26. Sep 17

Possible to agree to age limit for managing directors as grounds for termination

It is possible to agree to an age limit for a managing director of a GmbH in his employment contract, with his reaching the specified age serving as grounds for ordinary notice of termination. That was the verdict of the Oberlandesgericht (OLG) Hamm [Higher Regional Court of Hamm].

In the instant case, the plaintiff had been employed as a manging director at a company since 2005. The employment contract included a fixed term that was supposed to run until August 31, 2018, yet it also featured a provision stating that both parties could terminate the contract with six months ordinary notice once the managing director reached the age of 60. In 2015, the company’s meeting of its shareholders dismissed the managing director and issued ordinary notice of the contract’s termination in due time shortly thereafter. The managing director took the view that the termination was unjustified, arguing that he was being discriminated against on account of his age by the relevant provision in the employment contract. He therefore claimed that this provision violated Germany’s Allgemeine Gleichbehandlungsgesetz (AGG) [General Act on Equal Treatment].

Nonetheless, his legal action against the termination was unsuccessful. The Oberlandesgericht Hamm held in its ruling of June 19, 2017 that it is possible to agree to an age limit of 60 in the employment contract of a GmbH managing director without violating the AGG. It went on to say, however, that for this to happen the managing director must be entitled to a company pension after leaving the company (Az.: 8 U 18/17).

The OLG Hamm left open the question of whether the AGG should be applied to the dismissal of a managing director in the first place, stating that even assuming protection for legal persons as employees based on the AGG, the clause agreed in the employment contract was valid.

The Court ruled that agreeing to an age limit below the statutory retirement age for GmbH managing directors is acceptable in principle if it is ensured that the managing director will be entitled to a company pension after his departure. The OLG justified this by arguing that the job profile for executive bodies is particularly demanding and might therefore give rise to a commercial interest in an age limit. The ruling is not yet final, with an appeal to the Bundesgerichthof, Germany’s Federal Supreme Court, having been lodged.

Dismissing a managing director and terminating his employment relationship frequently leads to legal disputes. We at the commercial law firm GRP Rainer Rechtsanwälte recommend incorporating appropriate provisions in the articles of association and employment contract. Lawyer who are experienced in the field of company law can offer advice.

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