– What information, education and advisory duties are imposed on employers? –
The Regional Labour Court (Landesarbeitsgericht – LAG Hamm, judgement of 06.12.2017, file no. 4 Sa 852/17) decided that the employer (AG) is liable for damages if the advice on deferred compensation in company pension schemes (bAV) was incorrect. This was the case even if the advice was given by a credit institution. This applies analogously to insurance intermediaries of all kinds, as these also operate within the employer’s sphere of duties, i.e. his vicarious agents.
The employee did not notice until after the occupational pension scheme had been paid out that contributions to statutory health insurance still had to be paid.
Drumbeat at a bAV symposium of the Handelsblatt
The then Chairman of the Pension Senate at the Federal Labor Court (BAG) had already caused a stir in 2005 with a specialist lecture and a technical paper on the subject of “Information, clarification and consultation obligations in company pension law”. The LAG Hamm, but not yet every labour court, now follows this line of employer liability.
The LAG Munich (judgement of 15.03.2007, Az. 4 Sa 1152/06) condemned an employer to the payment of arrears of salary because the conversion of remuneration with zillmerized tariffs (thus such, which raise the acquisition costs in the first up to less than 10 years distributed) does not lead to the legally demanded equal value with the converted remuneration.
Potentially up to more than 20 million occupational pension contracts affected
It goes without saying that not only the SHI contribution obligation (as well as the contributions to nursing care insurance) must be informed, but also that the employee (AN) pays these contributions as a pensioner all by himself, i.e. not only “half” the contribution as regulated until 2003. Specialist lawyers and interest groups have taken legal action en masse against the “full SHI contribution on company pensions since 2004”, among other things – right up to the Constitutional Court: Always unsuccessful because the wrong person was sued!
Employer liability seems more promising. The economic result is even more glaring if, because the income limit for the assessment of contributions has been reached, (almost) no contribution to the SHI system would have been incurred anyway, if the conversion of remuneration had been waived altogether if the information had been correct.
How the “support” of the occupational pension scheme will be the downfall of agents and brokers?
It is ensured that no employer must inform his (new) employees about the occupational pension scheme without being asked, § 1a BetrAVG. Only when the employee has decided in favour of deferred compensation in particular, do limited obligations to provide information and advice begin. Any employer who leaves this to an insurance broker or bank advisor is better advised to have the content of the advice checked and to include it in the personnel file.
The support provided by agents and consultants, but also queries from employees to such consultants, mean that liability continues to exist, i.e. the expiry of the limitation period is prevented: for it is certainly possible to obtain the correct advice even in the case of previously concluded contracts, so that the occupational pension contracts could still be made non-contributory if necessary.
The liability of agents and consultants shall become time-barred 10 years after the respective breach of duty
The Federal Court of Justice assumes that each breach of the duty to provide advice must be considered separately, even with regard to the limitation period. In case of omission, the last possible moment of correct information or advice counts. In this case, an intermediary would also be liable to the AG for incorrect advice, either during the initial consultation or later if care was promised – for example, in the case of a planned change in the law (in the case of the LAG Hamm: full statutory health insurance contribution obligation since 01.01.2004).
Indes: He could have advised the AG correctly, but then only misinformed in the discussions with the employees (AN), or later within the scope of the support, without any discussions with the employees. Under certain circumstances, the agent or consultant may even have given the Principal documentation that was correct, but not documented anything to the Contractor, since the latter is not becoming an insured party (UN). This would not be unlawful, so the question is what the burden of proof would be. If applicable, he is only an assistant to the Contractor in the fulfilment of contractual obligations. How to protect oneself as a public limited company, the employer might only find out after a lost trial before the labour court?
Further duties of the employer to inform, educate and advise
The agent’s liability expires 10 years after the wrong advice (correspondingly in the case of care). This period will often have expired by the time the company pensioner receives his occupational pension scheme payment. An action for a declaratory judgment by the employer may therefore be necessary.
Not to be forgotten are the reductions in entitlements to statutory pensions, as well as sickness and unemployment benefits, probably also accident pensions – through deferred compensation. When it comes to profitability, the question of whether statutory pensions are not more profitable also arises time and again?
Defence options for employers, consultants and intermediaries ?
Agents as well as the Client could defend themselves against the Contractor by proving that no damage at all has occurred and that there is therefore no interest in a determination.
