In a sensational criminal case last year, the Braunschweig regional court acquitted four VW HR managers of allegations of breach of trust – but the German judiciary continues to be concerned with the often lavish payment of high works councils. The chamber responsible at the time made it clear that senior staff representatives are generally not allowed to receive salaries at the level of executives in the company. On the other hand, she is of the opinion that the classification of employees who have been released from work should generally be based on the salary they were receiving for their previous work at the time they were posted to the works council.
The court’s core argument: full-time jobs in the works council are ultimately honorary posts that cannot be compared with tasks in higher management, even if special knowledge and experience are acquired. When asked, the VW group works council in Wolfsburg emphasized that the legislature must now finally create clarity with a reform of the Works Constitution Act as to which exact standards should be applied for payment. “The legal uncertainties in the determination are an issue for operational co-determination throughout Germany. It’s no longer just about Volkswagen.”
One impetus for the judge’s detailed explanation is likely to be the request for revision that the public prosecutor’s office sent to the Federal Court of Justice (BGH) judged. The question was whether three former managers and one manager who was still in office between 2011 and 2016 had unlawfully approved excessive salaries for influential VW works councils such as long-time chairman Bernd Osterloh (65). The court saw no intent and no infidelity. However, the prosecution demanded probation and fines for the managers – including the two ex-HR directors Horst Neumann (73) and Karlheinz Blessing (65).
In its verbal justification, the chamber initially left largely open how an appropriate level of remuneration for works councils should be assessed under labor law, independently of the question of criminal guilt. The Works Constitution Act only makes vague specifications for the grouping of senior members of employee representatives in particular – many other commercial lawyers also see it that way.
It is often a difficult trade-off. On the one hand, works councils must not be given preferential salaries, so that “bought loyalty” to the company management is prevented. On the other hand, there must be no disadvantages for them – in terms of career paths that they might otherwise have taken. Osterloh, now Head of Human Resources at VW Commercial Vehicle Holding Traton, earned up to 750,000 euros during his time at the top of the works council in bonus years.
The presiding judge, Bohle Behrendt, surprisingly agreed with a “strict view” discussed among experts. Accordingly, “payment as a ‘co-manager’ or ‘at eye level’ with the negotiating partners on the employer’s side is inadmissible”. Rather, the basis for the decision on the salary level of a works council must always be the “customary development of comparable employees”. “Special careers could not be taken as a basis.”
In other words: responsibility and skills that have grown later should not be the benchmark, but solely the status at the time of release. For Osterloh, that would have meant that he would have received at least a mid-five-figure annual salary, but most likely not a six-figure or even high six-figure annual salary. Until 1990 he was the so-called complaints manager in quality control.
Responsibility that does not grow later should be the benchmark
Behrendt also rejected an extension of the basis of assessment to “such qualifications that are obtained while working on the works council. (…) It’s about replacing the remuneration that would have been earned without working on the works council.”
None of this affects the acquittal of the four personnel managers for the time being – at least as long as the BGH has not presented its opinion on the case. It is still unclear when the decision will be made there.
From circles involved in the process in Braunschweig, it was said that criminal and labor law would collide sensitively if the federal judges were to follow Behrendt’s interpretation. Because there are already decisions by the Federal Labor Court (BAG) and arbitration proceedings with renowned labor law experts that support the possibility of higher salary comparison groups for experienced works councillors: “What exactly does this ‘please not too much, but please not too little’ do in practice should mean that the legislature leaves the companies alone.”
Policy decision expected
Cases decided differently have so far apparently left the judge colleagues in Lower Saxony unimpressed. “The overall result obtained may be perceived as practically unsatisfactory,” they wrote about their verdict. However, it is “to be accepted given the existing legal situation, even in global corporations in which works councils are involved in important decisions”.