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08.05.2019 | KPMG Law Insights

Company pension scheme – pension commitments and breach of trust

Current case law
Christine Hansen and Jean-Baptiste Abel

Pension commitment and breach of trust (BAG ruling dated April 26, 2018, 3 AZR 738/16)

The employee had been promised benefits under the occupational pension plan. After the entitlement had vested, he had caused his employer serious, albeit not existentially threatening, damage by committing a criminal act. The advisory board of the provident fund, which is made up of equal numbers of members, then revoked the pension commitment. Eight years later, when the employee’s marriage was dissolved, the family court did not take into account the pension entitlements.
About two years later, the plaintiff claimed – before retirement – that the revocation of his pension commitment was invalid. After the Labor Court had granted the claim, the Regional Labor Court dismissed the claim. The appeal before the BAG was successful.
The BAG took the view that the employer could not rely on the family court decision that there were no company pension entitlements. The family court had to examine only as a preliminary question whether a pension claim existed. If this claim is uncertain, the family court must suspend the proceedings until a decision has been made on the claim under employment law.
The employer could also not invoke the revocation of the pension commitment on the grounds of breach of trust. The binding subsumption of facts under individual factual characteristics exceeds the limits of a permissible arbitration agreement. Due to the remuneration character of the company pension scheme, a revocation of pension commitments is only possible if the employee has defrauded the vesting of his or her pension entitlement by covering up serious misconduct or has caused irreparable, irreparable damage to the company’s existence through gross misconduct. The interests of the employer are sufficiently protected by claims for damages and the possibility of offsetting against the pension claims.

Conclusion: The BAG consistently continues its case law on the revocation of pension commitments and emphasizes the remuneration character of the company pension plan. The relationship between the family court judgment and the labor court judgment, on the other hand, remains an “open building block.” It will be interesting to see how the Federal Court of Justice and the Federal Labor Court (Bundesarbeitsgericht – BAG) combine the decision on pension equalization and any subsequent decision on the underlying occupational pension scheme with regard to the liability.

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christinehansen@kpmg-law.com

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