Surviving dependants’ pensions – so-called late marriage clauses may be discriminating, depending on their design

BAG of Feb. 19, 2019 – 3 AZR 219/18

So-called "late marriage clauses" in surviving dependants' pension commitments may constitute an unjustified age discrimination and can therefore be ineffective, unless a specific cut-off date can be justified on the basis of a specific connecting factor particularly linked to the legal structure principles of company pension schemes.  

Facts of the case

A widow filed a complaint with regard to a widow's pension before the labor courts. The deceased husband of the plaintiff had received the commitment of a company pension from his employer in a company agreement, which also included a surviving dependants’ pension for his wife. The widow's pension was to be 60 per cent of the employee's pension at the time of his death. The pension scheme limited the right to a widow's pension. The pension was only to be granted on the condition that the husband had not yet been sixty-three years old, and the widow not yet sixty, at the time of marriage. Relying on this clause, the employer was, initially successfully,  able to defend himself against the lawsuit before the higher labor court [LAG], because the now deceased husband had already been 78 years old at the time of the wedding. 

Decision

The plaintiff's appeal against the appeal judgment was successful before the BAG [German Federal Labor Court]. The highest German labor court came to the conclusion that the late marriage clause in its specific form was not in accordance with the requirements of the general principle of equal treatment and was therefore ineffective, pursuant to Sec. 7 para. 1 1st half sentence in conjunction with para. 2 AGG [German General Equal Treatment Act]. The late marriage clause directly concerned the age of the spouse, i.e., it restricted elderly spouses' entitlement to a widow's pension, who were therefore treated less favorably than younger spouses. This direct disadvantage (within the meaning of Sec. 1, 3 para. 1 (1) AGG) due to age required a sufficient justification. 

The LAG had seen such justification in Sec. 10 para. 1 (3) no. 4 AGG. According to this clause, the setting of age limits in occupational social security schemes as a condition of membership or drawing of a pension or invalidity benefits, including the setting of different age limits under those schemes for certain employees or groups of employees, is regularly justified. In contrast, the BAG emphasizes that the examples listed in Sec. 10 para. 1 (3) AGG must always be measured against the basic requirements of Sec 10 para. 1 (1) and (2) AGG. Also, age limits in pension schemes must be objective and reasonable as well as justified by a legitimate objective in order to be AGG compliant. In addition, the means of achieving that objective should be appropriate and necessary. In the present case, the BAG acknowledged that it was a legitimate objective of the employer to limit the financial burdens arising from the pension commitment, in particular from components of the surviving dependants’ pension scheme. However, the age limit chosen for the late marriage clause was not an appropriate means of achieving such an objective. It could not replace the employee's pension interest which is to be generally recognized (regardless of the age at the time of the marriage).  

Here, the BAG saw difficulties in the fact that there was no objectively comprehensible point of contact for the maximum age of the employee chosen in the pension scheme at the time of marriage (63 years) in the context of the pension scheme. In this regard, the standard retirement age under the occupational pension scheme was 65 years. Therefore, there was no plausible reason why a marriage after the age of 63 should lead to the exclusion of the widow's pension.

It can be seen from the statements made by the BAG that the court generally sees valid starting points for a certain point in time until which a marriage must be concluded so that the widow can later receive a surviving dependants’ pension. To this extent, for example, it could be required that the marriage must already have existed at the time of termination of the employment relationship or when the insured event occurs in the person of the actual pension beneficiary himself (for example, invalidity) or upon reaching the definitive fixed retirement age under the employer's pension scheme. 

Practical tip

The BAG did not see any possibility to replace the ineffective clause in the company agreement and the resulting legal loophole with an effective clause. According to the case-law of the BAG, this is only possible if the parties to the contract ultimately only have one possibility of closing the loophole. In the present case, however, several different starting points would have come into question, so that a supplementary interpretation of the pension scheme was eliminated.

Care should be taken if employers consider introducing a company pension plan, whether in collective or individual pension schemes, and drafting their own content and details. Over the intervening years, the BAG has made numerous decisions on various clauses on the structuring of occupational pensions, each of which requires very careful perusal, and which must be observed when designing pension provisions. As the present case shows, the proverbial "devil is in the detail". Even if certain restrictions are still permissible on their merits, the question of appropriateness in the individual case must always be considered in the context of the specific design. We would gladly support you here as a contact partner!