Under German statute, employees may request that a certain amount of their compensation be transferred to a company pension scheme. Since the introduction of the statutory option to defer compensation, employers wondered whether they are obliged to notify their employees of such option. In some cases, insurance brokers have stoked fear among employers that they are obliged to pay damages to their employees if they failed to notify them about the option to defer compensation. Now, for the first time, the Federal Labour Court addressed the issue of a purported duty of notification on the part of the employer (Federal Labour Court, judgement of 21 January 2014 – 3 ABR 807/11).
In the decided case, an employee sought damages from his employer when his employment came to an end, since the latter had failed to notify him of the statutory option to defer compensation. The employee asserted that he would have deferred a certain amount of his monthly compensation and put it towards an entitlement to benefits under the company pension plan had the employer notified him about this option.
The Federal Labour Court has now made it expressly clear that the employee‘s right to defer compensation does not give rise to a corresponding duty on the part of the employer to inform the employee about such right. An obligation of this sort is neither set down in statute nor does it follow from the employer‘s duty of care. In other words, it is up to the employee to inform himself about the possibilities for deferring compensation.
Practical recommendations
The employer does not need to actively approach employees and inform them of their statutory right for deferred compensation. However, the employer may not refuse the employee’s desire to defer compensation, provided the statutory requirements are complied with. Last, if the employer creates a company pension plan that goes beyond deferred compensation, e.g. through a collective bargaining agreement or a works agreement, the duty of care may require to notify new hires about this.