Pension proximity can be considered in case Social Selection

Employer’s Margin of Discretion

An insolvency administrator terminated the employment of a 63-year-old employee after concluding a balance of interests with a list of names with the appointed works council. The insolvency administrator justified the selection of the employee on the grounds that she was the employee in her peer group who was most worthy of social protection, because she was the only one who had the opportunity claim an old-age pension in accordance with §§ 38, 236b of the German Social Code VI (Sozialgesetzbuch VI, SGB VI) shortly after termination of the employment relationship. Therefore, she is to be classified behind all other comparable employees. As a purely precautionary measure, the insolvency administrator terminated the employment relationship again after further negotiations of a balance of interests with a list of names with the works council due to the then intended closure of the business after production had ceased. The employee filed an action for protection against dismissal against both terminations.

Selection solely on the basis of pension proximity inadmissible

The BAG ruled that only the second termination was valid. In the event of a termination for operational reasons, the employees to be terminated must generally be selected on the basis of the criteria set out in Section 1 para 3 sentence 1 of the German Unfair Dismissals Act (Kündigungsschutzgesetz - KSchG), i.e. length of service, age, maintenance obligations and severe disability. According to the ruling, the proximity to pension may be taken into account in the social selection with regard to the criterion age to the detriment of the employee concerned. The court emphasized that the purpose of social selection is to give notice of termination to the employee who is socially least in need of protection, taking into account the relevant selection criteria. The selection criterion age is ambivalent in this context. On the one hand that the need for social protection initially increases with increasing age, because older employees typically have poorer chances of placement on the labor market. On the other hand, it decreases if the employee can either dispose of a replacement income in the form of a uncut old-age pension - with the exception of the old-age pension for severely disabled persons (§§ 37, 236a SGB VI) - within two years of the end of the employment relationship at the latest or already has such an income because he or she is drawing an uncut old-age pension. These circumstances can be taken into account by the employer with regarding to the selection criterion age to the disadvantage of the employee. The first termination in dispute was nevertheless invalid, because it was made solely on the basis of the proximity to the pension, disregarding the selection criteria length of service and maintenance obligations, and was therefore grossly incorrect.

Exception for old-age pension for severely disabled people

It should be noted that the possibility of an old-age pension, which can be drawn by severely disabled persons in accordance with §§ 37, 236a SGB VI, cannot be taken into account to the detriment of the employee to be terminated. In this respect, the court seem to follow on from the ruling of the European Court on the inadmissibility of lower social plan compensation due to the possibility of drawing an early retirement pension due to disability (ECJ, 6 December 2012, C-152/11). To consider the pension proximity of a severely disabled person is nevertheless likely to be permissible. However, precisely not due to the special pension for severely disabled persons.

A momentous decision for the social selection?

The created clarity with regard to the eligibility of consideration of the pension proximity in the context of a social selection to be carried out is welcomed. However, it should be noted that a selection decision may not be made solely on the basis of pension proximity, but that other selection criteria must also always be taken into account.