social plan severance age is a common feature of many social plans: older employees close to retirement often receive a considerably lower severance than younger colleagues with similar length of service.
social plan severance age: Legal basis
The General Equal Treatment Act prohibits discrimination because of age – but makes an explicit exception for social plans in § 10 sentence 3 no. 6 AGG. Works council and employer may grade severance payments according to age or length of service, even if this treats younger or older employees differently. The reason: A social plan is meant to alleviate the economic disadvantages of job loss, not to fully replace lost income – and these disadvantages vary depending on age and labor‑market prospects. This approach to social plan severance age reflects the idea that older workers nearing retirement often have access to early retirement benefits and therefore need less protection than younger staff who must bridge the gap to the next job without such support.
BAG ruling: Severance under social plan drops to a minimum after age 60
How far this discretion reaches was clarified by the Federal Labour Court on March 26, 2013 (Case 1 AZR 857/11) in a concrete case. A field‑service employee born in 1946, employed since 1987, was dismissed on 1 July 2009 as part of the closure of the field service department. The social plan calculated severance using the formula gross monthly salary × years of service × age factor. The factor rose from 0.7 (ages 30‑39) to 1.0 (ages 51‑59), then fell to 0.3 (ages 60‑62) and to 0 for employees over 62 – backed by a minimum severance of two monthly salaries.
The claimant was 63 at the time of dismissal and therefore received only the minimum severance of about €10,650 on a gross monthly salary of €5,325, while younger colleagues with the same length of service got multiples of that amount. He sued for the full factor and argued age discrimination. The Federal Labour Court dismissed the claim: the reduction is justified because employees in this age group typically have access to early retirement benefits and are thus economically less in need of protection than younger workers who must bridge the period until the next job without that safety net.
When a social plan severance can still be challenged
The ruling does not mean that every social plan severance with age grading is automatically lawful. Courts examine each case to see whether the grading pursues a legitimate aim and is proportionate. Factors that may render a social plan severance vulnerable to challenge include:
- No minimum amount: If the severance for older employees drops to zero without them actually having a secured retirement provision (e.g. a pension without deductions), the factual justification is missing.
- Fictional instead of actual proximity to retirement: If a blanket retirement age is used that the employee cannot reach because of a later career path or deductions, the typification is open to attack.
- Abrupt instead of gradual grading: A sudden jump from full severance to a fraction at a single age threshold is more likely to be seen as an impermissible generalization than a smooth reduction.
- Incorrect cut‑off date: If the relevant age or length of service is miscalculated – for example, the cut‑off day is set wrong – this alone can entitle the employee to the higher tier, irrespective of the AGG question.
What affected employees should check before filing a claim
Anyone receiving a reduced social plan severance should first read the exact wording of the grading clause and recompute their own cut‑off date – mistakes in assigning an employee to an age group are not rare in practice. Only once the calculation itself is correct does the substantive AGG question arise: Does the grading pursue a legitimate aim, and is it proportionate? A protection‑against‑dismissal suit concerning the underlying dismissal and a separate suit for the correct social plan severance are legally distinct and should both be examined in good time.
Whether age may play a role at all is not only a question for social plan severance age but also for the calculation of severance based on age in general. Because such a dispute with the employer can go through several instances, many affected persons shy away from the cost risk. Litigation funding by RechtStark assumes this risk and makes it possible to enforce a justified claim without having to advance the costs of the proceedings oneself.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.