Teilzeit- und Befristungsgesetz, TzBfG). Sec. 2 para. 2 of the TzBfG explicitly states that, individuals working in mini jobs are to be considered part-time employees just as employees working part-time, but above mini job remuneration level. The union considered the exclusion of marginal employees effective. It argued that the occupational retirement provision in particular served the purpose of supplementing statutory retirement provision; in view of the minor employment, the applicant under the old rules did not acquire any rights under the statutory pension scheme.

While the Labour Court of Rosenheim had dismissed the employee’s complaint, the Higher Labour Court of Munich had granted the claim (decision of 13 January 2016, docket number 10 Sa 544/15), arguing that the general non-discrimination principle not only applies to part-time employees vis-à-vis full-time employees but also to different treatment of different forms of part-time employment.
The hearing before the Third Senate of the Federal Labour Court was scheduled for 17 October. On the day before the union withdrew its appeal against this decision in favour of the employee.

Size (doesn’t) matter – Minimum size for police officers discriminates women

The ECJ ruled in a judgment on 18 October that a uniform minimum size as a requirement for men and women to get a job is inadmissible (docket number C-409/16). A Greek court had asked the ECJ whether “a height (in the case of men and women) of at least 1.70m”, is compatible with Directive 76/207/EEC which prohibits any indirect discrimination on grounds of sex as regards access to employment, vocational training and promotion, and working conditions.

“In the present case, the referring court itself found in its decision that a much larger number of women than men are of a height of less than 1.70m, such that, by the application of that law, women are very clearly at a disadvantage compared with men. It follows that the law at issue in the main proceedings constitutes indirect discrimination.”

Such an unequal treatment may be permitted if it is justified. This is the case if the unequal treatment is objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary. (see for a similar situation our article about age limits).

In general the ECJ has already held that the concern to ensure the operational capacity and proper functioning of the police services constitutes a legitimate aim. However, the suitability and the necessity of such a regulation are questionable, it is questionable whether it is not possible to use milder actions to achieve the goal. The ECJ points to two critical points: First, there are also police tasks where no physical force is necessary and secondly, the correlation between body size and higher assertiveness is questionable. This is also recognized by the ECJ:

“In that regard, while it is true that the exercise of police functions involving the protection of persons and goods, the arrest and custody of offenders and the conduct of crime prevention patrols may require the use of physical force requiring a particular physical aptitude, the fact remains that certain police functions, such as providing assistance to citizens or traffic control, do not clearly require the use of significant physical force. Furthermore, even if all the functions carried out by the Greek police required a particular physical aptitude, it would not appear that such an aptitude is necessarily connected with being of a certain minimum height and that shorter persons naturally lack that aptitude.”

The ECJ points in particular to lower minimum sizes for the greek army and coast guard. In this respect, a problem of coherence is again shown. Moreover, the Court emphasizes that other – more individual – selection criteria would allow a more precise and more specific differentiation.

Thus it shows again that special caution is required in case of unequal treatments. The existence of a legitimate goal does not automatically lead to justification. Rather, the concrete implementation must always be checked exactly.

Hurdles at the temporal limits of work contracts – When is a fixed-term contract valid?

In practice, fixed-term contracts lead to practical problems in a large number of cases. On the one hand, this is because they demand a variety of formalities (see our article from July 24 ). On the other hand, however, it is even more difficult to determine whether it is possible to limit the work contract temporarily at all. Both a limitation with and without reason are acknowledged. Both are apparent from the directive 1999/70/EC concerning the framework agreement on fixed-term work. This includes the following rules:

“To prevent abuse arising from the use of successive fixed-term employment contracts or relationships, Member States, […] shall, […], introduce […], one or more of the following measures:
(a) objective reasons justifying the renewal of such contracts or relationships;
(b) the maximum total duration of successive fixed-term employment contracts or relationships;
(c) the number of renewals of such contracts or relationships.”

