Age as ambivalent criterion in social selection

In its ruling of 8 December 2022 (6 AZR 31/22), the Federal Labour Court (Bundesarbeitsgericht) pointed out that the criterion of age is an ambivalent variable in the context of social selection. Although older employees are usually in more need of social protection than younger ones, age can be assessed to the disadvantage of employees who will be entitled to statutory pension payments without deductions within a maximum period of two years after the intended termination date.

Social selection process required in case of redundancies

If employees out of a group of comparable employees shall be made redundant for operations reasons, a so called social selection (Sozialauswahl) must be carried in order to identify those employees who are in least in need of social protection; they are to be dismissed first. The social selection is carried out on the basis of the following four criteria that are listed in the Dismissal Protection Act (Kündigungsschutzgesetz): length of service, age, number of dependants (spouse and children) and severe disability.

In the case of mass redundancies, the different criteria are weighted and points are awarded for each criterion in order to identify the employees who are in least need of social protection. A higher age generally results in a higher number of points and thus a stronger need for social protection. Since older employees have usually been employed longer with the company than younger colleagues, age again works in their favour in the criterion of length of service. They therefore usually have a high social protection, which is justified by the fact that the chances of finding a new employment decrease with increasing age.

The reasoning of the court

With regard to the criterion of age, the Federal Labour Court now ruled that the employee’s entitlement to receive statutory pension payments without deductions within the next two years following the effective termination date (and, even more so, the fact that the employee already receives a statutory pension payment) can be taken into account to the disadvantage of the employee. A higher age is therefore not automatically and linearly associated with a higher need for protection. Instead, the age may work to the detriment of employees who are close to retirement.

It is not clear from the press release why the Federal Labour Court referred to a period of exactly two years. This period was probably chosen because older employees, who have previously been employed for at least four years, are entitled to receive unemployment benefits for a maximum period of two years. They can therefore bridge the period of time until they will receive a statutory pension payment by receiving unemployment benefits.

This decision is in line with case law of the Federal Labour Court on the calculation of severance payments, where the fact that employees are close to retirement also justifies a less favourable calculation of severance payments in order to avoid overcompensation.

Effects on practice

The press release suggests that the employer can take into account that employees are close to retirement, but is not obliged to do so. This gives the employer some flexibility in the social selection process.

Applying a strict period of two years has the consequence that the criterion of age in the context of social selection suddenly gets the opposite effect. Employees who were on the safe side in terms of social selection may find themselves in a far less favourable position from one day to another. This hard tipping point is unsatisfactory. It is however to some extent mitigated by the fact that all four criteria are still to be taken into account and employees who are close to retirement will therefore continue to benefit from their length of service in most cases.

Finally, severely disabled employees must not be discriminated by this adjudication. Therefore, their entitlement to receiving unreduced statutory pension payments for severely disabled employees at an earlier point in time must not be not be taken into account in the social selection.