According to a ruling by the BGH, many employee representatives are threatened with severe salary cuts. In the VW Group, those affected want to defend themselves legally.

At the beginning of the year, the Federal Court of Justice (BGH) triggered a shockwave among trade unionists and works councils. He overturned an acquittal against several former Volkswagen personnel managers who allegedly granted employee representatives such as former works council chairman Bernd Osterloh too high salaries. The trial against the accused at the Braunschweig Regional Court is now being reopened. Regardless of the accusation of embezzlement, the BGH decision may have far-reaching consequences for the remuneration practice of works councils.

Christian Müßgens

Business correspondent in Hamburg.

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According to the written reasoning published Friday, Germany's top criminal judges are rejecting a widely used method of calculating reasonable salaries. Accordingly, "hypothetical" assumptions about the further career of a works council member alone must not be a yardstick for his payment. Anyone who joins the works council takes on an honorary office, but continues to receive a salary, which, according to the judgment of the BGH, must be reviewed and possibly reduced in many cases.

At VW's headquarters in Wolfsburg, the decision is making waves. "It is a scandalous verdict that is tantamount to a nationwide frontal attack on co-determination," said a spokesman for the employee representatives there. Not only in the VW Group, where the power of the works councils is particularly pronounced, but in many companies interventions are now pending. The group said that it had taken note of the reasoning of the judgment of the Federal Court of Justice. "The company will take into account the findings contained therein on the scale of works council remuneration."

Unclear provisions in the Works Constitution Act

The starting point is unclear regulations in the Works Constitution Act on the salary of employee representatives. It stipulates that they may neither be favoured nor disadvantaged for their work – without precise instructions for practice. As a rule, it is considered which career path those affected would have taken if they had not joined the works council and been released from their work. In doing so, companies also use qualifications that were acquired in the work as a works council and justify more salary according to the usual model.

The BGH now sets much narrower limits to this practice. In his reasoning, he deals particularly intensively with cases in which works councils received remuneration at the level of managers. This was the case, for example, for Osterloh, who earned 750,000 euros at the top in his function as VW works council chairman. Almost two years ago, he accepted an offer from the Group and moved to the Management Board of the truck holding company Traton as Head of Human Resources.

BGH: Applying strict standards

In the sense of independence, a "strict standard should be applied", the BGH now rules. "This prohibits focusing on the hypothetical salary development of the works council in the case of a special career." In order to determine equitable remuneration, the undertaking could use for comparison only persons who, at the time of taking office, carried out similar, essentially equally qualified activities. In Osterloh's case, these were several employees with whom he worked at the beginning of his career in the VW Group as a "complaint resolver" in production – at a significantly lower salary than later.

From the point of view of the works council, however, it is not only about lavishly paid top works councils, but about many employee representatives with collectively agreed remuneration. Around 98 percent of VW's works councils would be remunerated accordingly, it is said. However, since hypothetical careers are often the benchmark in these cases, the pay of about a third of the 255 VW works councils is under scrutiny after the BGH ruling. Already with the current monthly salary around February 28 is to be cut, according to informed circles.

Those affected want to defend themselves "by all legal means", which can take years. Since the judgment of the BGH conflicts with previous case law of the Federal Labour Court, a joint senate of both courts may be necessary to ensure uniform case law.