Friday, September 23, 2011

Germany: Costs of Works Councils - Does the Employer Really Have to Pay For All and Everything?

By Bernd Weller, Partner, Heuking Kuhn Luer Wojtek, Frankfurt am Main

In many companies, there is a continuous dispute between works council and employer with regard to the costs incurred by the works councils. The works council usually orders office equipment, instructs lawyers, books external training and accommodation and asks for the payment of overtime work – due to long hours in a works council meeting. In this context, many companies are unaware of the stipulations of the works council constitution act (“Betriebsverfassungsgesetz, BetrVG”). During recent months and years, the Federal German Labour Court (“Bundesarbeitsgericht, BAG”) had to deal with such questions quite often and, hence, has clarified many disputes.

With regard to the costs of the works council, typically the following aspects have to be considered: 1. office equipment, office space and personnel, 2. training and external accommodation, 3. expenses of works council members, 4. release and continued pay for works council work, 5. instruction of lawyers, and 6. works council overtime.

1. office equipment, office space and personnel

Section 40 of the BetrVG reads as follows:

Ҥ 40 expenses of works council and material facilities
(1) Any expenses arising out of the activities of the works council shall be borne by the employer.
(2) The employer shall provide, to the necessary extent, the rooms, material facilities, means of information and communication and office staff required for the meetings, consultations and the day-to-day operation of the works council."

As one can see, the law itself makes a difference between (i) expenses, and (2) means that are to be provided by the employer. There is a significant difference between the two categories:

Everything that falls into the scope of Para. (2) is to be provided by the employer. The works council can bring a claim for certain goods and materials in court. The works council, however, cannot buy and organise such material and goods on its own. The following procedure must be observed:

(1) In the first step, the works council decides that it needs certain material.
(2) It then goes to the employer and asks the employer to provide it with the desired goods.
(3) The employer then has to evaluate whether or not – in his opinion – the goods are necessary for the works council’s work.
(4) If the materials are necessary, he should provide the works council with the goods. Otherwise the works council can sue the employer at the Local Labour Court.

During the pending court proceeding, however, there is no obligation for the employer to provide the works council with the desired goods – unless ordered otherwise in a preliminary injunction. Proceedings at the Labour Court between works council and employer (involving the Local, Regional and the Federal Labour Courts) may last for between three and four years. Hence, it can be a tactical instrument for the employer to force the works council to bring a claim through the Labour Court to be provided with certain goods.

But what has been considered “necessary” by the German Labour Courts? Without a doubt, a works council can claim a reasonable works council room, works council computers, fax (separated from the employer’s one), access to a copy station, access to meeting rooms, works council telephone line, internet and email access (for each individual work council member), in particular circumstances a mobile phone for the works council, the collection of legal texts, legal reviews, paper, pens and a homepage in the company’s intranet (if the company has and uses an intranet) and a personal assistant (‘PA’) for the works council.

Usually, disputes between works council and employer concern the works council’s room (size and location), IT and PAs.

It must be noted that consent of the employer is not required. Quite the contrary: the works council can, with the Court’s help, force the employer to provide it with certain goods and means. As regards the works council’s room, there is no absolute minimum according to German Labour Courts. The particular situation of the company and the premises concerned will be relevant. In addition, the number of works council members and those fully released from the working duties (see below) are important to decide what size is actually necessary for the works council. Typically, works councils demand an office that is big enough for all of the works council members to meet at the same time – each with a separate computer. That, however, is not necessary under German law. Typically, only smaller groups of the works council meet in the works council office. If the works council assembles all works council members, they can – like the employer’s representatives do – book a normal conference room and have the meeting there.

Another typical dispute concerns the intranet. Wherever the company has its own intranet, works councils often demand the option to publish their messages to staff on the intranet. Most of the German Labour Courts will grant such an entitlement to the works councils. That, however, does not give the works council’s the right to be its own administrator. The administration of the works council’s intranet site remains with the employer. Of course, the employer must refrain from censoring the works council’s messages. Only where the works council clearly commits criminal offences (for example defamation), can the employer censor the works council’s messages.

Last but not least, the works council’s demand to be provided with its own PA often shocks the employer. Although the works council’s individual members may – wherever necessary – leave their normal jobs and do work council work (see below), that does not prevent a works council from demanding its own PA. Again, whether or not and to which extent (part time, full time) the works council can successfully claim its own PA depends very much on the circumstances of the case. In bigger companies, such a claim is more likely to be granted than in small companies. The selection of the PA is, however, the employer’s task, not the works council’s. The works council can only in particular circumstances reject the employer’s selection. It is not necessarily a bad idea to give the works council a PA selected by the employer.

Para. (1) of section 40 covers most other expenses and costs of the works council, which are described in detail below.

2. Training and external accommodation

According to the BetrVG, both the works council as a representative body and its members individually are entitled to be trained externally to the extent necessary. There is a widespread, and incorrect, belief that each works council member can claim (only) three weeks of training during the four year term of the membership. At any point in time, the works council can meet and jointly decide that the training of an appointed member of the works council in a specific topic is considered necessary. That can exceed the three weeks cap. Again, the works council can book external training and accommodation without the employer’s consent. However, the procedure to be observed is the following:

· 1. The works council decides in one of its meetings to send one or more works council members to a specific external training at a specific point in time.
· 2. That decision is made known to the employer.
· 3. The employer then has three options: (i) consent, (ii) object to this specific date – for example making reference to an important meeting or important workflow that requires the presence of the appointed works council member on his/her workplace, and/or (iii) highlight the fact that the same training is offered at a different point in time and a different location that causes fewer costs and a smaller impact on the internal workflow.
· 4. The works council then can decide to stick with its original plan or to follow the employer’s concerns.
· 5. If the works council does not follow the employer’s concerns, the employer must consider whether to enter into a dispute with the works council regarding the costs of the training.

