German law, based on the German Co-Determination Act
(Mitebstimmungsgesetz - MitbestG) and the German One-Third
Participation Act (Drittelbeteiligungsgesetz - DrittelbG), grants
employees of German companies the right to directly participate in
company policy by being represented in the supervisory board. In
order for the MitbestG or the DrittelbG to apply, certain
thresholds have to be met.
Now, with resolution dated February 16, 2015, the German
Regional Court of Frankfurt am Main (Az. 3/16 O 1/14), has decided
that, considering the law of the European Union, the term
"group" pursuant to the MitbestG and the DrittelbG has to
be interpreted that employees who are employed in abroad
subsidiaries of a group – in particular in the European Union
– shall also be taken into account in calculating the
threshold for a co-determined supervisory board. This resolution
might have substantial effect on company practice.
Facts: The subject of the court decision was a
German group, which employs in Germany 1,624 employees, and abroad
within the European Union, 1,747 employees. A supervisory board was
set up according to the DrittelbG, which consisted of 12 employer
representatives and six employee representatives.
Court Decision: The Regional Court of Frankfurt
am Main decided that the supervisory board had to be set up on
equal terms and had to consist of six each of employer
representatives and employee representatives. The threshold of
"more than 2,000 employees" pursuant to Sec. 1 MitbestG
was reached as in addition to the 1,624 employees employed in
Germany the 1,747 employees employed abroad also had to be taken
into account pursuant to Sec. 5 MitbestG. According to previous
practice, only the employees being employed in Germany had to be
Consequences for Practice: This court decision,
which is not yet final, might have great importance for many
companies, if the court opinion should prevail that such employees
also have to be taken into account who are employed abroad. In
particular, internationally operating companies and groups could be
affected by the changed jurisdiction.
Companies and groups to which the DrittelbG applies could reach
the threshold of "more than 500 employees" more quickly
than before, exceeding it for the first time by taking into account
employees who are employed abroad. The same pertains to companies
and groups to which the MitbestG applies and which are intervened
by the MitbestG when reaching the threshold of "more than
2,000 employees". As a consequence, affected companies would
have to set up a supervisory board for the first time or would have
to increase the number of employee representatives in
already-existing supervisory boards.
The principals of the court decision could also be applied to
operational co-determination according to the German Works
Constitution Act (Betriebsverfassungsgesetz - BetrVG). In
particular, the group works councils pursuant to Sec. 54 et seqq.
BetrVG or, if applicable, also the economic committee pursuant to
Sec. 106 BetrVG, could be affected, if the "company" term
according to these provisions in extensive interpretation would
also include employees being employed abroad.
Already, companies being potentially affected by this court
decision should think about remedial strategies. Organizational and
restructuring measures can be taken preventively. Moreover,
currently in case of company acquisitions, the consequences of this
court decision have to be taken into account, in particular as the
organizational and financial effects are substantial, and as it is
not clear at the moment if this legal opinion will prevail. The
outcome of the proceedings shall therefore be awaited with
excitement. We will keep you informed in this regard.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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