Different principles for different payments

On 8 December 2015 the Federal Labour Court (Bundesarbeitsgericht, BAG, docket number: 1 AZR 595/14) ruled that it is permissible to limit severance payment entitlements in a social plan (Sozialplan) to employees who are facing unemployment as a result of the termination. In contrast to this, a bonus payment in exchange for a waiver to sue has to be granted regardless of future unemployment.

In the relevant case the employer closed a worksite and therefore terminated all employment relationships. The termination affected employees as well as public servants, who were put on unpaid leave for the time they worked in the private sector and whose original work relationship with their first employer would resume after the termination. With regard to the termination, different payments were granted. A social plan entitled the employees to a severance payment and an additional works agreement (Betriebsvereinbarung) granted a bonus provided the employee did not bring unfair dismissal proceedings. However, as the public servants were excluded from all payments the court had to decide whether this exclusion was in violation of the principle of equal treatment.

The BAG ruled that the parties were allowed to limit the severance payment to those employees who would face unemployment as a result of the termination. Therefore excluding public servants does not violate the principle of equality.

In contrast to this, a bonus rewarding employees who do not sue for dismissal protection must be granted irrespective of future unemployment. Its main purpose is to motivate the employee not to sue for dismissal protection. Therefore, excluding public servants from such benefits violates the principle of equal treatment. As a result, the court decided that the public servants are entitled to the bonus as well.