This regulation thus enables the use of fixed-term contracts with objective reasons (a) and without objective reasons but with other regulations (b and c). German law has implemented these requirements in The Act on Part-Time Work and Fixed-Term Employment (“Teilzeit- und Befristungsgesetz – TzBfG”). Even according to this law the use of fixed-term contracts is possible both with (sec. 14 (1) TzBfG) and without (sec. 14 (2) TzBfG) objective reason.
The law emphasizes, however, that a fixed-term contract without objective reason is not permissible, if the employee has previously been employed by the employer. The German law uses the term “bereits zuvor“, which can be translated with “already before”. But what this means is controversial.

In 2011 the Federal Labour Court of Germany decided that the employee is not employed “already before”, if the employment relationship was more than three years in the past (docket number 7 AZR 716/09). In this case, a fixed-term contract without objective reasons should still be possible. The Federal Labor Court thus ignores the clear wording of the rules in sec 14 (2) TzBfG. For this reason, the judgment was strongly criticized and rejected both in the literature and the jurisprudence. The 18 regional labor courts, too, followed the judgment in part only, and further argued that a previous period of employment always prohibits a fixed-term contract without objective reason. Lastly, this view was shared by the regional Labour Court of Lower Saxony (Landesarbeitsgericht Niedersachsen) in July (docket number 6 Sa 1125/16).

The legal situation is obviously not clear. The employer cannot be confident that fixed-term contracts without objective reason are permissible, in the case of an employment more than three years in the past. As can be seen from the regional Labour Court of Lower Saxony, he cannot rely on the correctness of the case law of the Federal Labour Court, as this is massively criticized.

If an employer wants to act in the right way, a fixed-term contract without objective reason should only be concluded if there was no previous employment relationship with the employer at all. Otherwise, the risk is very high that there is a contract without a fixed term. However, the Federal Labor Court will again decide this issue in the near future. Here it is possible that the criticism is taken into account and the jurisprudence changed. For employers this would be desirable in any case. The law and jurisdiction should be so clear that every employer knows what rights and duties he has. This would also simplify the application of the rules for fixed-term contracts and minimize the practical problems.

Restructuring of a business in Germany – an overview

Where restructuring measures comprising collective redundancies become necessary, the employer must fulfil a number of legal requirements to successfully implement such measures. While it is sometimes tempting to implement the necessary restructuring in a way that ignores the various legal requirements (e.g. co-determination of the works council etc.), there are only exceptional situations in which such a way does not lead to a total failure of the original plan. For the employer, unlike for the employees, there is usually no alternative than to adhere closely to the rules of the law, which requires financial preparation, a solid planning, open communication and clear execution.

The most important legal issues are the works council’s consultation rights. The usual time frame for such consultations is 3 to 6 months, which can even be exceeded if the negotiations become complicated. However, a well-prepared employer will be able to control the situation and to limit delays to the process beyond the usual time frame to a minimum. Typically, the employer is forced by financial circumstances to undertake restructuring measures, albeit this is not a requirement. The main financial risks in restructuring measures are the length of the negotiation/implementation phase (with associated remuneration costs) and the amount of severance compensation. In order to keep both risks as small as possible, an employer should prepare the restructuring in great detail and give as much information as possible when informing the works council. This will limit delays to the consultation process and improve the negotiation atmosphere. The employer is obliged to inform the works council as soon as the restructuring is seriously planned, and before a final decision has been made.
Moreover, the employer is legally bound to negotiate with the works council about the restructuring measures to be taken with a view to reaching a so-called balance of interests agreement (Interessenausgleich). Even though there is no legal duty to come to such an agreement, the employer is banned from starting the implementation of the restructuring (e.g. by issuing termination notices) unless the negotiations with the works council end in agreement or have finally broken down. Furthermore, the employer and the works council must agree on a severance plan (Sozialplan) for all employees affected by the restructuring in order to provide compensation for the financial prejudice sustained by staff as a result of the envisaged restructuring measures.

Another important issue relates to the European Directive relating to collective redundancies (Mass Dismissal Directive) which also requires as prior information and consultation with employees’ representatives and the Employment Administration (Agentur für Arbeit).

