Germany: Application Of The General Equal Treatment Act To The GMBH Managing Director

Last Updated: 11 July 2019
Article by Tabea Frühinsfeld and Joana Christin Seidel
Most Read Contributor in Germany, July 2019

The parties are in dispute about the effectiveness of the termination of a temporary managing director contract that had been repeatedly extended. Article 7(3) of the service contract contains a provision according to which, from the managing director's age of 61, both parties may unilaterally terminate the work relationship at six months' notice effective at year-end.

By letter dated June 23, 2016, the plaintiff, who was born in 1955 and was 61 years old at the time, was dismissed effective December 31, 2016.

The plaintiff claims that his service contract did not end by the notice of termination. His lawsuit was unsuccessful in the lower courts.

The appeal to the Federal Court of Justice was successful. The Federal Court of Justice overturned the appellate court's judgement and referred the case back to the Higher Regional Court.

In the case at issue, the application of the General Equal Treatment Act is not already excluded by Section 2(4) General Equal Treatment Act. The provision stipulates that only the provisions of general and special protection against dismissal apply to dismissals. The Dismissal Protection Act does not apply to management service contracts, however.

The material scope of application is possible under Section 2(1) no. 2 General Equal Treatment Act. The provision in Article 7(3) of the service contract is a dismissal condition within the meaning of the statutory provision.

The personal scope of application (Section 6 General Equal Treatment Act) does not already result from Section 6(3) General Equal Treatment Act. The provision deals with the conditions of access to employment and promotion of self-employed individuals and members of corporate bodies, in particular managing directors and executive board members. Conditions of dismissal are not covered by Section 6(3) General Equal Treatment Act, however.

Instead, in the opinion of the Federal Court of Justice, the personal scope of application under Section 6(1) sentence 1 no. 1 General Equal Treatment Act is permitted. Since the General Equal Treatment Act has transposed the underlying European Directive with the same content and does not refer to the concept of employee under German law, the concept of employee needs to be interpreted under European Union law, taking into account the relevant case law of the Court of Justice of the European Union. The Directive's objective of protecting a broad circle of persons allows it to consider the external managing director of a GmbH as an employee protected against discrimination by dismissal conditions.

The case law of the Federal Court of Justice, according to which members of corporate bodies are not employees within the meaning of employment law provisions, but are exercising an employer function themselves, does not preclude the classification of the external managing director of a GmbH as an employee within the meaning of Section 6(1) sentence 1 no. 1 General Equal Treatment Act. This decision is based on the national concept of an employee, which is of no relevance for the purposes of Union law here.

A member of a management body who, for consideration, provides services to the company by which the individual has been appointed, who carries out his activities under the direction or supervision of another corporate body of that company and who may be dismissed from his post without restriction at any time, meets the conditions to be considered an employee within the meaning of Union law.

Accordingly, the external managing director of a GmbH is to be regarded as an employee within the meaning of Section 6(1) sentence 1 no. 1 General Equal Treatment Act in the event of termination of his managing director contract if the material scope of application of the General Equal Treatment Act is permissible via Section 2(1) no. 2 General Equal Treatment Act.

This interpretation does not conflict with Section 6(3) General Equal Treatment Act. The provision extends the personal scope of application of the General Equal Treatment Act on the grounds stated therein to managing directors, etc. It does not restrict protection for those individuals, however, who are already falling within the personal scope of application of the General Equal Treatment Act because of Section 6(1) sentence 1 no. 1 General Equal Treatment Act.

The termination provision in the service contract violates the prohibition of discrimination in Section 7 General Equal Treatment Act. It includes the defendant's right of termination when a certain age limit has been reached. The right of dismissal is thus tied to one of the grounds mentioned in Section 1 General Equal Treatment Act – age.

Contrary to the assumption of the appellate court, this unequal treatment is also not justified under Section 10 General Equal Treatment Act, since no legitimate objective is apparent. In contrast to the previous instance, the Federal Court of Justice denied the existence of operational and company-related interests as a legitimate objective. There would be no empirical evidence for a need for age limits below the statutory retirement age due to the high requirement profile for managing directors. An analogy with Section 10 sentence 3 no. 5 General Equal Treatment Act is not possible either, since the provision does not apply to termination by dismissal. The Higher Regional Court must now decide whether the defendant is still able to state operational and company-related interests that justify the unequal treatment. To the extent that such interests are part of an overall social policy objective, the Federal Court of Justice considered this to be possible.

Practical tip:

The decision shows that compliance with the General Equal Treatment Act must also be ensured when drafting managing director service contracts. Termination options should not be linked to reaching a certain age limit, otherwise there is a risk that they will be ineffective. Companies should also review and, where necessary, adapt existing contractual arrangements.

With the decision discussed here, the Federal Court of Justice has shifted the coordinates of the work relationship of GmbH external managing director closer to the employment relationship. The principle that members of corporate bodies are not employees within the meaning of employment law provisions because they perform employer functions themselves is thus abolished for the scope of application of the General Equal Treatment Act.

It remains unclear whether in the future the Federal Court of Justice will also consider external managing directors as employees in all other laws – which are based on European law and which are governed by the EU legal concept of employee – and whether it will subsequently apply all Union law employee protection provisions to external managing directors.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions