Indemnification of the Works Council against lawyers’ costs

BAG, judgment dated 18.3.2015 – 7 ABR 4/13

The Works Council Constitution Act (BetrVG) obliges employers to assume the necessary costs of the Works Council (Sections 40 Subsection 1, 80 Subsection 3, 111 Sentence 3 BetrVG). This also includes the costs of any advising of the Works Council by a lawyer. The obligation of the employer to assume the costs of advice aimed against the employer can involve enormous potential for conflict – in particular if the advising results in (expensive) decision-making processes.

Labor Courts are mainly generous as regards the question of whether the involvement of a lawyer is necessary in the context of a decision-making process. Through the decision quoted, the BAG (Federal Labor Court) has now again drawn attention to the fact that, when checking the necessity, the Works Council must not act solely on the basis of its subjective needs. Rather, the Works Council is required to weigh up on the one hand the interests of the workforce in proper execution of the office of a Works Council and, on the other hand, the justified interests of the employer. When deciding on the bringing of or defense against legal action, the Works Council must not disregard the interest of the employer in limiting his obligation to bear costs. Like any other party that can act at the expense of another, it must therefore adhere to the standards that it would apply if it or its deciding members were required to bear the costs.

As such, the BAG is repeating its established case law, according to which lawyers’ costs of the Works Council need not be reimbursed by the employer if the intended legal action appears obviously without prospects of success from the outset, or if legal counsel is involved in abuse of law, with the result that the interests of the employer in limiting its obligation to bear costs are disregarded. However, this hurdle is reached only in exceptional cases, and is more likely to fail due to technical errors of the Works Council.

Weighing up of interests by the Works Council

In the decision at hand, the BAG has considered the assumption of costs for the initiation of a decision-making process, aimed at appointing an arbitration body to deal with the complaint of an employee, as not necessary under Section 40 Subsection 1 BetrVG, as there was no previous attempt at agreement. Generally speaking, the legitimate interest to take legal action, required under Section 99 ArbGG (Labor Court Law) for the formation of an arbitration body, is lacking if, in a matter requiring participation, employer and employee side have not carried out the attempt at amicable agreement, envisaged under Section 74 Subsection 1 Sentence 2 BetrVG, but rather have referred the matter straight to the arbitration body.

The BAG has simultaneously made it clear that an employer is only required to bear the costs of work by a lawyer for the Works Council if the appointment is based on a correct resolution of the Works Council. The Works Council must have concerned itself with the corresponding facts as a body, and formed a uniform will through a vote. As such, the burden of producing evidence and proof lies with the Works Council.

Correct passing of resolutions

In the event of legal action spanning several instances, an effective resolution of the Works Council is required not only prior to the initial appointment of a lawyer, but fundamentally also before an appeal is lodged on behalf of the Works Council. This is particularly true if the Works Council has been defeated in the first instance. Not least in the interest of limiting the costs of the employer, the Works Council must check whether, and if so with what arguments, an appeal against a decision to its detriment offers a prospect of success. Whether the proceedings should be continued in the next instance is a matter that the Works Council cannot assess when initiating the proceedings, but rather only once it knows the reasons for the decision to be contested and has concerned itself with these.

This formal argumentation is also of significance because the absence of a resolution cannot be rectified by retrospective approval.

Summary

The basic constellation, in which the employer is required to pay for the advising of the Works Council aimed against the employer, contains potential for conflict per se. Frequently, it is then the formal arguments that can provide an employer with promising argumentation for refusing to bear costs.