Benefits

Occupational pensions: Deviation from employer’s (contractual) obligation to adjust pension benefits requires detailed statement of reasons

By judgment of 21.06.2019 (docket number: 7 Sa 92/18) the State Labour Court Hamburg has ruled that a deviation from the employer’s obligation to adjust pension benefits in accordance with an increase in state pension benefits – as provided for in the employer’s pension plan in the event that the employer considers an adjustment “not justifiable” – requires a detailed statement of reasons. The employer must describe all relevant factors for his decision, the company’s economic status quo and the assumed negative development which would arise from the pension adjustment. The parties were in dispute over the adjustment of the …

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Entitlements on company pension are subject to particular protection in the event of a transfer of business according to Section 613 a German Civil Code

By judgment of 22 October 2019 (docket number: 3 AZR 429/18) the Federal Labour Court has extended its settled case law regarding the replacement of pension plans in the event of mergers and acquisitions. A replacement of a pension plan by a pension plan existing at the acquirer a must be in accordance with the principle of protection of legitimate expectation and the principle of proportionality. For occupational pensions, the Federal Labour Court has developed a special three-stage examination that reflects these principles. In the present case, the Federal Labour Court stated that these principles and requirements also apply in …

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Occupational Pensions: Federal Labour Court confirmed its ruling with respect to so-called “age difference clauses” in pension arrangements

By judgment of 11 December 2018 (docket number: 3 400/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that a survivor’s benefit is reduced if the age difference between the spouses is more than 10 years is admissible and is not to be considered as unjustified discrimination on grounds of age. The plaintiff was born in 1945. Her husband was born in 1930 and died in 2014. The spouses married in 1966. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The corresponding pension plan contained a clause according to …

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No co-determination rights of the works council for stock options issued by a foreign parent company

In a judgment dated 3 August 2017, the Higher Regional Labour Court of Hessen has held that a works council’s co-determination rights do not extend to stock option plans by an employer’s foreign parent company (docket number 5 TaBV 23/17).   Under German law, works councils have a co-determination right regarding remuneration principles. In this case, the foreign parent company decided annually and independently from the local employing entity whether stock options were to be granted, which employees would receive these stock options and, if so, how many. Local employment documents of the German employees did not include any reference …

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Transitional payment prior to retirement to be considered as an occupational pension

By judgment of 20.03.2018 (3 AZR 277/16) the Federal Labour Court has ruled that a transitional payment (taking into account pension payments) that is granted to a former employee during the first six months after their retirement is to be deemed to be an occupational pension and is, therefore, covered by the German Pension Insurance Association (Pensionssicherungsverein). The former employee (plaintiff) was granted a transitional payment on the basis of a works agreement by his former employer, which was insolvent at the time when the payment was due. According to that agreement, the transitional payment was intended to be granted …

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Occupational Pensions: Submission by Federal Labour Court to the European Court of Justice regarding compensation for benefit reductions by the Pension Insurance Association

By order of 20 February 2018 (3 AZR 142/16 (A)), the Federal Labour Court asked the European Court of Justice for a preliminary ruling on the interpretation and direct application of Article 8 of Directive 2008/94/EC. According to that provision, Member States are required to ensure that the necessary measures are made to safeguard the interests of employees regarding pension entitlements in case of insolvency of the employer. The plaintiff receives benefits from a company pension insurance fund (Pensionskasse) which were reduced by the company pension insurance fund due to economic difficulties. In the past, the plaintiff’s former employer compensated for …

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Occupational Pensions: Legitimacy of so-called “age difference clauses” in pension arrangements

By judgment of 20.02.2018 (3 AZR 43/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that spouses receive a survivor’s benefit only if they are no more than 15 years younger than the deceased former employee is admissible.   The plaintiff was born in 1968. She married her husband, who was born in 1950 and died in 2011, in 1995. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The pension scheme provided that spouses receive a survivor’s benefit only if they are no more than 15 years younger than …

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Compensation (severance pay) of director’s pension benefits

By judgment of 23.05.2017 (II ZR 6/16) the Federal Supreme Court (Bundesgerichtshof) has ruled that the prohibition against compensating for pension benefits according to Section 3 German Occupational Pension Act (Betriebsrentengesetz) may be derogated from by mutual consent and, as a result, ongoing pension benefits of a director can be paid out (severance pay). In the present case, the admissibility of the compensation for an ongoing pension, which in principle according to Section 3 German Occupational Pension Act is inadmissible, was in dispute. However, the applicability of this provision (Section 3 German Occupational Pension Act) was excluded in the pension …

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Occupational Pensions: Free bus ticket for wife to be considered as pension

By judgment of 23.06.2017 (6 Sa 173/17) the Regional Labour Court of Düsseldorf has ruled that with regard to the period from which the employee receives a pension, a free bus ticket provided by the employer to the employee’s wife is to be considered to be an occupational pension and therefore cannot be revoked. The employer, a transport company, granted his employees and their husbands/wives a free bus ticket both for the period of employment and the period of retirement. The basis for these benefits was (inter alia) a works agreement of 1991. In 2016, the employer concluded a new …

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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 …

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Ins and Outs of Bonus and Commission Payments – Part I

Employers may grant their employees bonuses in addition to fixed basic salary for a variety of reasons, for example, to reward performance, loyalty to the company or just as a Christmas gratuity. In this context different questions arise. This two-part post addresses the most common questions regarding bonus and commission payments.    What are the different types of bonuses payments? The term “bonus” is not limited to a special kind of a bonus payment. In fact, there are numerous different kinds of bonus payments. These can be categorized in line with the reasons they are paid, as follows: Performance based …

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The Ins and Outs of German Vacation Time and Vacation Pay

As we approach summer many employers start to intensify their staff’s vacation planning.  Vacation regulations in Germany are not as straightforward as many employers might think. Today’s blog therefore aims to provide a basic overview on German vacation rules for employers. How much vacation pay and time are employees entitled to? Starting off with the basics, German employment legislation already entitles an employee to a minimum vacation time after only one full month of employment. Surprisingly, the full annual vacation entitlement is gained after six consecutive months of employment. The statutory minimum amount of time off an employer must grant …

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