No obligation of the employer to provide information about conversion of remuneration

Employers are not required to draw the attention of their employees on their own initiative to the entitlement to conversion of remuneration within the scope of the company old-age pension scheme.

The Federal Labour Court (BAG) has now clarified the question of whether employers are obliged to pay damages if they fail to explain to their employees that they have a statutory entitlement to conversion of remuneration.

Since 2002, employees have had a legal entitlement to use part of their salary for building up a company old-age pension. The corresponding ruling can be found in the Law on Improvement of Company Old-Age Pensions or, in short, in the Company Pensions Act (BetrAVG). This states at the very beginning in Section 1a that employees can request the employer to build up a company old-age pension from their future remuneration entitlements. Thus far however, a disputed question has been whether the employer is also required to draw the attention of his employees to this vested right on his own initiative. The Third Senate of the BAG has now ruled on this matter. The employer is not required to expressly draw the attention of his employees to the possibility of conversion of remuneration.

The claimant was an employee who was employed with the defendant company up until 30 June 2010. Following the end of the employment relationship, he demanded damages of 14,380.38 euros from his employer, claiming that the employer had failed, in breach of duty, to inform him of his entitlement to conversion of remuneration under Section 1a BetrAVG. Given corresponding knowledge of his entitlement, he would have converted 215.00 euros per month of his salary into an expectancy of benefits under the company old-age pension scheme. He would have chosen direct insurance as form of implementation.

In its judgment of 27 July 2011, the State Labour Court Hesse, as previous instance, had dismissed the action for damages. The claimant’s appeal to the BAG was now likewise unsuccessful. The BAG decided that neither Section 1a BetrAVG nor the employer’s duty to give assistance obliged the employer to inform the employee of his own accord concerning the entitlement to conversion of remuneration under Section 1a BetrAVG. As such, there was no violation of obligations by the employer, as required for a claim for damages.

The decision must be assessed as positive news for employers. At the same time, there is a need for caution. Courts are still required to keep the duties to inform and the related risks to employers within reasonable limits. Because only in this way is it possible to generate or maintain the urgently required acceptance among employers of a company pension scheme. Nevertheless, the BAG has made it very clear in other decisions that the employer can by all means be liable for damages – in particular if he offers complex pension systems or voluntary advisory services. If the employer provides information in this context, the content of this information must be correct and complete.

Conclusion

Against this background, employers are well advised to limit the references, provided by them on company pensions, to fundamental subjects, e. g. to the forms of implementation available in the company, the works agreements concluded in this respect or to the fundamental possibility of conversion of remuneration. They should by all means refrain from individual “pension support” in order to avoid liability risks.