Loss of pension entitlements due to criminal conduct

Legal basis for the decision

The Munich Regional Court ruled that the plaintiff had lost his pension entitlements and that he had to repay the pension payments already made to the Kreissparkasse.[1] The court based its decision primarily on the fact that the employment contract stipulates that the plaintiff's pension commitment is based on "principles of federal civil service law". In this respect, in the opinion of the court, the employment contract also refers to Section 59 of the Civil Service Pension Act (BeamtVG) in conjunction with Section 41 of the Federal Civil Service Act (BBG). This stipulates that retired civil servants lose their pension entitlements if they are sentenced to at least one year's imprisonment for an intentional criminal offense committed prior to the termination of their employment. The court clarified that the plaintiff's conviction for several intentional criminal offenses also leads to a loss of pension entitlements if the total prison sentence for the criminal offenses committed amounts to more than one year's imprisonment. It was therefore not decisive that a prison sentence of at least one year was imposed for a single act of breach of trust.

Significance for practice

The above-mentioned civil service regulations are based on the idea that persons who seriously violate the state legal system are no longer worthy of receiving a pension from the state. In principle, this idea cannot be applied to pension commitments (company pensions) that are governed purely by private law. Unlike civil servants, employees and legal representatives of legal entities (e.g. board members or managing directors) are not subject to any general contractual obligation to behave in accordance with the law. Off-duty breaches of the law are only relevant if there is a connection to the employment or service relationship. Furthermore, company pensions not only have a pension character, but also a remuneration character. The payment of a company pension also rewards the employee's loyalty to the company. Claims from pension commitments (so-called pension entitlements) enjoy property protection and become vested pro rata with increasing loyalty to the company if the employment relationship ends before the pension event occurs but after the employee has reached the age of 21 and the pension commitment has been in place for at least three years. In this respect, the Occupational Pensions Act does not contain a provision comparable to §§ 59 BeamtVG, 41 BBG on the loss of pension entitlements in the event of a criminal conviction.

However, it is established case law of the Federal Labor Court and the Federal Court of Justice that serious breaches of fiduciary duty by the employee can entitle (former) employers to "revoke" a pension entitlement or company pension in part or even in full. In the event of such serious breaches of fiduciary duty, employers can raise the objection of abuse of rights against the employee. However, it is not sufficient that there is good cause for the extraordinary termination of the employment or service relationship or that the employee has breached criminal law provisions.[2] Rather, the objection of abuse of rights is only admissible in the case of serious breaches by the employee if the employee's loyalty to the company subsequently proves to be worthless or at least significantly devalued as a result. In this context, case law has identified two constellations in particular in which (partial) revocation of a pension commitment may be considered, depending on the circumstances of the individual case:

• Cover-up of serious misconduct by the employee if this prevented the employer from terminating the employment contract in good time before the pension entitlement became vested;[3]
• Threat to the employer's existence due to serious breaches of duty by the employee (e.g. due to criminal offenses against the employer's assets such as embezzlement, theft, fraud, etc.);[4]

If revocation of a pension commitment is not likely to be successful, in the case of current company pensions, consideration should at least be given to offsetting the full amount of the employee's own counterclaims (e.g. claims for damages). In this context, attachment exemption limits in favor of the company pensioner are not to be observed if, for example, the counterclaim is based on an intentionally committed tort or other "particularly objectionable conduct" on the part of the company pensioner[5].

Conclusion

Employers are well advised to check whether a (partial) revocation of pension commitments can be considered in the event of verifiable serious compliance breaches by managers and employees. It is true that the requirements of the courts for (partial) revocation are high. However, compliance violations are regularly associated with acts of concealment, so that a (partial) revocation of a pension commitment may be promising.

If you have any questions, please do not hesitate to contact us.

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Lucas Mühlenhoff, LL.M. Lawyer, specialist lawyer for employment law

 

 

[1] Cf. press release dated December 12, 2024, available at: www.justiz.bayern.de/gerichte-und-behoerden/landgericht/muenchen-2/presse/2024/7.php

[2] BGH, judgment of December 17, 2001 - II ZR 222/99, NZA 2002, 511.

[3] BAG, judgment of November 13, 2012 - 3 AZR 444/10, NZA 2013, 1279.

[4] BAG, judgment of April 26, 2018 - 3 AZR 738/16, NZA 2018, 1066.

[5] LAG Düsseldorf, judgment of October 16, 2012 - 17 Sa 461/11, BeckRS 2013, 65003.