Monday, October 20, 2014

Germany - Foreign Managers, Matrix-Structure and Employment Law

By: Bernd Weller
Partner, Heuking Kühn Lüer Wojtek, Frankfurt am Main

In one of this newsletter’s past editions (, we have already highlighted that legal issues may arise when – in a matrix-structure within an international corporation – foreign managers are responsible for managing German employees. A recent decision of the Higher Regional Labor Court of Baden-Württemberg, decided on May 28, 2014, (4 TaBV 7/13) put a new twist on this issue.

The Higher Regional Labor Court of Baden-Württemberg had to decide whether or not the works council of a German operation had a right of consultation and objection with regard to the appointment of a manager who
• was an employee of a different group company,
• who never in person visited the German operation and who
• managed employees of the German operation via email and telephone.

The German works council claimed that he had to be consulted with before the person could be appointed as manager. The works council further claimed that it had a right to object to the appointment of the manager. Although the manager was never present in the operation of the works council’s competence, the Higher Regional Labor Court of Baden-Württemberg shared the works council’s opinion. According to the Higher Regional Labor Court of Baden-Württemberg, a manager becomes part of a (German) business-operation whenever he/she is entitled to instruct employees of that operation.

Under German employment law, the works council must be informed before hiring a new employee. Hiring means not only the conclusion of an employment agreement but as well the mere presence and inclusion of a person into the operation’s internal procedures. With that understanding, the appointment of a (external) supervisor for the operation’s employees is indeed “hired” in the meaning of Sec. 99 of the German Works Council Constitution Act (Betriebsverfassungsgesetz). In such cases, the works council has further a right to object to the envisaged hiring – based on certain specific reasons (for instance because of the fear that the appointment or hiring of a certain employee has detrimental effects on other employees).

In general, German works councils are not very supportive of foreign managers. This is because works councils often (with some justifications) fear that foreign managers do not care about the limits of German employment law whenever they manage German employees. It is to be expected that works councils will use the decision of the Higher Regional Labor Court of Baden-Württemberg very often in the (near) future in order to either prevent the appointment of foreign managers or at least delay or render it more expensive for the employer. In the end, the employer can always enforce the appointment; however, it requires a time-consuming and costly court proceeding.