Occupational Pensions: Principle of equal treatment does not apply to pension commitments for managing directors

By judgment of 25 November 2020 (docket number: 7 U 1297/20) the Munich Higher Regional Court [Oberlandesgericht München] has ruled that a managing director of a limited liability company [GmbH] cannot invoke the principle of equal treatment under labour law [arbeitsrechtlicher Gleichbehandlungsgrundsatz] if other managing directors have received a better pension commitment. The principle of equal treatment is not applicable to managing directors.

The plaintiff was a managing director and as such had received a pension commitment. The future pension benefits were determined by an annual contribution to be paid by the company to an insurance company. Several other managing directors had received a significantly better pension commitment in the past, in which the amount of the future pension benefits was half of the last salary. The plaintiff claimed that he was also entitled to such a high benefit level and that the company would have been obliged to grant him such a pension commitment as the other managing directors had received earlier. This resulted from the principle of equal treatment, he argued. The employer rejected the claim, as this principle was not applicable to managing directors and a change of the system on a certain effective date would be a justifiable reason anyway.

The Munich Higher Regional Court agreed with the employer’s view and rejected the plaintiff’s claim. It referred to a ruling of the Federal Court of Justice [Bundesgerichtshof] in 1993 and stated that the principle of equal treatment was generally not applicable to representative bodies of corporation (such as managing directors). The reason for this was that their remuneration packages – and as such pension benefits – were negotiated individually with the employer. Moreover, there would be no unequal treatment even if the principle of equal treatment were applicable, the court argued. The principle of equal treatment only prohibits arbitrary unequal treatment; This means that unequal treatment is justified if there is an objective reason to do so; In principle, key date regulations are suitable to justify different treatment, provided that the choice of the point in time sufficiently takes into account the facts to be regulated and the interests of the persons concerned. In the court’s view, this was the case here. The employer was free to effect a change of his pensions system by using key date regulations.

The decision confirms the case law of the Federal Court of Justice and is to be welcomed. It makes it clear that a managing director cannot assert pension claims on the basis of the principle of equal treatment if his terms of employment have been individually negotiated.