The Federal Labour Court (Bundesarbeitsgericht – BAG) has ruled on 13 July 2021 (docket number 3 AZR 298/20) that the employer’s statutory subsidiary liability, according to which the employer is in principle liable for an external pension provider if it does not pay (so-called “Subsidiärhaftung”), does not generally lead to a joint and several liability (“Gesamtschuld” according Section 421 German Civil Code) with the external provider.
Facts / Background:
The parties were in dispute about the payment of an invalidity pension. The employer (defendant) had granted the employee (plaintiff) a pension commitment which was implemented via a pension fund (Pensionskasse) as external pension provider/carrier. The employee became incapacitated and claimed the benefits. However, the underlying insurance documents (pension plan) provided that termination of the employment relationship was a prerequisite for receiving the benefits. Therefore, benefits were denied for the period during which employment was still in place. The plaintiff took action against this and sued, among others, the employer and the pension fund as joint and several debtors. He argued that the relevant clause in the pension plan was an unreasonable disadvantage and violated the law on general terms and conditions (“AGB-Recht”).
The Federal Labour Court found the claim to be unfounded. It had to clarify two questions; namely, whether there was an unreasonable disadvantage leading to the invalidity of the relevant provisions, and, in addition, whether the employer would have to be liable as a joint and several debtor at all.
On the question of unreasonable disadvantage, the court found that a disadvantage was in principle triggered by the clause; This resulted from a weighing of the interests of the plaintiff and the interests of the defendant. However, such disadvantage could be resolved by interpreting the provisions accordingly and therefore did not lead to the overall invalidity of the provisions. In the present concrete case, an interpretation of the provisions showed that no unreasonable disadvantage to the plaintiff could be assumed.
The question of whether the employer was to be considered a joint and several debtor was also explicitly denied by the court. This does neither result from contractual agreements nor from Section 1 (1) sentence 3 German Occupational Pensions Act (Betriebsrentengesetz). Section 1 (1) sentence 3, which provides for the employer’s subsidiary liability, does not establish joint and several liability. The employer’s subsidiary liability – i.e. the employer’s obligation to pay instead of the external pension provider – concerns cases where the pension provider does not fulfil the employer’s obligations towards the beneficiary. It is therefore only a subordinate/subsidiary obligation of the employer. A joint and several debt, however, would require a parity of the obligations considered for the creation of a joint and several debt. However, such a parity does not exist.
The decision is to be welcomed. It confirms the general understanding of Section 1 (1) sentence 3 German Occupational Pensions Act (Betriebsrentengesetz) and clarifies once again that the employer’s subsidiary liability is not a matter of equal liability, but that the employer would only have to step in in exceptional cases, namely when the external provider is unable to meet its obligations. These cases occur extremely rarely in practice, but they do exist. Therefore, in the case of certain types of commitments – such as pension fund commitments (Pensionskasse) – it must always be checked very carefully whether the external provider is actually able to perform on a permanent basis. This is particularly important in the case of business transfers when such commitments are taken over, as risks often only become apparent many years later.