Germany: the new statutory retirement age - a boost for age discrimination disputes?

This article was included in the November 2010 issue of People - the Employment and Pensions newsletter

The state pension insurance system in Germany has been under considerable strain for many years. The reasons are manifold: mass unemployment for decades, reduced wage ratio, early retirement, decrease of full-time jobs which are subject to social insurance contribution and increase of atypical jobs. At the same time the demographic trend leads to enormous extra costs for adequate funding of the state pension insurance.

In view of the German demographic trend, in 2001 the Federal Government had shifted the focus from state pension insurance to company pension schemes and private pension systems (“Riester-Rente”) which have been subsidized considerably by public funds. Moreover, the Government had pressed ahead with legislation to raise the State Pension Age for men and women. In March 2007, the Bundestag passed the “Rentenversicherungs-Altersgrenzenanpassungsgesetz” (“the Act”) which changed numerous provisions in the fourth and sixth book of the German Social Security Code (SGB) and will become fully operative in the year 2012.

The core of the Act is the gradual increase of the standard retirement age from 65 to 67 years which would be the new standard retirement age for all employees who are born after December 31, 1963. However, the concept is fragmentary and excludes specific groups of employees, for example employees who have agreed on part-time employment prior to retirement before January 1, 2007. For these employees the standard retirement age will remain at the age of 65. The protection of particular groups of employees is not a surprise and evidence of the German legislator’s efforts to grant protection in compliance with the principles of trust and confidence. The gradual retirement age increase from one month per year of birth (beginning from 1947) to two months per year of birth (beginning from 1959) is therefore a specific characteristic of the Act.

In view of the new piece of legislation, fixed retirement age clauses which provide for an automatic termination of the employment contract at the age of 65 will disappear in employment contracts (except for contracts which concern particular groups of employees, such as pilots, where a fixed retirement age may still be required for obvious reasons). They will be fully replaced by flexible clauses which, more generally, refer to the “statutory retirement age”.

However, the replacement of fixed retirement age clauses by flexible terms and the full operation of the Act will not reverse the current trend. Legal disputes in the field of age discrimination are on the rise, in particular in connection with the General Equal Treatment Act (AGG) which implements the EU Employment Equality Directive 2000/78/EC. We anticipate that the Act will raise the employees’ awareness for age discrimination issues and expect a further boost in legal disputes in this area of law. Recent judgments confirm that the mere reaching of the statutory retirement age and the employee’s entitlement to receive a pension do not provide a legitimate reason for the employer to terminate employment and reveal that the requirements for a “forced retirement” will soon come under stricter scrutiny of the courts.