Has an employer failed to fulfil its obligation to provide a pension scheme? Then an employee can make a claim for fulfilment and/or compensation. An employee can also claim payment for the harm he/she has suffered due to missing pension rights. (Fulfilment of the pension commitments is not an issue if the employee has left the company in the meantime.) A pension agreement entitles an employee to a pension.
In that case, an employer is obliged to pay the pension premiums. They also have to ensure that the pension agreement is realised according to the rules. This means deducting a monthly employee share from the salary, which the employer pays to the pension provider together with the employers own share. In a recent court case, a former employee claimed damages, arguing that their employer had failed to fulfil its obligation (as stated in the employment contract) to register with the pension fund and pay the premiums. The compensation claim was equal to the part of the pension premiums payable by the employer. The employee argued that the employer had not paid the premiums, contrary to the pension agreement.
The employment contract stipulated that the employer would ensure the payment of premiums to the pension fund. The employer had failed to fulfil this arrangement. It had not deducted any employee contribution for the pension premium from the employee’s salary. It had also not paid any pension premium itself. According to the employer, the reason was that the employee had not accepted the offer to participate in the pension scheme because he had not completed and returned the participation form for that purpose. The employer had deduced from this that the employee was not interested in entering into a pension agreement. Subsequently, the employee refuted this.
The Court of Appeal ruled in favour of the employee, as did the Sub-district Court. The court ruled that the employer could not simply assume that the employee did not want to participate in the pension scheme, since agreement to the pension scheme formed part of the employment contract.
It was ruled that in case of any deviation from this agreement, the employer had to inform the employee properly. It was therefore not acceptable on the part of the employer to assume the employee’s non-participation in the pension scheme on the basis of a failure to complete a separate participation form. The court concluded that the employer had not fulfilled its obligation under the pension agreement to administer the pension and pay the premium. The employer was therefore obliged to compensate the employee for the loss of two years’ worth of pension accrual.
Court of Appeal ‘s-Hertogenbosch 3 May 2022, ECLI (abridged): 1408
Inform employees properly about the pension scheme
What can we learn from this ruling? It is essential for the fulfilment of the pension scheme agreement that employees are properly informed about the scheme, and that any agreements about it are clearly discussed.
Your organisation cannot simply assume that an employee does not want to participate in a pension scheme, but rather must ensure that employees are aware of the consequences of not accruing a pension.
Duty of care
Are you an employer with fewer than 50 employees and you conclude a pension agreement with these employees? Then you assume a duty of care. This duty of care means, among other things, that your organisation must properly inform employees about the content of the pension scheme, as well as any changes to it. The above ruling also shows that the financial consequences of having unclear agreements about a pension scheme can be considerable. Your organisation should also be careful not to assume a pension liability, which is what the employer did in this case.
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Court of Amsterdam 13 September 2021, ECLI (abridged): 5029.
This article appeared earlier in Rendement.