German Employment Law Blog – Federal Labour Court on default interest regarding an adjustment claim for a company pension scheme
by RA Dr. Christian Zeller
The Federal Labour Court found in a just published decision (judgment dated 10.12.2013, reference 3 AZR 595/12) that under German Employment Law a pensioner cannot claim default interest from his former employer under the following conditions:
- The employer has refused to adjust the pension benefits
- There is a dispute as to what extent the pension has to be adjusted – the pensioner files a court complaint before the German Employment Court
- The German Employment Court of the first instance decides in favour of the pensioner, the Higher Labour Court confirms this in appeal proceedings and the employer pays the adjusted pension only after this second instance decision becomes valid.
Under German Employment Law the employer has the statutory obligation to evaluate every 3 years whether the pension benefits paid out have to be adjusted. If he refuses to adjust at all or does not adjust in an appropriate way the pensioner may take court action.
Opposed to the first and second instance decisions the German Federal Labour Court now found that the pensioner may not claim default interest beginning from the day the pension should have been adjusted (“Anpassungsstichtag”), but only after the last instance decision has become valid. In the case decided this made a difference of more than 4 years of default interest payments.
Where such a German pension dispute goes through all instances it could make a difference worth several more years of interest payments. This shows that the current decision could have a significant financial effect on similar cases.
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