Ute Kleinsteuber v Mars GmbH Posted In: Case Law
Case ReferenceCase C-354/16
Legal BodyCourt of Justice EU (CJEU/ECJ)
Type of Claim / JurisdictionContracts of Employment, Pensions
Key Issues: Social Policy – Equal Treatment – Method for calculating acquired pension rights – Part Time Workers
Case: Ute Kleinsteuber v Mars GmbH
Reference: Case C-354/16, CJEU (First Chamber), 13 July 2017
Legislation: Directive 2000/78/EC
Ms Kleinsteuber, born on 3 April 1965, was employed by Mars and its predecessor in law between 1 October 1990 and 31 May 2014, in various positions. She worked both full-time and part-time, with rates of activity of between 50% and 75% of the activity of a full-time employee. Mrs Kleinsteuber enjoys, in relation to Mars and after having reached the age of 55, the right to an occupational pension.
According to the pension plan, in the case of a worker who is not employed full-time, first of all, the relevant annual salary of the worker who is entitled to a pension is calculated. Then, that salary is reduced by the average rate of activity during the whole of the period of employment. Finally, the different rates relating to the salary’s components are applied to the resulting amount. The amount of the occupational pension is thus calculated using a so-called ‘split pension’ formula. A distinction is thus drawn between the income earned falling below the ceiling for calculating contributions to the statutory pension scheme and income exceeding that ceiling. The ceiling for calculating contributions is, in German social security law, the amount up to which the salary of a person benefiting from statutory cover is used for social insurance. The salary components above the contributions calculation ceiling were valued, during the calculation of Ms Kleinsteuber’s occupational pension, at 2% whereas the salary components under that limit were valued at 0.6%. Mars’ pension scheme lays down, in addition, a ceiling for the years of service which can be taken into account, set at 35 years.
Ms Kleinsteuber challenged before the Arbeitsgericht Verden (Labour Court, Verden) Mars’ calculation of the amount of her occupational pension and considered that she is entitled to a larger pension than that calculated by Mars. The Bundesarbeitsgericht (Federal Labour Court, Germany) has already indicated in that respect that the rules in Paragraph 2 of the German Law on Pensions are appropriate and necessary for achieving a legitimate aim.
The Verden Labour Court decided to stay the proceedings and referred a number of questions to the Court of Justice of the EU (CJUE) for a preliminary ruling.
Consideration by CJEU
It was apparent to the CJEU, from the documents before the Court, that the full occupational pension complements, on a voluntary basis by the employer, the benefits received from the statutory pension scheme. Thus, the objective of Mars’ pension scheme is to reflect at the age of retirement, if possible in a full and proportionate way, the standard of living which the employee enjoyed during his employment. The split formula aims, for its part, to take into account the different cover needs for remuneration bands below and above the ceiling for the calculation of contributions, the latter not being taken into account during the calculation of the pension paid by the statutory pension scheme.
It must be considered that such objectives, which aim to establish a balance between the interests at issue, in the context of concerns falling within employment policy and social protection, in order to guarantee the provision of an occupational pension, may be considered public interest objectives.
The CJEU held that:
1. Clause 4.1 and 4.2 of the Framework Agreement on part-time work annexed to Council Directive 97/81/EC of 15 December 1997 must be interpreted as not precluding national legislation which, in calculating the amount of an occupational pension, distinguishes between employment income falling below the ceiling for the calculation of contributions to the statutory pension scheme and employment income above that ceiling, and which does not treat income from part-time employment by calculating first the income payable in respect of corresponding full-time employment, then determining the proportion above and below the contribution assessment ceiling and finally applying that proportion to the reduced income from part-time employment.
2. Clause 4.1 and 4.2 of the Framework Agreement and Article 4 of Directive 2006/54 must be interpreted as not precluding national legislation which, in calculating the amount of the occupational pension of an employee who has accumulated full-time and part-time employment periods, determines a uniform rate of activity for the total duration of the employment relationship, in so far as that calculation method of the pension does not violate the pro rata temporis rule. It is for the national court to satisfy itself that this is the case.
3. Articles 1 and 2 and Article 6(1) of Council Directive 2000/78/EC must be interpreted as not precluding national legislation which provides for an occupational pension in the amount corresponding to the ratio between (i) the employee’s length of service and (ii) the length of the period between taking up employment in the undertaking and the normal retirement age under the statutory pension scheme, and in so doing applies a maximum limit of reckonable years of service.
Why is this decision important?
The rules on pensions and part-time workers are complex and employers will often commit an inadvertent breach. This case demonstrates that, as long as the employer’s calculations are based on legitimate objectives in accordance with the relevant legislation, the distinctions made for part-time workers can still be upheld.
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.