Works council salaries: Federal Court of Justice considers infidelity to be possible if works councils receive high salaries

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IG Metall boss

: "Works council work is not compatible with manager salaries"

Photo: Britta Pedersen / dpa

Only the salaries of the works councils in the Volkswagen Group were negotiated.

However, the sentences with which the judges at the Federal Court of Justice in Karlsruhe orally justified their judgment on January 10 made personnel managers sit up and take notice across the country: If board members in companies pay their works council members too high a salary, the offense of infidelity could be fulfilled (Az 6 StR 133/22).

According to the highest German court, top managers may be liable to prosecution if they pay too much money to employee representatives who have been released from work.

As a result, the BGH overturned the acquittals for four former VW managers and referred the case back to the Braunschweig Regional Court: With their decision, the Karlsruhe judges ensured that the dispute about the appropriate payment of works councils, which had been smoldering for years, boiled up again.

The case is not a special case for Volkswagen, but is of fundamental importance for companies in Germany and for the German model of co-determination.

If the Federal Court of Justice questions the remuneration system that has been in use up to now in its written justification expected at the end of February, then hundreds of corporations and companies in Germany will have to react.

Like many other DAX companies, Volkswagen only wants to comment on the remuneration dispute once the BGH has written its reasons for the judgment.

According to information from the "Handelsblatt", an internal task force in Wolfsburg is already busy preparing a salary cut for 80 of the approximately 250 exempted works council members in the group.

"Hypothetical career" of works councils: According to the BGH ruling, the VW model can no longer be maintained

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Ex-works council chief

: In years with a high bonus, up to 750,000 euros at VW

Photo: Christophe Gateau / dpa

In the specific case, the public prosecutor's office accuses two former VW board members and two HR managers of having paid several senior VW works councils over the years 2011 to 2016.

The long-standing head of the VW works council ,

(66), received up to 750,000 euros a year as a top earner including a bonus.

Osterloh started as a line worker at

, but as head of the works council he saw himself as a "co-manager", without whom important decisions at VW could hardly be made.

In the Osterloh case, Volkswagen referred to a so-called "hypothetical career": In his more than 30 years at Volkswagen, the head of the works council had also been offered top management positions, which he had turned down because of his work as head of the works council.

After leaving the general works council in 2021, Osterloh actually switched to the board of directors of the VW subsidiary

and has been working as HR director ever since.

However , the BGH rejected

payment on the basis of a "

Works councils are supposed to negotiate "on an equal footing" with the top managers in a group.

However, this does not mean that they are entitled to be paid like a top manager.

Works council as honorary office: the majority of corporations work with comparison models

In contrast to VW, the majority of DAX companies work with the "

" model - a remuneration model that follows the case law of the Federal Labor Court (BAG) from 2005.

The Dax companies surveyed are correspondingly relaxed: they see no reason to change anything in their current remuneration models.

At least as long as the written judgment of the BGH is not available.

"Each fully exempted works council member is assigned comparable persons who are comparable to the works council member in terms of training, function and professional career," said

at the request of manager magazin.

These comparison persons form the "yardstick for a development customary in the company": If there is a salary increase for them, the member of the works council who is released from work also receives this salary increase.

handles it in a similar way

, basing the salary of a works council "on the career path of three selected employees who have comparable starting positions."

The benchmark for the remuneration of the works council is therefore "the typical normal course"

Such an auxiliary construction, which forms the salary of an exempt works council through a "shadow cabinet" of several comparable employees, has become necessary because the Works Constitution Act (BetrVG) hardly gives any concrete guidelines on the subject of payment for works councils.

"The members of the works council hold their office free of charge as honorary posts," it says succinctly in §37 BetrVG.

At the same time, employees who work full-time as part-time works council members may not be disadvantaged or favored because of this activity (§78 BetrVG).

Because work on the works council itself cannot be remunerated, but the elected employee representatives cannot be disadvantaged either, corporations such as

pay their exempted works councils according to the wage loss principle: when it comes to remuneration, it is assumed that the respective works council member would have continued in his or her previous position.

The car

also bases its remuneration model on the case law of the Federal Labor Court: BMW, BASF, Continental and Telekom currently see no reason to review or change their remuneration models.

Conflict between criminal law and labor law

Nevertheless, the judgment of the BGH leads companies into dangerous territory.

So far, disputes about the payment of works councils have been negotiated and decided before the labor courts, the BAG has given the direction with corresponding judgments.

Now, however, personnel directors have to fear that they will be liable to prosecution for breach of trust if they pay too much salary or too high bonuses to workers' council members who are not on duty.

The topic becomes even more explosive because the Works Constitution Act does not contain any specific guidelines as to how much money a works council may earn and up to what limit HR managers are on the safe side.

and

are therefore eagerly awaiting the detailed written justification of the BGH judgment - and are hoping for concrete specifications

.

"We would welcome it if the legislature would create regulations to eliminate the existing legal uncertainties in the remuneration of works councils," a Siemens spokesman told manager magazin.

Unions push for reform

Trade unions and employee representatives formulate their criticism more clearly.

According to IG Metall, 50 years after its most recent amendment, a revision of the Works Constitution Act is overdue.

But all reform proposals, whether from IG Metall or the German Trade Union Confederation (DGB), have failed in parliament in recent years.

"More clarity and certainty," demands the chairman of IG Metall,

(67).

He expects that the BGH will return the ball to the Federal Labor Court on the question of "appropriate remuneration".

"I cannot imagine that the highest German court in criminal law would contradict the highest German court in labor law," said Hofmann during the annual press conference of IG Metall in Frankfurt.

For him personally, working on the works council is not compatible with manager salaries, emphasizes Hofmann: "Works councils shouldn't earn more than those they elect."

In the worst case, those involved fear that the judgment of the Federal Court of Justice will also call into question the remuneration models previously approved by the Federal Labor Court.

Then not only Volkswagen, but many companies would have to react quickly.

And the discussion about a reform of the Works Constitution Act would continue to pick up speed.

According to one observer, "Most changes occur under high pressure."