Involvement of the works council in adjusting the remuneration of an exempted works council member

BAG 26 November 2024 - 1 ABR 12/23

The remuneration of (released) works council members has become the focus of public attention at the latest with the ruling of the Federal Court of Justice (BGH) of 10 January 2023 (case no. 6 StR 133/22) on the question of criminal liability for breach of trust in the event of violations of the prohibition of preferential treatment under works constitution law. The judgement of the BGH prompted many companies to review the remuneration of their works council members. In addition, the "Second Act to Amend the Works Constitution Act", which came into force on 25 July 2024, created "new rules" for the remuneration of works council members. With their judgement on the involvement of the works council in the remuneration adjustment of an exempted works council member, the judges of the First Senate in Erfurt have now also provided further legal certainty on this relevant topic

Facts of the case

The employer, which regularly employs more than 20 employees entitled to vote, operates two car dealerships in Leipzig for which the applicant works council has been established. 

The employer remunerated the Chairman of the Works Council, who was released from his professional duties, until the end of May 2020 in accordance with remuneration group VI of the collective wage agreement for employees of the member companies of the Central German Motor Vehicle Industry Collective Agreement in Saxony (TV).

After the released Chairman of the Works Council successfully completed the "Management Potential" assessment centre on 24 March 2021 and thus fulfilled the requirements for taking on the position of workshop manager, the employer paid him in accordance with the higher pay group VIII of the relevant collective agreement. 

The works council was of the opinion that it was entitled to a right of co-evaluation in accordance with Section 99 (1) BetrVG and asserted its participation in court in accordance with Section 101 sentence 1 BetrVG. The Leipzig Labour Court (case reference: 3 BV 17/21) and the Saxony Regional Labour Court (case reference: 3 TaBV 26/21) upheld the works council's application.

Decision of the Federal Labour Court (BAG) of 26.11.2024 - 1 ABR 12/23

The employer's appeal on points of law was successful before the First Senate of the BAG. According to the BAG, the works council is not entitled to a right of co-determination pursuant to Section 99 (1) BetrVG when increasing the salary of a works council member released from duties on the basis of Section 37 (4) BetrVG or Section 78 sentence 2 BetrVG. 

According to this provision, the works council must be involved in classification and reclassification, i.e. if the employer assigns the work to be performed by an employee to a pay group of the relevant pay scale. According to the BAG, the employer does not make such an assignment when increasing the remuneration of an exempted works council member pursuant to Section 37 (4) BetrVG or Section 78 sentence 2 BetrVG. Rather, the remuneration of the works council member is adjusted in accordance with the statutory provisions set out in these standards, i.e. either in line with the customary professional development of comparable employees (Section 37 (4) BetrVG) or to avoid discrimination because the works council member could not be promoted to a higher-paid position solely as a result of taking office (Section 78 sentence 2 BetrVG).

Practical note

The decision of the First Senate is to be welcomed from both the employer's and the works council's perspective, as it establishes clear principles on the scope of the right of co-determination pursuant to Section 99 (1) BetrVG and thus provides legal certainty on this controversial legal issue. In addition, the decision joins a large number of decisions by the highest German labour court on works council remuneration in recent years and thus underlines the high practical relevance for all parties involved.

The First Senate convincingly states that the works council has no right of co-determination pursuant to Section 99 (1) BetrVG if the employer sets the minimum wage pursuant to Section 37 (4) sentence 1 BetrVG. It thus confirms a decision of the LAG Baden-Württemberg of 26 May 2023 (case reference: 12 TaBV 1/23). The typical assignment of an activity to the characteristics of a remuneration scale for a classification or reclassification does not take place here. The amount of the remuneration entitlement under Section 37 para. 4 sentence 1 BetrVG is independent of the activity owed by the works council member under the employment contract. It is based solely on the remuneration of comparable employees with customary professional development. Even in the case of a remuneration adjustment pursuant to Section 78 sentence 2 BetrVG, the BAG is of the convincing opinion that there is no allocation of an activity to be performed by the employee to a specific group of a remuneration scale. This applies even if the pay for the higher-paid position - as in the case decided - is based on a company pay scale. In this case too, the work tasks to be performed by the works council member are not assessed - as required for classification or reclassification - but only a possible job.