"Monthly Dose" Employment Law: 08/2024

1. The validity of a works council election is not precluded by a smaller number of candidates than the available number of works council seats (BAG decision of 24 April 2024, 7 ABR 26/23).

In its decision of 24 April 2024 (7 ABR 26/23), the Federal Labour Court (Bundesarbeitsgericht, BAG) had the opportunity to discuss the legal question of whether the election of a works council with fewer candidates than the number of seats available on the works council by law under Section 9 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) would result in the invalidity of the works council election.

In the underlying facts of the case, the parties were in dispute over the invalidity of a works council election. At the employer's company, a new works council was to be elected in spring 2022 at its Hamburg site, which at the time had 170 employees. For such size of the site, the scale provided for in Section 9 BetrVG stipulates a works council consisting of 7 members. Since fewer candidates wanted to stand for the works council election than there were seats on the works council, the employer sent a letter to the election committee asking it to cancel the works council election because the statutory number of 7 election candidates had not been reached in accordance with Section 9 BetrVG. Nevertheless, a works council election took place on 10 May 2022, whereupon a works council with 3 members was constituted on 15 May 2022. The employer then initiated labour court proceedings with the request to declare the election null and void.

The BAG did not grant the application and ruled that a works council can also be formed if fewer employees stand for election than there are works council seats available in accordance with the statutory scale of section 9 of the Works Constitution Act. This follows, above all, from the fundamental principle of the law on works constitutions, as determined by the legislator in Section 1 (1) s. 1 BetrVG, that in sites with, as a rule, at least 5 employees who are permanently entitled to vote and of whom three are eligible for election, a works council can be elected in any case. This fundamental principle of the law on works constitutions requires that, in the event of a lack of candidates for election to a works council of a size corresponding to the scale in Section 9 BetrVG, the size of the works council should be reduced until the works council can be filled with eligible employees who are willing to take office. Section 9 BetrVG merely determines the number of works council members to be elected on the basis of the number of employees (entitled to vote) within the company as a rule and expresses the legislator's standard assumption that the threshold values specified in Section 9 BetrVG ensure that the committee can function properly and that the committee members have the necessary personnel resources to represent the interests of the employees. However, the provision offers no basis for the assumption that a ‘smaller’ works council is not (or no longer) capable of functioning at all and therefore, in the case of too few people interested in becoming a works council member, precludes the establishment of the works council, and does not make the election of a works council subject to the condition of a sufficient number of candidates in accordance with the scale from Section 9 BetrVG. In this respect, it is not possible to assume a lack of a quorum and a lack of decision-making ability of a works council that is ‘smaller’ than the applicable threshold value from Section 9 BetrVG when viewed in a typified manner. Rather, the elected works council members should be released from their professional activities to a greater extent in accordance with section 37 (2) BetrVG if necessary than would have been the case with a number of members in accordance with the applicable threshold value under Section 9 BetrVG. In this context, the election of a number of works council members below the applicable threshold pursuant to Section 9 BetrVG does not constitute grounds for setting aside a works council election – and certainly not grounds for declaring the works council election null and void.

Implications for practice

The BAG's decision vividly demonstrates the restrictive treatment of deviations of a works council election from the relevant statutory framework as a ground for setting aside or annulling a works council election. In the specific case, the BAG emphasises the high substantive significance of the principle under works constitution law (option for) electing works councils in companies capable of having a works council within the meaning of Section 1 BetrVG, which, when interpreting the statutory binding force of the quantitative provisions of the BetrVG – as in the specific case here concerning the number of persons to be elected to the works council pursuant to Section 9 BetrVG – forms an essential argument for the restrictive assessment of grounds for rescission and/or annulment.

2. Law on general terms and conditions as internationally mandatory law despite the parties' choice of law to the contrary (BAG judgment of 23 January 2024, 9 AZR 115/23)

In its judgment of 23 January 2024, the bag had the opportunity to expand its case law on the applicability of the law of general terms and conditions in accordance with Sections 305 et seq. of the German Civil Code (Bürgerliches Gesetzbuch, BGB) (GTC law) as mandatory law within the meaning of Art. 8 (1) sentence 2 Rome I Regulation despite the parties to the employment contract having otherwise chosen the law.

