Bloomberg News

BayernLB Loses Pension Case at Germany’s Top Labor Court

May 15, 2012

Bayerische Landesbank, Germany’s second-biggest state-owned lender, was wrong to stop granting employees extra pension plan packages after being bailed out, the country’s top labor court ruled.

The Federal Labor Court in Erfurt rejected an appeal against lower court rulings that found the lender must continue to grant the benefits, regardless of its financial troubles. Today’s cases are the first to reach the top court over the issue and may guide judges in hundreds of similar suits.

“We take the decision with regret,” company spokeswoman Franziska Roederstein said in an interview. “We have to make a one-time provision in a high two-digit million” euros because of the ruling.

BayernLB was among the German banks that were bailed out in 2008. The Munich-based bank received 10 billion euros ($12.8 billion) in capital and a 4.8 billion-euro risk shield from the Bavarian government, as well as 15 billion euros in loans from Germany’s bank-rescue fund.

The plaintiffs, who became eligible for the bank pension program in 2010, relied on a rule in a 1972 merger agreement that set up BayernLB by uniting smaller public lenders. Under the rule, employees who have been working in the banking sector for 20 years, of which 10 years must have been at BayernLB, may get an additional pension package decided on by management.

From 1972 to 2008, those packages were granted to virtually all employees with good performance. The bank stopped the program in 2009 after receiving government assistance.

The plaintiffs argued that, under German labor law, the bank bound itself because it granted the pension over decades and must treat all employees equally. BayernLB countered that it was necessary to end the program because of its financial situation and that the contracts didn’t guarantee the workers’ payments that were at the lender’s discretion.

The labor court heard nine cases over the issue today. Hundreds of more suits by employees are pending.

Today’s case is: BAG, 9 Sa 484/10 et al.

To contact the reporters on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons in London at aaarons@Bloomberg.net.


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