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Too much money for works councils: According to the BGH ruling, HR managers are now threatened with criminal proceedings for breach of trust


Anyone who pays too much to works councils can now be accused of willful disloyalty. Labor lawyer and law professor Stefan Greiner explains why the judgment of the Federal Court of Justice is not only causing an uproar for Volkswagen. And when for companies nationwide even a self-disclosure makes sense.

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In focus:

Volkswagen's ex-works council chief

Bernd Osterloh

was the exception with an annual income of 750,000 euros at times - the dispute in the VW case ignited among other things on his salary.

Photo: Christophe Gateau / dpa

mm: Mr. Greiner, there has been a debate about appropriate payment for works councils in companies for years.

The Federal Court of Justice has now overturned the acquittals for four former VW managers and found that a board member or authorized officer can be prosecuted for breach of trust if they pay an excessive salary to a works council.

Is there finally clarity with the judgment of the BGH?

Stefan Greiner:

It is now clear that the Federal Court of Justice has drawn the penal limits much narrower than was previously expected.

In labor law, the matter was already quite clear: according to the Works Constitution Act, work on the works council is an honorary post, but at the same time works councils may not be disadvantaged or favored because of their work.

However, these specifications are quite vague and open up a wide scope for interpretation.

The ban on discrimination was already effective because affected works councils took legal action before the labor court in the event of a dispute.

However, favoritism has not been a history of complaints, and some hiring managers have believed that there are no criminal penalties for overpaying employee representatives.

This has fundamentally changed as a result of the judgment of the BGH, and the world has been different for companies since then: HR managers are now threatened with criminal proceedings for breach of trust if they favor their exempted works councils.

The VW case was negotiated.

Why is the judgment still of particular importance for all Dax companies?

When it comes to co-determination, companies are in a real dilemma.

It is clear that works councils take on very responsible and important tasks.

These require negotiation skills, communication skills and economic expertise.

In particular, long-standing works council members, who also sit on the supervisory boards of corporations, often take on the tasks of a "co-manager": It is hardly possible to take these tasks into account in the remuneration due to the principle of honorary office.

Many companies are therefore in a quandary and tend to push the limits of paying their voluntary works council members quite a bit - sometimes beyond the limits of what is legally acceptable.

This is not a Volkswagen phenomenon.

This is widespread in the world of corporate co-determination.

Does that mean in concrete terms that all companies now have to fear criminal prosecution?

I can only advise all companies to take a close look at the remuneration models for their works councils now - and to adapt them to what is legally permissible as quickly as possible.

This is the only way they can avert criminal liability for their acting managers in the future.

That means the works councils get less money.

Some works councils will certainly have to accept a drop in salary.

The potential for conflict is immense.

How does a human resources manager know what is legal?

When does the benefit start?

Here, too, the BGH applies a strict standard and sets narrow limits.

For example, it is not permissible to assume a hypothetical "special career" for the works council.

To put it simply, an exempt works council member is paid according to the salary group in which he was at the time of his election.

A salary development beyond this salary group is only possible if the majority of comparable, similarly qualified colleagues in the company have also undergone this development.

The company must document and prove this.

So it's not just about annual remuneration of 750,000 euros, as in the case of former VW works council chief Bernd Osterloh.

Significantly lower privileges can also be criminally relevant.

So even a payment of a few hundred euros in excess of the collectively agreed salary group can result in a criminal complaint?

Since the judgment of the BGH is now available in black and white, no one can claim that nothing was known.

One can therefore assume that the responsible board members and board members acted with intent.

In the future, personnel managers will have to reckon with criminal prosecution, even if the benefits are relatively small.

After the judgment of the highest German criminal court, public prosecutors are likely to take a much closer look in the future - and not just at a few corporations, but in the breadth of the German corporate landscape.

The written judgment of the BGH has been available since mid-February.

Is there a criminal risk already hovering over the monthly statement for March?

Generally, yes.

In any case, companies should not lose any time in reviewing their remuneration practices for works councils - and, if necessary, adapting them as quickly as possible.

Works councils whose salary is now being cut will probably fight back in the labor court.

Companies fear a wave of lawsuits.

I think the chances of resisting it are pretty slim.

If a remuneration agreement is unlawful according to the standards of the BGH and BAG, then it is void.

Affected works councils cannot refer to these for the future.

Some employee representatives fear that they will even have to pay back money.

The legal situation is controversial: The affected works councils were the beneficiaries in view of the past payments.

The companies that can be accused of violating the law were responsible for the payments.

Against this background, the companies could find it difficult to recover the money from the beneficiaries.

On the other hand, there is definitely an approach in case law that an unlawful asset situation in such cases must be corrected by repayment.

For years, many companies and corporations have been working with remuneration models that are based on selected peers or the principle of loss of earnings.

They saw themselves in accordance with the most recent judgments of the Federal Labor Court.

What do companies that previously thought they were on the safe side of the law have to look out for when reviewing their models?

The benchmark is the principle of volunteering.

This means: Skills and qualifications acquired while working as a works council member may not be taken into account in the payment.

Flat rates or allowances due to special loads, for example during night-time collective bargaining, are also legally critical: only those allowances may be paid that are also common in the corresponding comparison group.

Companies must be careful to correctly form the peer groups for their works councils – and they must give good reasons if a works council's remuneration exceeds the remuneration of the peer group.

Assuming a special career to a long-standing works council and paying him or her a correspondingly higher fee is not compatible with the principle of honorary office.

And if companies now find out during this review that they have been paying their exempted works councils more money than the comparison group for years?

If the works council members were remunerated "extraordinarily high" - i.e. deviated massively from the comparison group - then after legal advice a voluntary disclosure should even be considered.

In the case of minor transgressions in the past, one would rather not assume a breach of trust.

But with a view to the future, things look different: now intentional infidelity can be assumed.

Critics believe that the sixth criminal senate of the Federal Court of Justice has rolled over the most recent case law of the Federal Labor Court with its judgment.

Do you also see a conflict between criminal and civil law?

I don't see this conflict.

In principle, the Federal Court of Justice has based itself on the case law of the Federal Labor Court: voluntary work, prohibition of discrimination, prohibition of preferential treatment, salary development within the framework of normal company development.

The criminal law dimension is new, as are the possible criminal law consequences: whether the Federal Court of Justice overshot the target with regard to intent and breach of trust is debatable.

But it is also clear that the judgment has created a new situation for everyone involved.

The principle of co-determination envisages that works councils also work on the supervisory boards of corporations and treat top managers as equals in negotiations.

Is the voluntary principle laid down in the Works Constitution Act still up to date?

The BGH only answered the question: "What can a works council earn?"

The question "What is works council work worth?"

did not stand up for the judges at all.

It's a societal question.

A question that aims at the Works Constitution Act.

Unionists have been calling for an overhaul for years, the most recent reform was around 50 years ago...

A reform of the Works Constitution Act, which puts the payment of works councils on a new legal basis, would have to be initiated by the trade unions and parliament.

That would result in an exciting social debate: On the one hand, representing the interests of employees should not be based on material incentives.

On the other hand, entrepreneurs and trade unions have an interest in the works council's work being carried out professionally and that there are always enough committed colleagues to work on the works council.

Perhaps the judgment of the BGH will contribute to the fact that this debate is now being held.

Source: spiegel

All news articles on 2023-02-23

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