Germany: When is a New Hire too old to join a Company Pension Scheme?

In Germany, all employees are mandatorily covered by the statutory pension insurance which provides the main source of income during retirement. In addition, many companies grant company pension benefits to their employees, subject to the terms and conditions of the company pension scheme established for this purpose. The amount of the company pension payable after retirement increases with the length of service.

The provisions of several company pension schemes require that an employee, when entering into employment, must be younger than a defined age in order to become eligible for joining the company pension scheme (typically 45, 50 or 55 years); otherwise, membership is excluded. The ratio of such age limit is consistent with the practice that company pensions reward longstanding service and loyalty to the company which generally cannot be achieved by employees joining the employer at an older age.

Sec 10 No. 4 of the German Act on Equal Treatment (AÜG) expressly allows age limits in company pension schemes. However, the Federal Labor Court—the highest labor court in Germany—recently held that Sec 10 No. 4 of the AÜG does not allow any kind of age limit—and deemed the age limit of 45 as discriminatory and unlawful—whilst an age limit of 50 is acceptable.

On 18 March 2014, the Federal Labor Court (3 AZR 69/12) had to decide whether the provision of a bank’s company pension scheme, according to which a new hire must be younger than 45 years in order to become beneficiary to a company pension scheme was lawful. The claimant was older than 45 when she joined the bank; on retirement, the bank refused to pay a company pension by referring to the age limit in its pension scheme.

The Federal Labor Court judged that the age limit of 45 was age discriminatory and ordered the bank to pay out a company pension to the ex-employee. The court argued that, although the law accepts age limits in general, any age limit must be reasonable and justified in order to be valid. The court stated that a new joiner aged 45 could potentially work for 20 years for the employing bank until he/she reaches the normal retirement age in Germany. The court considered this as a considerable length of time and saw no justified reason to exclude this group of employees from company pension benefits.

It is now clear that company pension schemes cannot provide for an age limit of 45. The question, however, is which age limit is acceptable for the labor courts. Employers get some comfort from a second decision of the Federal Labor Court: On 12 November 2013, where the court held that an age limit of 50 years is acceptable (3 AZR 356/12). New joiners aged 50 or above could only work for about 15 years for the company until they retire—this potential period was not considered long enough to reward loyalty with a pension.

In conclusion, employers having a company pension scheme with an age limit of 45 (or below) should amend the terms and conditions of their pension schemes. Employers with pension schemes having an age limit of 50 (or above) are, however, on the safe side.

Trials and Tribulations in UK Employment Tribunals

In July last year, fees were introduced for employees to bring claims and the Ministry of Justice has just published Tribunal statistics for October to December 2013 (the first full quarter since the introduction of the fees) which show that in that time, employment tribunals received 79% fewer claims than the same quarter in 2012 and 75% fewer than in the previous quarter. Read More

Germany: A “Permanent Temp Worker” is not the Lessee’s Employee

In Germany, many companies have resorted to utilizing temp workers through a third-party agency instead of hiring their own personnel. Temp workers typically are leased from an agency that employs the temps and assigns them to the company (lessee). This staffing model has increasingly received political criticism and judicial attention. Read More

Germany: Bonus Cap for Bank Staff Introduced

In Germany, remuneration of managers in general has increasingly come into public and political focus.

Over the last years, the German legislator enacted several law reforms concerning managers’ pay. Very recently, the German Banking Act (Kreditwesengesetz “KWG”) was amended effective January 2014, to provide for further restrictions on bonus payments for managers and employees in the banking industry. A reform of the German Stock Corporation Act (Aktiengesetz “AktG”) however, shifting the authority of determining the remuneration of board members to the shareholders’ meeting was stopped, but presumably only for the time being. Read More

Orrick’s Global Employment Law & Litigation Newsletter – Fall 2013

Welcome to the Fall 2013 edition of Orrick World: A Quarterly Report of Global Employment Law Issues for Multinationals. We have designed this newsletter to provide our multinational clients with quarterly updates on important employment law issues across the globe. Read More.

Is it now OK to have the ‘It’s not working…’ conversation in the UK?

July 29, 2013 was a big day for employment law in the UK.

Firstly compromise agreements were renamed ‘settlement agreements’. This is largely a rebranding exercise but one that is welcome as we now have a title which more accurately describes what the agreement is designed to achieve.

On this same date, changes around ‘pre-termination discussions’ came into effect. These changes are contained in the Enterprise and Regulatory Reform Act and talk about ‘confidentiality of negotiations before termination of employment’. The theory behind this new law is that employers should be able to discuss with their employees the option of the employee leaving with a settlement agreement without the risk that that discussion itself will be used against them in a future claim. Read More

Today is the Day – UK Employment Law Update

TODAY is a big day for employment law. Even though many of you will be thinking about your holidays, or may have even jetted off to sunny shores, take care to remember that certain changes are taking place which will affect your standard document and how you handle any exiting employees. Read more.

Job Interviews in Germany: No Right to ask Applicants about Preliminary Investigations by Public Prosecution Office

The German Federal Labor Court (Bundesarbeitsgericht) recently passed a decision (BAG, November 11, 2012 – 6 AZR 339/11) that dealt with an “evergreen” of German labor law: What questions employers may ask in interviews with job applicants and what questions are not allowed to be asked. Read More

Five Grievances Don’t Make A (Dismissal) Right

A recent case in the UK Employment Appeals Tribunal Woodhouse v. West North West Homes Leeds Limited UK EAT/0007(12) has looked at whether it is possible to fairly dismiss an employee who has raised repeated grievances, on the basis that the relationship with the employer has irretrievably broken down. Read More

Orrick’s Global Employment Law & Litigation Newsletter | Spring 2013

Welcome to the Spring 2013 edition of Orrick World: A Quarterly Report of Global Employment Law Issues for Multinationals. We have designed this newsletter to provide our multinational clients with quarterly updates on important employment law issues across the globe.