Generally, wherever the training is necessary for the works council’s work, the employer must bear the costs of the training, accommodation, travelling and the continued pay of the works council member during his/her absence. If an agreement between the employer and works council regarding the specific training cannot be achieved, the employer can deny payment of the above and force the works council member to sue the employer at the Local Labour Court.

3. Expenses of works council members

One of the strongest principles of the BetrVG is that the office of works council member is an honorary post. As a consequence, no remuneration or advantage shall be granted to the works council member due to his/her office as works council member. On the other hand, the works council members shall have no disadvantage from their post. As a consequence, the employer is obligated to bear the necessary costs that are caused by the works council membership.

Whenever the works council member commutes to the work place for works council work, such commuting expenses must be borne by the employer. In general, there are few disputes about such expenses. However a recent decision of the Federal Labour Court highlighted the potential financial exposure of employers in this regard. A female works council member, mother of two children, travelled overnight due to works council assemblies. During that time, the works council member hired a babysitter and claimed the expenses from the employer. To the surprise of many, the Federal Labour Court ordered the employer to bear the expenses for the babysitter.

The important question with regard to expenses is twofold: was the expense caused solely by the works council membership and were the expenses necessary? If both questions are answered “yes” the employer must bear the costs.

4. Release and continued pay for works council work

Works council members – as honorary members – in general have to perform both their normal job and perform the work council duties in addition to this. It is obvious that duties as employee on the one hand and works council duties on the other hand may be contradictory. The BetrVG provides two different solutions to this challenge. First, depending on the size of the company and the number of works councils members, the law allows individual works council members to be released full time from their normal job duties (with continued pay). Second, the law entitles each and every works council member to a temporary release from his/her normal job in order to perform works council tasks, provided that such release is “necessary”. However, necessity is not monitored based on objective criteria. German Labour Courts only check whether or not the individual works council member could legitimately be convinced that a specific task was necessary at a specific point in time. In a nutshell, this limits the monitoring to cases of (evident) abuse.

5. Instruction of lawyers

Lawyers can be instructed by works councils for various purposes – as advisors in the day-to-day business, as representatives in court disputes, as experts for legal questions, as trainers, as participant in arbitrary committees (“Einigungsstelle”) or as speakers in town hall meetings.

If employer and works council call in an arbitrary committee, the remuneration of each external member of such committee is stipulated by law: the (neutral) chairperson freely negotiates his or her remuneration with the employer and the external additional members, i.e. in particular the works council’s lawyer, receive 7/10 of the chairperson’s remuneration.

In court disputes, the representation of the works council is in almost all cases considered necessary. Therefore, the employer must bear the costs of the works council’s legal representation. The fees of the works council’s lawyer are determined according to a statutory lawyers’ remuneration scheme under German law.

Where a lawyer is being instruct as trainer, the above (cf. 2.) applies mutatis mutandis.

In the remaining scenarios, that is where the lawyer is instructed as legal expert or as legal advisor in the day to day business, this is often because of a dispute between employers and works councils. Works councils often (wrongly) believe that they are entitled to be continuously advised by an external lawyer. According to section 80 Para. 3 of the BetrVG,

“The works council can call an external lawyer as expert in after having concluded a respective agreement with the employer and in so far as the call in is necessary for the due full filament of the works council’s tasks.”

According to the law, the works council’s must observe the following procedure:

· 1. First of all, the works council must make a formal resolution (“Beschluss”) according to which the employer’s permission shall be asked to instruct an external lawyer in relation to a specified question and with specified costs.
· 2. Then it is the employer’s decision to grant the instruction of an external lawyer or not.
· 3. Should the employer not grant the instruction of an external lawyer, the works council cannot instruct an external lawyer before a final and binding decision by the German Labour Courts has been made. Such decision may take some years of court proceedings.

As a consequence, works councils have no entitlement to be legally advised on a day to day basis. According to the Federal German Labour Court, such entitlement does not exist and is not needed. According to the BetrVG, the works council is entitled to significant external training so that the works council is able to perform its tasks alone without day to day legal advice.

Nevertheless, many employers pay for the external lawyer of the works council basically for two reasons. First, correct legal advice sometimes facilitates negotiations with the works council – negotiations become more professional. Second, there is often a deep and loyal relationship between works councils and their lawyer. In scenarios where the works council’s lawyer do not earn “enough” such lawyers can use their influence on the works councils to have them take a stronger stand vis-à-vis the employer and file more lawsuits.

6. Overtime payments

Works council members sometimes use a lot of their working time for works council duties. They then often demand the payment of “overtime work” caused by their works council duties. With regard to such overtime, the following must be noted:

· First of all, works council members are generally required to perform their works council duties during normal working time. Works council work outside of normal working time should only occur in exceptional cases. Unfortunately, again the courts monitor only the existence of (evident) abuse.
· If a works council accumulates overtime due to the works council work, section 37 Para. 3 of the BetrVG stipulates that such overtime shall be compensated for by a release from normal working duties. Such release from normal working duties shall be made within one month after the “overtime”.
· The works council member is entitled to overtime pay only where such release is not possible for operational reasons.

7. Summary

As one can see, the BetrVG has much confidence in the works council members and allows them many opportunities to incur costs. Of course, few employers are happy with this. However, in practice he success of German companies on the world markets should be proof that the management of German operations can be successful notwithstanding the existing duties according to the BetrVG.