Claims to Occupational Pensions do not Expire

When your employment ends and you and your employer want to guarantee that all rights and duties have been finally fulfilled and nothing more may ever be claimed. Therefore usually a so-called "total execution clauses" will be employed. Such stipulations are used to create clear relationships after employment and prevent future disputes among the former parties of the employment contract. The BAG (April 20, 2010, re 3 AZR 225/08) recently decided that as a rule occupational pension claims in as much as such regulation affects total execution clauses.


The special significance of pension claims requires a clear declaration, the court held. Therefore, pension claims (such as a claim to an occupational pension) are routinely not covered by total execution clauses. Such claims would for the most part have a high economic value. Their maintenance and fulfillment are of great significance to the beneficiaries, so that from the point of view of the court no employee would want to waive such rights without a special reason. The significance of the pension claims, therefore, requires an unambiguous declaration; a waiver would have to be expressed clearly and free of doubt. Such a clearly avowed waiver cannot as a rule be learned from the usual total execution clauses.


The decision has huge ramifications for designing company transactions: According to German law, the buyer of a business or a section of a business obtains this object "as is". In other words, the purchaser is subject to all obligations which the seller has towards his employees. The buyer, therefore, has a large interest in guarding against claims of employees leaving the business. This can occur among other things by means of total execution clauses. According to the current judgment of the Federal Labor Court, special attention is now to be directed to the handling of occupational pension claims in the course of company transactions.


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