The works council’s right to inspect payroll with gross salaries broken down by employee names

The works council may demand access to the employees’ payroll. Considerations under data protection law do not require anonymization or pseudonymization.

Federal Labor Court, May 7, 2019 – 1 ABR 53/17

Facts of the case

A company granted the works council access to its electronic employee salary file – the payroll showing gross salaries, while stripping employees’ names from the list, thus in anonymized (more correctly: pseudonymized) form. The works council requested access to the payroll showing gross salaries broken down by employee names in court.

Decision

The works council prevailed in all three instances. The Federal Labor Court reviewed issues relating to data protection law in detail.

The court states that the transfer of data from the employer to the works council – irrespective of the discussion as to whether the works council is “part of the data processor” or whether it is a data processor itself – requires justification under data protection law. The Federal Labor Court further states that Section 80(2) sentence 2 Works Constitution Act itself does not constitute such a standard of justification.

Rather, the justification under data protection law for data processing is provided by Section 26(1) sentence 1 Federal Data Protection Act, according to which data processing is justified “... where necessary … to exercise or satisfy rights and obligations of employees’ representation laid down by law ...” Section 80(2) sentence 2 Works Constitution Act entitles the works committee or a committee set up in accordance with Section 28 Works Constitution Act “to inspect the payroll showing the gross wages and salaries of the employees.” Accordingly, the data collection would be justified by Section 26 Federal Data Protection Act, because the works council is entitled to the right according to Section 80(2) sentence 2 Works Constitution Act. Due to the legislative decision, no additional individual assessment was required. Since the payroll would only list gross salaries, the works council would not have access to sensitive personal data (marital status, number of children, religious affiliation). In addition, the works council would only be able to inspect the data and do so not as a body, but only as members of the committee. Finally, the German provision in Section 26 Federal Data Protection Act is also in line with Article 88 GDPR, which is why the works council as a whole has the right to access the list broken down by employee names.

The Federal Labor Court further states that the scope of the works council’s right of access is not restricted by the provisions of the Transparency in Wage Structures Act, either. In that law, there would be data protection restrictions on employees’ right of access, which do not apply, however, to the relationship between employer and works council that is detached from the Transparency in Wage Structures Act – particularly since independent rights under the Works Constitution Act are concerned.

Assessment

The Federal Labor Court decision is largely correct and welcome. What is correct above all is the statement that the restrictions under data protection law are also to be considered in the relation to the works council, thus each individual transfer of data to the works council requires justification. On April 9, 2019 (1 ABR 51/17), the First Senate already reminded the works council of its own duties in internal data processing and data protection (access restriction, erasure of data provided to the works council by the employer, etc.). With its May 7, 2019 decision, the Federal Labor Court is now continuing this trend.

The Federal Labor Court also rightly refers to Section 26 Federal Data Protection Act, which justifies the transfer of data to the works council in paragraph 1 sentence 1. In what is typical for data protection law, however, this is not a blanket justification for each case of participation, but exclusively made within the scope of necessity. The Federal Labor Court decision exhibits a key gap in this relation, however. It refers correctly to the necessity criterion in Section 26 Federal Data Protection Act. It also correctly holds that the right of access under Section 80(2) sentence 2 Works Constitution Act is also granted only within the scope of necessity. There is still a need, though, to address the question of why it is necessary to access a payroll broken down by names instead of a pseudonymized list. The fact that more personal data is not included in lists showing gross salaries only describes the intensity of the intervention (which according to the Federal Labor Court is mild), but fails to justify it.

While the Federal Labor Court points out that the employer has a list broken down by names and that the works council has a right of access to the list, the argument – as in the previous instance at Hamm State Labor Court – represents a wrong conclusion. The employer does not (only) have one list. Right from the beginning, the employer apparently had various (electronic) lists available; it had granted the works council access to an anonymized payroll. The employer has access to all payroll-relevant data of its employees – including the more sensitive data (religion, etc.). Even “the” gross salary list itself had to be drawn up separately (for the works council). Therefore, the argument does not even hold true linguistically. It is also wrong in the subject matter itself. The question is whether the listing of the names in the payroll showing gross salaries (in the case at issue, a company with between 200 and 400 employees) holds any added value for the works council’s work and the exercise of its rights and obligations. The right of access is intended to enable the works council to maintain and grant salary equity in the company. For this purpose, it must know primarily the remuneration data, the work performed, the job titles, and classifications, if any. Whether the employee’s name is Müller, Schmidt, or Schneider is irrelevant for this question. In this respect, it speaks volumes that neither the Federal Labor Court decision nor the decision of the lower instance offer independent arguments for the necessity of listing names in the gross salary list. Those arguments are not recognizable, either. 

Cases are repeatedly cited in which the works council wishes to clarify injustices of which it learned from individual employees. But are those cases of Section 80(2) sentence 2 Works Constitution Act? At best, they relate to incorrect classification according to Section 99 Works Constitution Act and the work council’s associated rights of access and participation. In the worst case scenario, the works council is supposed to – unlawfully – be misused by employees as an extended point of information. To check the fairness of remuneration, however, it would be sufficient to carefully examine the work, job descriptions, and classifications comparable to those of the employee concerned. No added value is discernible from listing names. If such added value can neither be recognized nor positively argued by the works council, the processing of personal data in this way is inadmissible under data protection law – for lack of necessity. 

Tips for use in practice

The Federal Labor Court decision will spread rapidly among works councils – with respect to the right of access to payrolls showing gross salaries broken down by names. The information that works councils have to design their internal data exchange and data processing in compliance with data protection provisions will spread less quickly. It is therefore advisable to seek the dialog with the works council and to provide it with support for the internal organization and information of the works council members – for example by access to the data protection officer.

A number of data protection commissioners indicated to us that they do not share the Federal Labor Court’s view and that they do not consider it necessary, and therefore inadmissible under data protection law, to permit access to payrolls broken down by names to the works council. Data protection authorities, which do not share the opinion of the Federal Labor Court, will need to argue with employers citing the justified reference to the Federal Labor Court decision to avoid fines; after all, it can hardly be right to impose fines on employers for compliance with the Federal Labor Court jurisdiction.