The Federal Labor Court of Germany (“FLC”) decided on April 12, 2011 (1 AZR 764/09), that generally, the severance claim resulting from a social plan may be calculated on the basis of factors which are determined or influenced by the age and/or years of service of the individual affected employee, at least when the calculation favors older workers.
In this particular case, the claimant employee was 38 years old when she was terminated. Her severance was calculated as follows: “age-range factor x years of service x monthly salary.” The respective factor was determined in the social plan with 80 percent of the monthly salary for employees up to the age of 29, 90 percent for employees aged 30 through 39, and 100 percent for employees 40 years of age and older. The plaintiff claimed the 100 percent factor by arguing that the reduced factor linked to her lower age constituted a case of age discrimination in accordance with the European directives.
Although the FLC rejected this claim on its particular facts, any age-related differences used to calculate severance claims require careful consideration.
The German Equal Treatment Act includes several exceptions that justify age-related decisions and measures based on objective reasons, including age-related differences in a social plan in connection with the calculation of severance. This is in accordance with the European directive that allows the implementation of local-law exceptions if they are based on legal targets in the areas of employment politics, employment markets, and professional education. In light of the Andersen decision of the European Court of Justice (October 12, 2010; C-499/08), which was discussed in the previous European Labor & Employment Law Update, in each particular case it is necessary to analyze whether the specific measure is necessary to reach the legal target and whether the interests of the individual are sufficiently taken into consideration. The courts are likely to focus on two questions: (1) Is the local-law exception in accordance with the European directive allowing an age-related difference? (2) Is the particular measure necessary and reasonable within the sense of this approved legal exception?
The answer to the second question requires a case-by-case analysis. The FLC decided in the case opening this article that the reduction of the factor for younger employees (those under 40) did not amount to age discrimination in relation to the calculation of severance owed in connection with the loss of employment, because younger employees generally have better chances on the employment market. This will not always be the case; for example, employment chances may vary by region and/or professional category. Therefore, it is advisable to review age-related market conditions in more detail and reflect them correctly in the social plan.