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14.10.2021 | KPMG Law Insights

Company pension scheme – Discrimination against part-time employees in the calculation of the pension amount?

Discrimination against part-time employees in the calculation of pension amounts?

Making the working time to be performed more flexible while ensuring that it can be called off is primarily in the economic interest of the employer and is therefore only permissible to a limited extent according to the principles established by the Federal Labor Court (BAG) and now codified in the Part-Time and Fixed-Term Employment Act (TzBfG). In occupational pension schemes, there may be a violation of the general principle of equality that cannot be justified by objective reasons if pension entitlements are calculated unequally for groups of employees with different working time models because only certain salaries used for the calculation are classified as pensionable. The BAG recently ruled in its judgment of February 23, 2021 (3 AZR 618/19) when even the autonomy of collective bargaining cannot effectively structure pension systems in this way and what criteria are relevant for the legal assessment. We summarize for you.

 

  1. Initial situation of the decision

In the decision in question, the BAG had to rule on the complaint of an employee regarding the calculation of his company pension. The core issue was whether the relevant regulation for determining pensionable remuneration contained an impermissible unequal treatment of part-time employees compared to full-time employees.

The employment contract provided for flexible working hours. The basic monthly working time was only 40 hours. This basic working time could be increased by mutual agreement between employer and employee (“work on call”). Over a period of approximately 12 years, the plaintiff worked an average of more than 130 hours per month. The working hours were thus still slightly below those of a full-time employee, but several times higher than the agreed basic working hours.

The collective agreement applicable by reference to the employment relationship stipulated that the employee’s occupational pension was calculated only according to the amount of the salary paid for the basic working hours (= 40 hours/month). The employee’s occupational pension entitlements calculated by the defendant employer were thus significantly lower than what would have resulted if full-time work had been agreed or, in any case, a basic working time of at least €1,000. 130 hours/month would have resulted. The employee objected to this and requested a ruling that the employer must calculate his pensionable income on the basis of the actual hours worked up to the respective monthly hourly volume of a full-time employee.

The proceedings were preceded by a legal dispute about the scope of the plaintiff’s standard working hours agreed in his employment contract, which ended in 2017 before another chamber of the BAG (10 AZR 620/16) by way of settlement.

 

  1. Result and reasoning of the decision by the BAG

The BAG ruled in favor of the employee and found that the collective agreement provision for calculating the occupational pension solely on the basis of the basic working hours was contrary to equality and therefore null and void (Section 134 BGB): The calculation of the pension was to be based on the actual working hours.

The parties to the collective bargaining agreement have broad discretionary and creative leeway due to the autonomy of collective bargaining protected by Art. 9 of the German Basic Law (GG). A violation of the principle of equality of Art. 3 para. The BAG considers the violation of Sec. 1 GG to be justified only if the parties to the collective bargaining agreement have failed to take into account actual similarities or differences in the living conditions to be regulated which are so significant that they should have been taken into account for reasons of justice.

In terms of the structure of the occupational pension scheme, this means: The parties to the collective agreement are in principle free to determine the amount of the pension and the relevant remuneration components. However, the BAG considers a limit to have been exceeded if employees regularly and consistently perform additional work up to full-time work in addition to their basic working hours, which does not have any effect on pensions, while other employees with a higher basic working time acquire further pension entitlements from this.

The BAG considers on-call employees and employees with fixed working hours to be comparable in this respect and denies an objective reason for unequal treatment with regard to the occupational pension scheme, which is of a pension and remuneration nature. Insofar as employees perform regularly and consistently remunerated work, this is an activity that justifies being taken into account in the calculation of pension entitlements in accordance with the remuneration purpose of the occupational pension scheme. Remuneration components that are fixed due to practical handling and thus typically shape the standard of living should not be disregarded to the detriment of the occupational pension.

In its reasoning, the BAG initially argues closely to the increase in working time on call underlying the case, but at the end of the decision it concedes that cases of regular overtime work can also lead to an increase in the working time owed and can therefore also be taken into account within the framework of the defined benefit level for the calculation of a pension scheme linked to the contractual working time.

In passing, the BAG comments on the previous court settlement between the parties and also makes an important and practice-relevant statement here with regard to the occupational pension scheme: When interpreting a court settlement, high demands must be placed on the will to waive pension claims. Such a settlement would regularly only settle the dispute about the specific subject matter of the proceedings.

 

  1. Implications for employers

The decision is a wake-up call for employers whose pension system links the calculation of pension entitlements to certain wages in connection with the contractually agreed working hours. If flexible working time models with a variable scope of working time are (supposed to be) applied in such constellations, or if overtime actually accrues on a regular basis for part-time or on-call employees, the non-inclusion of these working times in the occupational pension scheme can lead to considerable expenses that have not been taken into account.

How should differentiation be made in practice according to the type of overtime? The BAG points out one possibility: The employer can use the calculation logic of Section 4 of the Continued Remuneration Act as a basis for determining the pensionable salary. The regulation provides for a distinction between additional overtime (which cannot be taken into account) and regular working hours (which may deviate from the contractual arrangement).

In cases of “unplanned (extra) work” on a significant scale, employers may be confronted years later with a burden of explanation and proof that they cannot meet with their own information on the background and scope of (extra) work performed. According to the graduated burden of presentation and proof applicable in labor law, employees only have to prove the total number of hours worked. On the other hand, it is incumbent on the employer to refute the working hours presented in this respect.

With regard to the occupational pension scheme, it is therefore necessary to prove that the working time in excess of the contractual arrangement results (in part, if applicable) from unforeseen, precisely non-regular workload. In this case, non-fixed working hours should be disregarded. With appropriate documentation, the risk of “escalating” pension claims can be avoided.

 

  1. Conclusion

The decision shows once again how fundamentally important the occupational pension scheme is for both parties to the employment contract: In particular, for employee groups earning low wages due to certain working time models, the question of equal treatment in terms of remuneration may arise (once again) at retirement age. For companies, the sustainable management of the longest-lived pension obligations is always worth a “Remember bAV!”.

Employers with flexible work schedules and regular overtime should analyze their benefit systems early to avoid unexpected stresses. Current concepts for making work more flexible, such as “New Work” and “Work 4.0”, should also be considered in relation to occupational pension schemes. Good conceptual design and ongoing review of supply systems for regulatory as well as economic adjustment requirements, needs-based design options and documentation can help reduce risks.

What issues are you currently dealing with in your company? We support you with our expertise in a vendor-neutral and sustainable manner. Please feel free to contact us.

 

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Dr. Julian Cahn

Manager

THE SQUAIRE Am Flughafen
60549 Frankfurt am Main

tel: +49 69 951195015
jcahn@kpmg-law.com

Christine Hansen

Senior Manager
Head of company pension scheme

Heidestraße 58
10557 Berlin

tel: +49 30 530199150
christinehansen@kpmg-law.com

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