Facts and Procedural History
In the case 3 AZR 118/24, the Federal Labour Court (BAG) deals with key questions of German employment and occupational pension law. Specifically, the focus is on the obligation to provide occupational pension benefits after a company has transferred its business activity to another legal entity as part of a transfer of undertaking.
In the case at hand, an employee who had previously worked for the company brought a claim for occupational pension benefits. The claim was based on benefits promised by a support fund that was associated with the former employer. However, the question arose as to the manner and extent to which the new employer, following a transfer of undertaking, is liable for the promised pension benefits.
In the second instance, the Regional Labour Court of Lower Saxony held that the new business owner assumes the pension obligations from the date of transfer, but only to a limited extent in this particular case. The claimant lodged an appeal to the BAG.
Legal Focus Areas
Transfer of Undertaking and Transfer of Pension Obligations
The relevant legal framework is set out in Section 613a of the German Civil Code (BGB). This provision regulates the rights and obligations in the event of a transfer of a business or part of a business to a new owner. The central question is whether and to what extent existing rights to occupational pension benefits are transferred to the acquirer.
In this context, the BAG highlights that, in the case of pension systems administered through institutions such as support funds, a differentiated assessment is required depending on the type and scope of the promise made. A distinction is especially made between direct and indirect pension promises. While the new business owner is generally liable for ongoing benefits, the scope of liability may be limited if implementation is based on a reinsured support fund.
Limits of Liability in Case of a Transfer of Undertaking
The BAG’s judgment ties in with established case law, according to which the ‘new’ employer is generally liable under Section 613a BGB for pension entitlements and benefits. However, according to the statutory provisions and their established interpretation, there are limits to this liability if certain forms of pension provision—such as support funds as in this case—have been chosen.
In particular, the statutory provision seeks to achieve an appropriate balance of interests: employees are to be protected against the loss of pension entitlements, but corporate transfers should not be unduly hampered by excessive liability burdens. In the present case, the BAG specifies that the new employer is only liable to the extent that benefits can no longer be provided from the assets of the relevant support fund (including any reinsurance).
Relevance for Practice
The decision is of significant importance in the context of corporate transactions and succession arrangements. It clarifies that, although there is a general obligation to join occupational pension schemes upon the transfer of a business, the precise scope in individual cases depends on the specific terms of the pension promise and the type of funding. Merely stating that a new business owner must fully and unconditionally assume all pension obligations does not do justice to the content of Section 613a BGB and the interplay with the Company Pension Act (BetrAVG).
Nevertheless, it should be noted that, as a rule, employees’ pension entitlements remain protected in the context of a transfer of undertaking, unless exceptional and limiting circumstances apply.
Implications for Companies and Investors
Careful examination of existing occupational pension schemes is particularly required in corporate transactions and restructurings. Complex issues arise not only for acquirers and transferors but also for investors and shareholders, who must realistically assess and manage financial liability risks.
The current BAG decision once again highlights how important a detailed analysis of pension commitments (including any support fund regulations and reinsurance agreements) is as part of the due diligence process. It also emphasizes that statutory and contractual limitations on liability can be effective, thereby increasing planning certainty for acquirers.
Particularly in the context of international corporate mergers, coordination with foreign legal systems must also be observed in order to avoid double claims or liability gaps.
Conclusion and Outlook
The decision 3 AZR 118/24 provides clarity in the area of tension between employee protection and economic interests in business takeovers. It highlights the complexity of occupational pension systems during business transfers and makes clear that the transfer of liability must be assessed on a differentiated basis, depending on the form of implementation chosen.
Finally, it should be noted that such matters always require individual legal assessment—especially in view of ongoing developments in case law and changing statutory requirements. Should further questions arise in relation to the topics discussed, these can be clarified in the context of qualified legal advice. The Rechtsanwalt at MTR Legal are available to provide further information in the field of employment and corporate law.
