No need to retire – Federal Labour Court facilitates continued employment of pensioners
BAG, judgment of 19 December 2018 in Case No. 7 AZR 70/17
In the case of the agreed termination of an employment relationship upon attaining standard retirement age, contracting parties may postpone the date of termination by reaching an agreement (§ 41 third sentence of the Sixth Volume of the Social Code (Sechstes Buch im Sozialgesetzbuch – SGB VI)) during the period of employment. This provision is not in breach of EU law.
The employee, born in 1949, was employed at a school with weekly working time of 23 hours. The framework collective agreement for Federal States (TV-L) was applicable for his employment contract and foresaw, under Article 44 No. 4, that the employment relationship would automatically end on 31 January 2015 (this was when the statutory retirement age was reached). Just a few days before this date, the employer and the employee concluded an agreement pursuant to which the employment relationship was to end not on 31 January 2015 but on 31 July 2015. In February and March 2015, the employee's weekly working hours were even increased to 25.5 hours per week. Afterwards, the employee brought legal action, claiming that the employment relationship had not ended on 31 July 2015 due to the agreed limitation, but continued to exist for an unlimited period of time.
The teacher was unsuccessful at all instances. The Federal Labour Court considered the time limitation of the employment contract to be valid. The essential provision in Article 41 third sentence SGB VI fulfils the constitutional guidelines and is compatible with EU law according to a decision of the Court of Justice of the European Union dated 28 February 2018 (Judgment of 28 February 2018 in Case C-46/17 – Hubertus John v Freie Hansestadt Bremen). The contracting parties validly postponed the termination date to 31 July 2015. In view of the Federal Labour Court, the subsequent limitation until 31 July 2015 is justified in accordance with Article 41 third sentence SGB VI. In the underlying case, it was irrelevant whether a "postponement agreement" also supposes that only the termination date is changed, while maintaining all other contractual terms. The agreement of 20 January 2015 postponed merely the termination date. Working hours were increased by means of a separate Agreement.
Consequences for practice
The decision makes life easier for employers and employees. Article 41 third sentence SGB VI has been subject to several judicial decisions. In 2016, the State Labour Court Bremen had already raised concerns regarding the compatibility of the norm with European legislation, which however were not shared by the ECJ in the end. The Federal Labour Court now had the chance to take a decision with regard to the validity of this provision and rightly determined its compatibility. Despite the theoretical risk of abuse through the termination date being postponed too frequently, the provision does not constitute discrimination due to age. Possible cases of abuse will have to be subject to judicial review by labour courts.
In times of skills shortages, this judgment provides employers with pleasant flexibility and planning security when it comes to the continued employment of pensioners after they have reached the statutory retirement age. In this way, a better transfer of knowledge to the next generation can be ensured. Also, sprightly pensioners can stay longer with the company. It is, however, imperative that the agreement is concluded before the statutory retirement has been reached, and that an applicable collective agreement or the employment contract foresees the termination of the employment relationship upon attaining statutory retirement age. Moreover, it is recommended that the agreement actually only postpones the termination date. Contractual amendments with regard to remuneration and/or working hours should be concluded in a separate agreement and separated in time. As always, errors will result in an unlimited employment relationship, so be careful when drafting such agreements.
If you have any questions related to this topic, please feel free to contact Martin Biebl (Lawyer, Licensed Specialist for Labour Law).