Discriminatory severance payments

The Federal Labour Court (Bundesarbeitsgericht, BAG) ruled on 17 November 2015 (docket number: 1 AZR 938/13) that regulations in social plans may be invalid if they provide for a (adverse) lump sum calculation of the severance payment only for severely disabled employees, whilst severance payments for other employees are calculated on an individual basis (and are therefore higher).

In the case at hand the social plan agreed with the works council granted a severance payment for employees in the event of a redundancy, calculated on the basis of a formula which applied to all employees. Employees who were entitled to an early retirement pension (after max. 12 months of receiving unemployment benefits) could receive a severance payment of up to EUR 40,000. However, severely disabled employees (entitled to a pension due to their disability) were excluded. The social plan only provided for a lump sum of EUR 10,000 (severance payment) and an additional amount of EUR 1,000 (for disability).

The plaintiff, a severely disabled employee, received a severance payment in the amount of EUR 10,000,-. However, an employee with comparable social status apart from the disability would be entitled to a capped severance payment of EUR 40.000,-.

The Federal Labour Court confirmed the ruling of the Higher Labour Court Cologne (Landesarbeitsgericht, LAG), arguing that such a clause is discrimination against disabled persons and is therefore null and void according to sec. 7 para. 2 General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) since the severely disabled employee would otherwise (according to the regulations, which apply to the other employees) be entitled to a higher severance payment.