Federal Labor Court Decision (BAG, Judgment of 28 April 2021, 4 AZR 229/20)

The validity of a dynamic reference clause in an employment contract—both in content and over time—requires that the collective agreements it refers to be clearly identifiable. When multiple collective agreements are referenced, this condition is met as long as the agreements are substantively identical.

If the content of the collective agreements diverges and the reference clause contains no conflict resolution rule, the dynamic nature of the clause ceases to apply. Instead, the reference becomes static and is limited to the last commonly applicable collective agreement.

Case Background

Until 2017, the employer—through its employers’ association (AGVL)—had concluded identical collective agreements with both the ver.di union and the Independent Flight Attendant Organization (Ufo). These included, among others, agreements on occupational pensions, early retirement (2002/2003), remuneration, and general working conditions.

In 2013, the employer terminated the pension agreements with both unions. However, the last jointly concluded collective agreement on general working conditions (MTV 1b) was not terminated and therefore continued to apply normatively. It still referred to the “old pension scheme.”

Subsequently, the employer concluded new collective agreements on working conditions solely with Ufo.

The employment contracts of the affected employees included so-called dynamic reference clauses, such as: “the applicable collective agreement shall apply.”

The plaintiffs experienced significant financial losses due to the application of the new pension agreement concluded only with Ufo. They filed suit, arguing that the new agreement should not apply.

Ruling by the Fourth Senate of the BAG

The court ruled in favor of the plaintiffs. It held that a dynamic reference clause in an employment contract is only valid if the referenced collective agreement(s) can be clearly identified.

When a clause refers to multiple collective agreements, this clarity only exists as long as the agreements are substantively identical.

If that clarity is lost due to diverging content in successor agreements by different unions—and the clause contains no conflict resolution provision—the dynamic nature of the reference no longer applies. However, this does not render the clause invalid. Instead, it transforms the reference into a static one, limited to the last shared version of the collective agreement.

Thus, “the applicable collective agreement” is not necessarily the newest, but rather the last commonly valid one.