In addition, individual protection of employees against dismissals has to be considered and dealt with, as even after successful agreement of collective agreements each affected employee can bring an unfair dismissal claim at the employment courts. A dismissal for business reasons is justified if the employer can prove that the employee’s function does not exist anymore, e.g. due to the closure of a production line or due to restructuring and downsizing of a working area. In addition, the employer must prove that he made the selection of those employees dismissed according to social criteria. This selection takes place among all employees at a site working on the same hierarchy level and having similar job qualifications. The social data to take into account are age, time of service at the company and family data such as the number of dependent children. It is important to note that a dismissal which is not valid under these legal criteria is void and the employee has the right to be reinstated.

The crucial point in each such reorganization is therefore to ensure that the employees remaining in the business are the right employees in terms of skills, willingness to perform and personal ability, while at the same time respecting in particular the above requirements of the information and consultation procedure and the social selection process.

Termination only on the basis of suspicion – Basics and difficulties

We recently reported on third parties’ pressure to terminate an employee in our blog. This time, too, we would like to take a current judgment (Federal Labour Court of Germany (“Bundesarbeitsgericht”) from 2.3.2017, docket number 2 AZR 698/15) as an opportunity to report on a further special possible termination: a termination based only on suspicion of unacceptable behavior.

German law also permits dismissal on grounds of suspected unlawful or unacceptable behavior (if it is a particularly serious suspicion and can be substantiated by facts). This means that the termination is permitted because of a presumed behavior, even if this behavior is not proven. The prerequisite of this termination is, however, that the employer has tried to clarify the truth completely, but this has remained unsuccessful. If, however, it turns out that the suspicion was faulty, termination is not possible; if the suspicion proves to be true, the employee can be terminated because of the concrete behavior.

It is also important that a deadline of two weeks has to be observed for the termination. It is necessary first of all that the employer has identified the facts as far as possible and has tried to clarify the suspicion. The worker must, in particular, be given the opportunity to comment; he must be heard. Only if, despite all these measures, the suspicion cannot be clarified, is a suspicion termination possible, which is to be pronounced within two weeks after the conclusion of the observation and hearing.

But what happens if the employee has been released in criminal proceedings? Is the employer still able to rely on the suspicion of a corresponding infringement? What is the allowed reason for the suspicion of the employer? These questions are answered by the current judgment of the Federal Labor Court. In the first place, it is clarified that the labor courts (when reviewing a dismissal) are not bound by the decision of the criminal courts. A suspicious termination thus also remains possible despite an acquittal. The decisive factor is the independent assessment of the facts by the labor courts. The acquittal can be considered here as an additional fact, but all circumstances must be considered comprehensively.

Thus, the grounds of a termination based only on suspicion have become clear: Criminal law and labor law differ. Labor law demands a serious suspicion based on facts, which must be submitted by the employer. In addition, it is imperative that the suspicious behavior was most likely true. Ultimately, all incriminating and mitigating facts must be weighed. Only under these conditions can the employment relationship be terminated without any clear evidence of a misconduct.

Allowances for work on Sundays, bank holidays or at night are protected against attachment

On 23 August 2017 the Federal Labour Court ruled (judgment, 10 AZR 859/16) that allowances for work on Sundays, on bank holidays and at night are protected against attachment so far as the amount of such payments is common practice. Whether the extent and amount of such allowances are “common”, which means they are protected against attachments (according to sec 850a no. 3 ZPO), can be linked to sec. 3b EStG.

In the current case, a personal insolvency proceeding was annulled, where the plaintiff was in a phase of good conduct (Wohlverhaltensphase) and assigned the attachable remuneration to a trustee. Between May 2015 and March 2016 the defendant transferred the attachable amount of the net remuneration of the plaintiff to the trustee by taking into account the allowances which were agreed in the tariff agreement for work on Saturdays and Sundays, on bank holidays, at night and on alternate shifts. According to the plaintiff these allowances are an unseizable extra payment for difficult working conditions (Erschwerniszulage) pursuant to sec. 850a no. 3 ZPO and therefore claimed for a payment of 1.144, 91 Euro, which had been overpaid by the defendant to the trustee.