It is a fact that more than 10 years after the change in the law and widespread information in the media about it, most AN still do not know anything about it. They could, if informed subsequently, make the contracts premium-free and should be made aware of this. If they then continue to pay, the AG is no longer liable. Moreover, this could serve as evidence that the employees would also have converted their remuneration or continued to pay if they had been informed correctly at an earlier stage, so that any damage is not causally attributable to the misguided advice. The motto was: he also wanted to burn money to spread the risk.
This would then be an approach to strategically reduce its own liability.
As a precautionary measure, employees can bring an action for a declaratory judgment against (often former) employers, and employers against intermediaries, consultants, banks and insurers (BoD).
First step: Ask intermediaries, advisors, banks and insurers to acknowledge
Before doing so, however, employers should ask their occupational pension bank or their occupational pension supervisory board or intermediary to recognise their own liability in the event of actions brought by employees, perhaps on condition that they cooperate in defending them. Thus, with potential liability for a total of several billion euros, the BoD throughout the industry had also committed itself to the AG because of the liability of the AG in the event of a lack of equal value as a result of zillmerization, because AGs are then liable for the replenishment to a value equal to the amount of the benefit claims for the converted remuneration.
Need for action by all sides within a set time frame
A manifold countervailing urgent “deadline” need for action is obvious, for CO against CL, intermediary against CL and CL against all, and if possible before the other and before “deadline expiry”. One should not count on the original consultants, because they often expect their liability to expire by the statute of limitations, by simply not doing anything, until one day, when the pension begins or the direct insurance becomes due, the contractor contacts the client because of low benefits.
Revocation of occupational pension contracts
If employers or employees compare which funds have been paid in and what is currently left of them after deduction of acquisition costs and ongoing administrative costs (e.g. as surrender value or maturity benefit), then you will often find major deviations from the “sample calculations for illustration” presented at the time of brokerage – i.e. regular losses of assets. Tax deductions and health/nursing care insurance contributions are still deducted from this, which can further reduce the unexpectedly low result by half.
However, many occupational pension contracts in life insurance can often be revoked and unwound due to incorrect revocation instructions, a process that can take an eternity. Many employees are themselves entitled to withdraw if they have become policyholders themselves.
Also for employers – from sole proprietorships to GmbH&Co.KG – it is possible to revoke insurance contracts from 1995 onwards – with the prospect of receiving up to more than double the surrender value according to an expert actuarial assessment. An option for an economic exit as employer from the occupational pension liability.
Thus, a defeat turns into the chance of an even higher profit for employers, which also eliminates a greater risk for the employee in time.
This is because if the employer becomes insolvent, the insolvency administrator will, if possible, revoke direct insurance policies and deferred compensation vis-à-vis the BoD, which destroys the life insurance contract and transfers its value to the insolvency estate. As a result, all benefits and pledges to employees are lost – employees lose their company pension scheme completely – because they have no claims to the Pension Protection Association – or they can file possible claims from the occupational pension commitment to the insolvency rate, usually with single-digit percentages.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.submission.de (published in issue 241 of 12.12.2018)
further published on
www.pt-magazin.de (published on 06.12.2018)
www.experten.de (published on 08.01.2019)
www.carekonrekt.net (published in issue 3/2019, page 4 under the heading: Properly educate about prevention)
www.daskrankenhause.de (published in issue 02/2019, pages 135-136 under the heading: Company pension scheme: Employers are liable to employees)
cash-Online (published in issue 02/2019, pages 94-95 under the heading: Better advised)
https://www.datev-magazin.de (published in issue 04/2019, pages 15 and 16)
www.altenheim.net (published in issue 04/2019, page 10)
www.fleischerwirtschaft.de (Published in “Allgemeine Fleischer Zeitung”, No. 21 of 22.05.2019, page 19, under the heading Pitfalls of the company pension scheme)
submissions Scoreboard, No. 95 of 17.05.2019
www.hussmedien.de (published in AuA, issue 07/2019, pages 432 and 433)
UnternehmerBrief Bauwirtschaft, issue 08/2019, page 21-22
www.elektropaktiker.de (Published in ElektroPraktiker, issue 12/2019,
Page 1000-1001 under the heading: Liability risks in company pension schemes)
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About the author
PhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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