News - Germany

Germany - December 2010

Germany: Parental leave periods do not count towards company pension payments

The decision of the Federal Labour Court is sufficient not only for pension payments but also other entitlements during parental leave.

The decision, made earlier this year, related to an employer-employee dispute over whether parental leave should impact pension payments.  While the collective pension scheme applied by the employer excluded such times from consideration, the employee felt this was an indirect discrimination based on sex, and claimed the regulations were invalid.

The court decided that parental leave leads to a suspension of the employment relationship as a matter of act of law and that not only the entitlement to current remuneration is cancelled, but also all types of special payments.  It concluded that, in accordance with an earlier decision of the Federal Labour Court (decision of 15.02.1994 - 3 AZR 708/93), these principles are decisive with regard to a company pension scheme.  Company pension regulations may determine that times during which the employment relationship is suspended due to parental leave do not have to be considered for the calculation of the pension, and this is neither an infringement of the General Equal Treatment Act (German: Allgemeines Gleichbehandlungsgesetz, AGG) nor of the underlying European anti-discrimination directives.  The Federal Labour Court rejected allowing recourse to the European Court of Justice as it has already decided several times that not considering times of parental leave does not offend EU law.

The implications of the ruling stretch beyond pension payments.  If an employer exempt from paying current remuneration is not obliged to perform any additional services directly or indirectly, extra payments, such as bonuses, additional pays of length of service, or other incidental benefits, could also be reduced respectively too.

However, with regard to severance payments from social compensation plans, the Federal Labour Court considers the situation to be different.  This is because severance payments are not considered to be remuneration for work performed but compensation for future disadvantages, and therefore parental leave must be considered in their calculation.

BAG, decision of 20.04.2010 - 3 AZR 370/08

For further information or to discuss any of the issues raised, please contact Stefanie Andrelang (Turn on Javascript!) on +49 89 242 2300.

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