Einführung in die Abfindung
A severance payment is a one-time payment made by the employer to the employee when the employment relationship is terminated. However, entitlement to severance does not arise automatically but only under certain conditions. The severance serves as financial compensation for the loss of the job and is intended to help the employee bridge the time until the next job. Especially in the case of a redundancy dismissal or within the framework of a social plan, severance can play an important role. Therefore, employees should inform themselves early about their rights and claims to receive appropriate payment in case of termination of the employment relationship. For employers, severance is an instrument to end the employment relationship amicably and to avoid possible legal disputes.
Voraussetzungen für den Anspruch auf eine Abfindung
The entitlement to severance is tied to certain conditions. Usually, this entitlement arises when the employer terminates the employment relationship and the employee either files a dismissal protection lawsuit or a corresponding agreement is made – for example, within the framework of a termination agreement. Compliance with the statutory deadline is particularly important: employees must file a dismissal protection claim with the labor court within three weeks of receiving the dismissal letter to protect their rights. The Dismissal Protection Act (KSchG) regulates the requirements for entitlement to severance and specifies in which cases a payment is possible. An entitlement to severance may also arise within the framework of a social plan or through an individual agreement between employer and employee. It is advisable to carefully examine the respective regulations and, if in doubt, seek legal advice.
LAG Nürnberg: Kürzung der Abfindung für rentennahe Mitarbeiter kann zulässig sein
In the case of planned dismissals, e.g., due to restructuring in the company, severance plays an important role for the departing employees. The severance payment is a central component when terminating the employment relationship under social plans. The loss of the job is often the trigger for a severance payment, especially when a social plan is applied. The closure of parts of the business is a typical reason for dismissals and corresponding severance payments. The differentiation in the amount of severance, such as a lower severance for employees close to retirement age, is due to the fact that these employees can retire sooner. This was decided by the Regional Labor Court of Nuremberg in its judgment of January 19, 2023 (Case No. 8 Sa 164/22).
Employees generally do not have a statutory claim to severance payment when the employer terminates the employment relationship. The legality of the dismissal and the justification for severance depend on the reasons for dismissal since these form the basis for the labor law assessment. If the employer and works council draw up a social plan in the case of upcoming dismissals, severance payment becomes a central issue. According to the Nuremberg Regional Labor Court ruling, severance for employees close to retirement age may be lower, as stated by the law firm MTR Legal Attorneys, which advises, among others, in labor law.
Severance significantly reduced: Reasons for the reduction of severance
In the underlying case at the Nuremberg Regional Labor Court, the company planned major restructuring measures that also led to job losses. The employer agreed on a social plan with the works council, resulting in a severance payment for affected employees. This severance payment represents a one-time compensation for the loss of the job.
This social plan provided that employees receive severance upon dismissal, the amount of which depends on three factors: length of service, gross monthly salary, and a so-called age factor. The years of employment and salary are decisive for calculating the severance since a certain portion of the gross monthly salary per year of employment serves as the basis. Depending on individual circumstances such as length of service, age, and personal situation of the employee, the severance amount may vary.
An example: An employee with a gross monthly salary of 3,000 Euro and 10 years of employment would receive – with an age factor of 1.0 – severance of 30,000 Euro (3,000 Euro x 10 x 1.0). It was stipulated that employees up to the age of 61 receive an age factor of 1.0, while from the age of 62 only a factor of 0.25 is applied. Therefore, a long-serving employee who had just turned 62 shortly before dismissal received only 9,250 Euro severance. Without the age limit, he would have received approximately 36,000 Euro. He considered this regulation discriminatory and sued for payment of the full severance.
Nuremberg Regional Labor Court rejects the lawsuit
The Nuremberg Regional Labor Court dismissed the lawsuit and declared the social plan provision lawful. Although the court acknowledged direct disadvantage due to age – this, however, was justified pursuant to Section 10 paragraph 2 sentence 3 no. 6 of the General Equal Treatment Act (AGG). The legislator expressly permits differentiation in favor of employees who cannot yet access statutory retirement pension. The background of this regulation is that employees close to retirement are generally better economically secured than younger employees who, after dismissal, would be dependent on unemployment benefits and possibly social welfare.
The Federal Labor Court (BAG) has already issued landmark rulings on severance pay regulations and their legal assessment in comparable cases.
Note: The decision of the Nuremberg Regional Labor Court (LAG) and the principles of the Federal Labor Court are of particular importance for future cases and should always be taken into account when legally assessing severance claims.
Hardship cases possible
In further justification, the court stated that the individual pension amount of the affected employee does not matter; rather, it depends solely on the objective possibility of receiving an old-age pension. Even if the actual pension is low, it is factually justified to consider this group of employees less when distributing limited social plan funds. The works council and employer parties have a wide discretion here. It is permissible and even necessary to set general age limits or key dates for planning certainty, even if this can lead to “hard” transitions in individual cases — as in the present case. The LAG Nuremberg has allowed revision to the BAG.
The outcome of the procedure shows that affected employees usually must expect a lower severance payment despite possible hardship cases if they already have an objective possibility to draw an old-age pension.
Scope of discretion of the parties
For employers and works councils, the ruling sends a clear signal: social plans may be designed so that employees close to retirement receive lower severance pay, provided the differentiation is factually justified and based on a comprehensible age limit. When designing social plans and severance arrangements, certain rules must be followed which arise from legal requirements and labor law framework conditions. The court thereby strengthens the scope of discretion of the parties involved. At the same time, it clarifies that not every disadvantage due to age is automatically discriminatory in the legal sense. Rather, it is decisive whether a legitimate goal is pursued and whether the measure is appropriate and necessary.
For employees, the ruling means that a significantly lower severance payment at retirement age can be legally permissible. Even if such a regulation feels like unequal treatment, it is not necessarily unlawful. Employees affected by such a reduction have a chance of success only if they can prove that the social plan regulation exceeds the necessary extent or is grossly unreasonable. Hardship regulations can be anchored in social plans but must be explicitly negotiated.
Severance pay and unemployment benefits
The payment of severance pay can affect the employee’s entitlement to unemployment benefits. In certain cases, the entitlement to unemployment benefits is suspended for a certain period if the employee receives severance pay. This is particularly relevant when the employment relationship ended through resignation by the employee or a termination agreement. However, if a lawsuit against the dismissal is filed within three weeks after receiving the termination, and the labor court finds the dismissal socially unjustified, severance pay is generally not deducted from the unemployment benefits. To avoid financial disadvantages, employees should definitely consult an employment law attorney before accepting severance pay. This ensures that their claims are preserved and they suffer no disadvantages when claiming unemployment benefits.
Differentiated treatment of different groups
The ruling shows that economic hardships can be mitigated with a social plan but generally cannot be fully compensated. Different groups may be treated differently as long as this is well justified. However, employers should create transparency and document the reasons for such differentiation to prevent potential legal challenges. Employees, in turn, should inform themselves early about their pension situation and, if necessary, seek individual advice before entering negotiations on social plans.
Further information on severance pay and social plans as well as other relevant aspects can be found in our articles – we offer comprehensive information and advice on this topic.
MTR Legal Attorneys advise on dismissals, severance pay, social plans, and other topics of labor law.
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