Pursuant to a decision of the European Court of Justice ("ECJ") in a preliminary ruling upon reference of the labor court Munich (Odar vs. Baxter, ref. C-152/11, decision of 6 December 2012), a formula in a social plan which reduces the redundancy pay for employees who are close to qualifying for statutory retirement pensions, including early pensions with reductions, does not constitute age discrimination. However, such formula may constitute a discrimination based on disability in violation of the provisions of the Equal Treatment Framework Directive (2000/78/EC).
Note that a reference for a preliminary ruling allows the courts
of the Member States to refer questions to the ECJ about the
interpretation of European Union law or the validity of a European
Union act. The ECJ does not decide the dispute itself. It is for
the national court to dispose of the case in accordance with the
ECJ's decision, which is similarly binding on other national
courts before which a similar issue is raised.
Introduction. The EU Directive 2000/78 on equal
treatment in employment was transposed into German law by the
General Equal Treatment Act (Allgemeines
Gleichbehandlungsgesetz–"AGG"). Pursuant to the
AGG, redundancy compensation plans (so-called "social
plan") can provide for different amounts of compensation
payments if the compensation scheme is graduated according to age
or length of service. The AGG further allows that the social plan
excludes from the benefits it provides employees who are deemed as
financially secure because they are entitled to a statutory
pension, even though they have been receiving unemployment benefits
prior to that.
Case. Baxter Deutschland GmbH
("Baxter") entered into a social plan with its works
council, providing for compensation payments for employees
suffering from a redundancy. The compensation was calculated
according to a standard formula, taking into account the
employees' length of service and age.
For employees older than 54 years old, an alternative calculation applied which did not take into account their length of service, but on the contrary, took into account the number of months which existed before being able to receive, at the earliest possible time, any kind of pension income whatever its amount.
The definition also covered any reduced pension income due to an
early beginning of retirement (i.e., early retirement due to
disability). In the present case, the employee, Mr. Odar, was 58
years old and recognized as being severely disabled. He had been
employed for almost 30 years with Baxter when Baxter terminated his
employment relationship. Under the German retirement pension
scheme, Mr. Odar would have received an ordinary old-age pension at
the age of age 65 but, being severely disabled, could claim an
early retirement pension at the age of 60 which would be of a
reduced amount. Pursuant to the special calculation formula from
the social plan, Baxter paid to Mr. Odar a reduced compensation (as
Mr. Odar was older than 54 years and could benefit from a early
reduced pension income due to disability). Mr. Odar brought an
action before the labor court of Munich requesting that Baxter be
ordered to pay him additional compensation equal to €272,000,
corresponding to the difference between the compensation he
effectively received and the amount of compensation he would have
received had he been not older than 54 years of age and the
standard formula had been applied to him. He argued that the
reduced compensation provided in the social plan was, in fact,
discriminating on grounds of age and disability.
Decision of the ECJ. The Baxter social plan
provides for a calculation method taking into account the
employees' age. Such difference in treatment on the basis of
age is justified pursuant to Directive 2000/78. Indeed, since older
employees mandatorily receive a statutory retirement pension as of
age 65, the social partners can rightfully decide to reduce in the
social plans they negotiate the redundancy compensation payment for
them.
However, the ECJ holds that the prohibition of discrimination on
grounds of disability precludes the implementation of the social
plan's provisions which take into account the possibility of
receiving an early retirement pension on grounds of disability
(alternative special calculation formula). Pursuant to the Baxter
social plan, severely disabled employees are paid a redundancy
compensation which is lower than the amount paid to a nondisabled
employee of the same age. This difference of treatment cannot be
justified as it constitutes a discrimination based on
disability.
Comment. The reduction of redundancy compensation
for employees close to old-age retirement does not constitute age
discrimination. In that aspect, the ECJ follows the German Federal
Labor Court, which has always accepted such difference in
treatment. It is justified by the objective to grant compensation
to former employees for the future, whilst taking into account the
need to achieve a fair distribution of the company's limited
financial resources in the context of a social plan. Moreover, the
aim of preventing persons who are not seeking new employment, but
who will receive a replacement income in the form of a retirement
pension, from claiming a compensation upon termination must be
considered as legitimate. However, the ECJ considers that a further
reduction of redundancy compensation for employees eligible for
early retirement due to disability constitutes a discrimination
based on disability. Indeed, these rules have an excessive adverse
effect on the legitimate interests of severely disabled employees
and on the social policy objectives pursued by such early
compensation. In the future, the social partners negotiating a
social plan will have to exclude the parameter "early
retirement pension" from alternative calculation formulas for
redundancy compensation, to prevent discrimination due to
disability. In addition, they will also have to exclude the
employees' gender or face the possibility of being considered
to discriminate due to gender.
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