The Federal Labour Court (Bundesarbeitsgericht, BAG, judgment of 30 September 2014, Case No. 3 AZR 930/12) ruled that the general terms and conditions contained in a pension commitment, according to which the granting of a widow’s pension requires that the beneficiary “has predominantly provided for the maintenance of the family”, were in breach of the transparency requirement pursuant to Section 307 (1) of the German Civil Code (Bürgerliches Gesetzbuch). 1 sentence 1 in conjunction with. Sentence 2 BGB is invalid.
Pensionssicherungsverein decides illegally: Widow goes empty-handed!
Before the Federal Labor Court, the Labor Court and the Regional Labor Court had dismissed the action for widow’s benefits against the Pension Security Association (PSV aG). The decisive factor for the BAG was that the clause in the text of the company pension commitment was non-transparent and thus invalid.
A so-called “main breadwinner clause” is not generally invalid, but only if it is non-transparent. Specifically, the promise of a widow’s pension read: “After your death, we will grant your wife a widow’s pension in the amount of 60% of the old-age pension promised in para. 3 or of the occupational or disability pension drawn in accordance with para. 4, if you have predominantly provided for the maintenance of your family”. Only a layman would judge this content to be understandable.
In the case in dispute, the husband had higher income from employment in some years and lower income in others – but the wife always had higher income with income from capital assets. The PSV did not even consider who had actually contributed to the family’s upkeep and with what income. According to the wording, the regulation of the entitlement to a widow’s pension is linked to whether the husband had predominantly provided for the maintenance of his family. It remains unclear, however, exactly what conditions must be met for the beneficiary to be considered the “main breadwinner”.
Unclear clause content, without clear rules on interpretation and application, becomes a trap
It was unclear, for example, the time period, as well as which income would be used for family maintenance or other purposes. It is also questionable when the use is one for the support of the family? For example, if the spouses book a package holiday together, but not if the wife treats herself to a cruise from her investment income? Or if someone pursues an expensive hobby? Or treats himself to an unnecessary convertible, but the other person gladly accepts an invitation to go for a drive on Sunday. Or expense for an expensive watch, either for yourself, or as a gift to the other person? Are alimony and living expenses the same thing? And do the contributions for a private pension insurance constitute maintenance?
Reference to terms of social security law reinforce the lack of transparency
The term “main breadwinner’s property” already has a typical meaning under social insurance law according to the general usage of the term, without, however, any reference being made to earlier provisions under social insurance law.
It is of little comfort to affected employers when the BAG states that such a clause could easily be formulated in a transparent and effective manner without any ambiguities or room for manoeuvre. It was precisely this possibility that encouraged the BAG to judge the clause to be non-transparent, because where transparency can only be created at all with a justifiable effort, it is also possible to cut back on the requirements for it. One may speculate as to whether the now insolvent employer also avoided taking qualified advice in other respects.
Interpretive roulette of the courts?
Since the law of obligations was changed with effect from 01.01.2002, form employment contracts have also been subject to general terms and conditions control. However, agreements in collective bargaining agreements, works agreements and service agreements shall remain exempt from this, sec. 310 para. 4 S. 3 BGB. So if the pension commitment is set out in a company agreement, then it wouldn’t be T&Cs, and the clause would be effective, so interpretable.
Another question is whether the content of an occupational pension commitment is subject to general terms and conditions control at all? This is because the contractually agreed main performance obligations, i.e. the activities as an employee on the one hand and the remuneration in the form of wages including the company pension scheme (bAV) on the other, are in principle not subject to review and the standards of the law governing general terms and conditions are not even applicable. However, legal prohibitions must be observed, i.e. usury and immorality.
At most, ancillary agreements to the remuneration and clauses restricting, modifying or structuring the main service, for example, would be subject to review under the General Terms and Conditions. If the occupational pension commitment for the widow is understood to be the main benefit, the BAG could have tried, dogmatically as a matter of priority, to close the lack of transparency by interpreting it in accordance with the employee’s recipient horizon and, alternatively, to decide on a contractual adjustment of the occupational pension commitment.
Employer collects insurance benefit alone – without employee participation
Commitments to company pension schemes are made en masse by means of form contracts, which are supplied free of charge by banks and insurance companies. Many an entrepreneur is later surprised to discover that the text was created by marketing or sales professionals. This means that there is a high risk for pension claimants, including widows and orphans, of not receiving the retirement benefits they had hoped for in the end, or for the entrepreneur the risk of having to pay where it was not actually intended. Clarity on this can then be achieved in each individual case by waiting to see what the Federal Labour Court will one day say on the matter.
The same applies to those beneficiaries for whom an occupational disability pension has been concluded by the employer, but where, among other things, leaving the company is a legal condition for the occupational pension benefit in the text of the commitment. If the employee does not leave, only the employer receives the insurance annuity benefit of a reinsurance policy, who may immediately tax this insurance benefit in the amount of the total cash value of the annuity as asset value (without liability value to be offset, in the absence of BU according to the pension commitment) and thus as a one-off profit, which can sometimes lead to liquidity problems. The employee, on the other hand, is left empty-handed after the occupational pension commitment, even if he had also paid the insurance premiums for the occupational disability pension within the framework of deferred compensation.
Insolvency of the employer due to negligent occupational pension provision
More frequently, the employer is faced with the threat of insolvency because the occupational pension commitment promises considerably more than the associated insurance would provide. Then, in the popular sense, the employer is threatened with bankruptcy.
The mixed calculation of pension provisions, in which a fixed percentage of married persons is assumed and the widow is always assumed to be e.g. 6 years younger, can also lead to sudden additional expenses in the millions for pension provisions if a highly paid employee leaves behind a widow who is 30 years younger and for whom the widow’s pension must then be paid for the rest of her life.
By Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.network-Karriere.com (edition 05/2015)
and
published in Cash-Online.de on 23.04.2015
Link: http://www.cash-online.de/versicherungen/2015/witwenpension/247128
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About the author
Dr. Johannes FialaPhD, 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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