Retirement Clauses in Collective Agreements and Employment Contracts are lawful

Estimated reading time 4 minutes

The Federal Labour Court has ruled that Collective Agreements can state that an employment contract will terminate on the regular retirement date without the employer being exposed to a claim of age discrimination.

Many employment contracts contain a clause stating that the employment relationship ends at the end of the calendar month during which the employee reaches the regular state pension retirement age. Until recently, it has been unclear whether such clauses would be in breach of age discrimination laws.

The Federal Labour Court has now ruled that works councils and employers may agree in a voluntary collective agreement that an employment relationship will cease at the end of the calendar month during which the employee reaches the regular state pension retirement age. The basic principles of justice and equity are upheld if the retirement clause is linked to that point in time at which the employee is entitled to full payments from the statutory pension insurance. Such a clause does not violate anti-discrimination rules.

In the event that contracts are agreed individually, this does not supersede the collective agreement. Therefore, if an individual contract does not expressly state that employment will terminate when the employee reaches the regular state pension retirement age, the contract will end in any event as a result of the terms of the collective agreement.

Commentary

This is a positive step for employers whose individual employment contracts do not include such a retirement clause or where the wording of such a clause might have been considered previously by the courts to be invalid for another reason. The wording in the voluntary collective agreement can now prevail.

Furthermore, this Federal Labour Court decision confirms prevailing opinion that a clause in an individual contract of employment which confirms that employment will automatically cease on the date the employees receive their regular state pension may also be valid. Where such clauses are included in an individual employment contract, employees are unlikely to be successful if they claim they are still employees after they receive payments from the statutory pension insurance or are entitled to such payments.

Resources

Federal Labour Court, Decision of 5th March, 2013 - 1 AZR 417/12

For further information or to discuss any of the issues raised, please contact Stefanie Andrelang on +49 (0) 89 2422300 at Keller Menz, Munich www.keller-menz.eu

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