The Federal Labour Court annulled the judgement of the Higher Labour Court. However, the Federal Labour Court confirmed that allowances for work on Sundays, on bank holidays and at night are extra pay for difficult working conditions according to sec. 850a no. 3 ZPO and consequently are unseizable. The Federal Labour Court refers to sec. 6 para. 5 ArbZG which regulates a compensation obligation for working at night, which has been classified as hard conditions by the legislative authority. Furthermore, working on Sundays and on bank holidays is particularly protected by the constitution (Art. 140 GG related with Atr. 139 WRV). Besides that sec 9 ArbZG prohibits working on such days.

There is no similar classification by the legislative authority regarding allowances for shiftwork and for work on Saturdays, hence such payments are not protected against attachment.

Ineffectiveness of a suspicion termination after the disappearance of 115.000 Euro

In order to protect employees from termination where there is suspicion that they have committed a crime, such a termination is subject to very strict conditions. In particular, the probability that the suspected employee is in fact guilty of the assumed crime has to be so high that the suspicion is considered urgent. The urgency of a suspicion can only be assumed if there are no reasons for also suspecting other employees of the committed crime.

In the present case (judgment of the Regional Labour Court of Hamm dated 14 August 2017, docket number 17 Sa 1540/16) an employee of the Sparkasse ordered a sealed case from a money transport service that should have contained 115.000 Euros. She opened it alone disregarding the four-eyes principle, then called another colleague to show him the content of the case, who could only find detergents and baby food but not any money in the case. The employee who opened the case claimed that she only found those things in the sealed case when she opened it alone.

After several investigations by the company itself, as well as by the public prosecutor, the company declared the termination of the employment contract due to the suspicion of a criminal offence referring to circumstantial evidence such as conspicuous financial transactions of the employee who opened the case. Besides that there was no reason for ordering such a high amount of cash.

The employee sued the employer using the dismissal protection suit, which was then approved by the Labour Court of Herne (Arbeitsgericht Herne, ArbG Herne). The employer then filed an appeal.

The Regional Labour Court of Hamm (Landesarbeitsgericht Hamm, LAG Hamm) decided that the suspicion termination was not justified and consequently ineffective because the employee’s guilt can neither be proved nor assumed with a probability that is high enough to come to the conclusion that she was the only person who could be blamed for taking the money. Besides that the court also censured the company for not having a hearing with the accused employee during the company’s investigations, which has to take place as a requirement for the suspicion termination.

This judgment shows that the suspicion termination as a way of terminating an employment contract by the employer can only be used very rarely and under very strict conditions. The employee’s risk of being blamed for crimes they have not committed and the effect on their employment is unreasonable. Therefore the blurring of borders between criminal law and the principles of German labour law has to be avoided as strict as possible in order to protect the employees as individuals.

Demonstrating readiness to work every three minutes is unreasonable

On 10 August 2017 the Labour Court of Berlin stated that it is unreasonable to require a taxi driver to press a button at short intervals of time in order to control the employee’s readiness to work (judgement of the Berlin Labour Court dated 10 August 2017, docket number 41 Ca 12115/16).

The employee works as a taxi driver for a taxi company. During those periods of time when he was not driving the taxi but waiting for the next fare, he was instructed by his employer to press a button every three minutes after the occurrence of a certain sound to demonstrate his readiness to work. If he missed pressing the button during ten seconds after the sound occurred, the following three minutes were counted as an unpaid break instead of working hours.

The employee claimed remuneration in the amount of the statutory minimum wage for times waiting for the next fare. He found the time tracking system of the employer unreasonable and from time to time not even possible to keep to. The Labour Court of Berlin (Arbeitsgericht Berlin, ArbG Berlin) mainly agreed to his opinion and decided that the employer’s time tracking system infringes the German Federal Data Protection Act (BDSG). The BDSG only allows an appropriate recording of employee’s data. The employer’s interest in controlling the readiness to work of his employees is generally legitimate. However, according to the Court’s decision there are more moderate methods of monitoring readiness to work. In particular such a permanent temporal observation does not seems necessary. Therefore, times spent waiting for the next driving job has to be considered as working hours, which have to be remunerated.

