Pensioner companies under the BetrAVG (Company Pensions Act)

BAG, judgment dated 15.9.2015 – 3 AZR 839/13

If a so-called pensioner company is created by means of a previously operative company transferring its business to a third party, and if the pensioner company is then released from adjustment of company pensions in accordance with Section 16 Subsection 1 BetrVG (Works Council Formation Act), this can, in exceptional cases, result in a claim for damages on the part of the company pensioners under Section 826 BGB (German Civil Code), aimed at the adjustment of the company pensions.

The Federal Labor Court was required to concern itself with the question of which claims a company pensioner can be entitled to, if a previously operative company becomes a so-called “pensioner company” through the sale of its business operations, i.e. no longer has any active employees but rather only services company pensioners. The plaintiff company pensioner was demanding an adjustment of his company pension in accordance with Section 16 BetrAVG (Company Pensions Act) to take account of inflation since the start of the pension. The defendant pensioner company (the pension debtor) invoked the fact that the adjustment had rightly not been made due to its poor economic position, and that the economic situation of other (group) companies was not decisive.

Change in case law

The Federal Labor Court initially specified its case law on prima facie liability. While it could be taken from the previous case law of the BAG (Federal Labor Court) that the appearance that an employer, obliged to adjust company pensions, will align the checking of the economic situation not only to his own position, but (also) to that of a third party (e.g. another group company), could also be triggered by the third party, the Federal Labor Court has now decided that this is not compatible with the principles of prima facie liability. The estoppel must be set by the pension debtor itself.

Inapplicability of Section 242 BGB in the context of Section 16 Subsection 1 BGB

A result, arrived at in application of Section 16 Subsection 1 BetrAVG, under which a pension debtor can invoke insufficient ability to pay, cannot be altered through application of the principle of good faith (Section 242 BGB). If, under Section 242 BGB, the pension debtor were unable to invoke an economic situation not sufficient to permit an adjustment, the purpose of Section 16 Subsection 1 BGB (retention of assets) would be circumvented.

Accrual following the creation of a pensioner company

The pensioner company resulting from sale of the business operations must not be equipped with sufficient financial resources to enable future pension adjustments. The principles, developed by the Federal Labor Court, on damage claims of the company pensioner under Sections 280 Subsection 1, 241 Subsection 2, 31, 278 BGB in cases of insufficient capitalization of a pensioner company, concern only the pensioner companies, created by way of spin-off under the Law on the Transformation of Companies,to which pension liabilities are transferred. They are not applicable to a pensioner company, created through transfer of its operative business to a third party.

Basis of liability in the event of sale of the operative Business

In these cases, a claim against the original pension debtor can result under Section 826 BGB (intentional unethical damage), if the overall character of the constellation created violates the feeling of common decency of all reasonably and just thinking persons. In this context, consideration must be given in particular to the reason for the sale of the company, and to whether the pension debtor has received a (market-oriented) counterperformance for the operative business sold by it. This must be considered in particular in cases of intra-group transfer of the operative business from one company to another.

Summary

The judgment summarizes the current case law of the BAG on the adjustment of company pensions in a group. With group matters, the possibility will have to be reckoned with in future of damage claims under Section 826 BGB frequently also being asserted, in addition to legal action for the adjustment of company pensions as per Section 16 BetrAVG. Depending on the submission of the plaintiff company pensioner, employers will have to reckon with the possibility of then having to demonstrate the economic justification of business or company sales – or even of other contract constructions between group companies – in the proceedings.