By judgement dated 5 March 2013 (docket no.: 1 AZR 417/12), the Federal Labour Court affirmed the permissibility of age limits in shop agreements, pursuant to which the employment relationship ends with the expiry of the calendar month in which the employer reaches the statutory retirement age.

Under examination in the case up for decision was a central shop agreement which envisaged the end of the employment relationship upon reaching the age of 65, without this requiring a termination. The claimant of the underlying dispute, born in 1942, had been employed at the defendant since 1980. According to the “notification of hiring” signed by both parties, the employment relationship had been concluded for an indefinite period. When his employment relationship with the defendant ended when he reached the age of 65 in August 2007, the employee in question took legal action.

Both prior instances dismissed the complaint. The claimant’s appeal on points of law was also unsuccessful before the Federal Labour Court. The Erfurt judges made it clear that it is fundamentally possible for a central works council and the employer to regulate in a voluntary central shop agreement an age limit for the end of employment relationships, as long as the principles of reasonableness and fairness within the meaning of Sec. 75 para. 1 German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] have been observed. These are regularly deemed observed if the age limit is linked to the time at which the employee could draw the statutory pension from the statutory pension insurance scheme. Such a regulation does not violate the prohibition of age discrimination. The agreement of an indefinite employment relationship is not an individual contractual agreement which suppresses the age limit regulation of central shop agreements.

One may not draw the mandatory conclusion from the judgement that the age limit regulation of a shop agreement fundamentally suppresses individual contractual agreements. An indefinite employment contract must, pursuant to the favourability principle, regularly have precedence over a later age limit regulation in a shop agreement, for it is usually more favourable for an employee if he himself is able to decide on the basis of this employment contract whether he wishes to retire upon reaching the statutory retirement age or whether he wishes to continue working. Decisive in the present case was that, by agreement in the employment contract, the employment relationship was subjected in its entirety to the applicable collectively bargained provisions, and that this had been sufficiently evident to the employee. The central shop agreement had thereby become the subject matter of the individual contract, with the result that in this particular case the favourability principle had not been violated. Consequently, in order to ensure the validity of age limit provisions in shop agreements, employers should not only ensure that the age limit provision is permissible in the actual shop agreement, but also that the indefinite individual employment contracts contain a corresponding opening clause for the applicable collectively bargained provisions.