No codetermination regarding a customer feedback function within a smartphone app

On 8 June 2017 the Labour Court of Heilbronn decided that a smartphone application, provided and operated by an employer, allowing customers to share their feedback including statements about the performance and the behaviour of certain employees is not a surveillance tool according to § 87 I Nr. 6 BetrVG, if the employer does not ask for this kind of feedback and does not process the information further (judgement of the Heilbronn Labour Court dated 8 June 2017, docket number 8 BV 6/16).

The employer, a company operating in the food retail business, runs an application that offers the possibility to give feedback to the individual branches of the employer. The app is available in common app stores and the feedback can be given as a free text that is delivered to an external service provider that views, collates and sorts the messages according to each branch and then sends it back to each store manager on a weekly basis.

The works council argues that this feedback operation infringes its right to co-determination according to § 87 I Nr. 6 BetrVG and requested the omission of using the feedback function or at least the omission of the collection, storage and use of the data that is included in the customers’ feedback messages.

The labour court did not rule in favour of the works council.

Although the app may be a technical device within in the meaning of § 87 I Nr. 6 BetrVG, it does not cause any employee supervision. The app cannot carry out the supervision on its own because it just passes on the messages it receives from the customers but does not collect any data independently. Furthermore the information about the individual employees is not processed automatically by the app itself but by an external service provider. A collection of data however requires a proactive approach that targets the collection of data. In this current case the employer does not ask the customer proactively to share their feedback. The app rather passively accepts the feedback messages. In consequence the app is not a surveillance tool according to § 87 I Nr. 6 BetrVG, hence the works council’s co-determination right according to § 87 I Nr. 6 BetrVG is not infringed.

Occupational Pensions: “Split pension formula” and pro-rata reduction of pension entitlements in accordance with European law

By judgment of 13.07.2017 (C 354/16) the European Court of Justice has ruled that a “split pension formula” and a pro-rata reduction of pension entitlements do not constitute discrimination against part-time employees or age discrimination.

The employer granted to his employees a pension promise, according to which salary components above the German Social Security Contribution Ceiling and salary components below are treated differently and those above have a larger impact on the calculation of the pension entitlements than those below (so called “split pension formula”). The chargeable period of service was limited to 35 years. In the case of part-time employees the calculation of the pension entitlements was based on an average degree of employment. In the event of early departure a pro-rata reduction according to Section 2 of German Occupational Pension Act was made. The plaintiff was a part-time employee and claimed for higher pension entitlements, arguing that the calculation (“split pension formula” and a pro-rata reduction) would constitute an inadmissible discrimination.

The European Court of Justice rejected the plaintiff’s arguments and remitted the lawsuit back to the initial German court, pointing out that the “split pension formula” does not give rise to a claim. Though women are at a disadvantage, as women are often part-time employees and the salary for part-time work rarely exceeds the German Social Security Contribution Ceiling, the calculation of the pension entitlements in such a way that prior to using the “split pension formula” the average degree of employment is determined – and not in reverse order which would lead to higher pension entitlements as claimed by the plaintiff – does not constitute inadmissible discrimination since salary components above the German Social Security Contribution Ceiling are not taken into account for state pension entitlements and therefore may be taken into account more strongly for company pension entitlements. Since there is no such supply gap and therefore no disadvantage for employees whose salary is below the German Social Security Contribution Ceiling – as is often the case with part-time employees – it is permissible to differentiate and to calculate in such a way. There is no discrimination against part-time employees. Furthermore, the Court stated that the pro-rata reduction according to Section 2 of German Occupational Pension Act does not constitute age discrimination. The calculation according to Section 2 of German Occupational Pension Act may lead to the result that younger employees receive a lower pension than those employees who have passed the same period of service at a higher age. However, the pro-rata reduction is to be considered appropriate since there is no better and equally effective calculation method.

The European Court of Justice has decided on two topics of high practical relevance. With regard to both the “split pension formula” and the pro-rata reduction according to Section 2 of German Occupational Pension Act the European Court of Justice followed the German Federal Labour Court’s view or the experts’ prevailing view.

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