The German Federal Labour Court has ruled that a legally invalid works agreement on pensions can be interpreted as ” individual pension grants with collective nature” (“Gesamtzusage”). This is in accordance with sec. 140 of the German Civil Code (German Federal Labour Court – Bundesarbeitsgericht, 23 February 2016, 3 AZR 960/13).

The court had to decide if a works agreement that turned out to be legally invalid can be interpreted as an individual pension grant and could therefore serve as the legal basis for the claim at hand. The court ruled that this is possible provided there are particular circumstances that justify the assumption that irrespective of the works agreement the employer was truly willing to commit himself to grant the pension as described in the (legally invalid) works agreement. Yet, the court clarified that one must take into account that a works agreement may be terminated at any time, whilst the modification of an individual pension grant requires the consent of both the employer and the employee. Therefore, the interpretation of a legally invalid works agreement as a summary of individual pension grants is possible only in very exceptional cases.

In the case at hand, the Federal Labour Court ruled that these criteria were met. The employer had already adopted a pension scheme and negotiated with the works council for years. There were no indications that suggested the employer did not wish to also grant pensions for the future.