Uncertainty regarding permissible amount of works council remuneration
The Works Constitution Act (BetrVG) does not go into great detail regarding the remuneration of works council members. The Federal Labor Court (BAG) has had good reason to develop fundamental principles in this regard.
The Federal Court of Justice (BGH) for criminal matters issued a ruling in early 2023 which caused uncertainty among those responsible as excessively high works council remuneration may constitute a criminal offense of embezzlement. As a consequence of this case law, some companies then significantly reduced the remuneration of works council members released from the other duties in a move to minimize the risk of criminal liability.
Although this approach is an understandable step in terms of risk mitigation, it is not a long-term solution for either side. The first courts have already ruled that wage reductions are unlawful.
An expert commission provides basis for the draft law
Building the proposals of the expert commission for “Legal certainty for works council remuneration”, the German government recently submitted a corresponding draft law intended to supplement Section 37 (4) and Section 78 of the Works Constitution Act (BetrVG).
“Comparable employees”
The initial aim is to supplement Section 37 (4) sentence 1 of the Works Constitution Act (BetrVG). This section currently stipulates that the remuneration of works council members “… may not be fixed at a lower rate than the remuneration paid to employees in a comparable position who have followed the career that is usual in the establishment.”
However, the provision does not go so far as to define the relevant comparison group. To date, this has been defined by Federal Labor Court case law.
In future, Section 37 (4) of the Works Constitution Act (BetrVG) shall include a provision regarding the relevant comparison group together with an option allowing for deviations due to objectively justified reasons. Furthermore, the parties will be able to conclude specific agreements defining the relevant comparison group. It should only be possible to review these agreements in the event of gross errors so as to leave the parties sufficient scope to agree on truly individualized regulations within the company.
“Prohibition of discrimination and favoritism”
Section 78 sentence 2 of the Works Constitution Act (BetrVG) also governs aspects related to works council remuneration. In conjunction with Section 611 a of the German Civil Code (BGB), this paragraph establishes a claim to a certain remuneration if lower remuneration would constitute a disadvantage arising from the works council activity. According to this Federal Labor Court case law, a works council member may not be financially disadvantaged because, for example, they were not promoted as a consequence of their works council activities.
This provision will now also be supplemented in line with prior Federal Labor Court case law:
The future law will clearly stipulate that a works council member is not disadvantaged or favored if they receive higher remuneration because they meet the necessary company requirements and criteria. This can consist of the remuneration arising from a promotion, for example.
However, such a claim is ruled out if the employer can objectively justify why the works council member would not have received the promotion.
Summary
The draft law adheres closely to the Commission’s proposals and, as a result, transposes parts of the Federal Labor Court’s case law on works council remuneration into applicable law.
In doing so, the legislator creates greater legal certainty for companies and works councils. Only time will tell to what extent and whether the regulations will pass the practical test. However, the draft has not yet become law.
You can also read more about these issues in our article “Determining the legally compliant works council remuneration”
What can we do for you?
Do you have any questions about works council remuneration and the current draft law? Do not hesitate to contact us!
Summary of the key facts:
- Until now, works council remuneration was only roughly regulated in the Works Constitution Act (BetrVG).
- Building on the proposals of an expert commission, the German government has now presented an initial draft law to clearly regulate works council remuneration.
- The draft law is based on proposals that fairly transpose the Federal Labor Court’s case law.