In the case underlying the decision, the parties were in dispute over the repayment of training costs. The defendant employer, an airline based in Dublin (Ireland) that operates international flights under an Irish flight licence, employed the plaintiff employee, a German national, as an aircraft captain from October 2016 to June 2018. During the term of the employment, the defendant paid social security contributions to the German social security system on the remuneration granted under the employment. The plaintiff was resident in Berlin and was stationed at Berlin-Schönefeld Airport (BER) throughout – as were the relevant aircraft that the defendant used for flights in its route network with BER as the departure airport. For reasons of aviation law, the plaintiff had to complete a 19-week training course at the beginning of the employment to qualify to fly the defendant's 737 aircraft. The employee successfully completed the training on 22 February 2017, and the defendant incurred training costs of EUR 25,000 for the training. The parties agreed in the employment contract that the employee would be obliged to reimburse the training costs in instalments in the event of termination of the employment within 5 years of its commencement. The repayment clause in the employment contract did not make any further distinction with regard to the termination of the employment. The employment contract also stipulated in a choice of law clause that Irish law would apply exclusively. The employee terminated the employment with the defendant in March 2018 by giving notice. After the plaintiff had handed in his notice of termination, the defendant – referring to the provision in the employment contract – requested that the plaintiff reimburse training costs in the amount of EUR 20,000. When the plaintiff refused to reimburse the costs, the defendant subsequently offset the costs against the plaintiff's claims for remuneration for the reference period from April to June 2018 in the total amount of EUR 17,124.34. The plaintiff then filed a lawsuit for payment of this amount. He justified the lawsuit in essence by stating that German law would apply to the employment and that the repayment agreement was invalid due to a violation of Section 307 BGB.

The BAG allowed the claim and ordered the defendant to pay the withheld remuneration. It denied the validity of the defendant's claims for reimbursement of the training costs, since the underlying repayment agreement, as a general terms and conditions clause, violated Section 307 BGB and was therefore invalid.

The BAG initially recognised the applicability of Sections 305 et seq. BGB to the employment despite the choice of Irish law. According to Article 8 (1) s. 1 Rome I Regulation, the parties to an employment contract with a cross-border nature are free to determine the applicable law in individual employment contracts. However, the choice of law may not have the effect of depriving the employee of the mandatory statutory protection to which he would be entitled under Article 8 (2) and (4) Rome I Regulation in the absence of the choice of law, Article 8 (1) s. 2 Rome I Regulation. The plaintiff's stationing at BER Airport, his domicile in Berlin and the payment of social security contributions to the German social security system during the employment would lead to the conclusion, in the holistic assessment of the applicable law in accordance with Article 8 of the Rome I Regulation, that the employment contract is more closely connected with the German state than with Ireland. The purpose of Article 8(1) s. 2 Rome I Regulation is to ensure that the choice of law does not circumvent mandatory provisions for the protection of employees in the objective law of the country.

The BAG clarified that the provisions of the law on general terms and conditions are to be regarded as provisions within the meaning of Art. 8 (1) s. 2 Rome I Regulation, which claim validity irrespective of the choice of law made by the parties. Thus, German law was applicable and a review of the general terms and conditions was to be carried out. In doing so, the BAG (updating its case law, inter alia, from its judgment of 13 December 2011, 3 AZR 791/09), that in further training agreements under employment contracts, a reimbursement of costs can generally be agreed if the employee leaves before certain deadlines have expired; however, this does not apply if the general terms and conditions clause also obliges the employee to reimburse the costs if the reason for the employee's notice of termination originates from the employer's sphere. In such a case, the clause would disadvantage the employee unreasonably, contrary to the requirements of good faith, and would thus be invalid. Consequently, the clause must exclude cases in which the employee terminates the employment relationship for other reasons for which the employer is responsible in order to be valid. The present clause therefore violates Section 307 (1) s. 1 BGB and is invalid. The defendant was thus unable to set off any claim for repayment against the plaintiff in relation to the training costs.

In its grounds for the decision, the court explicitly left open the question of whether the Irish choice of law clause in the employment contract would stand up to the control of the terms and conditions of the terms and conditions as a matter of GTC law. The BAG bases its concerns on the fact that the present choice of law clause gives the incorrect impression that only the law of the chosen member state applies to the employment contract, without providing any information that, according to Article 8 (1) s. 2 Rome I Regulation, the protection of the mandatory provisions of the objective law must be observed, and in this respect it violates the transparency requirement in the law governing general terms and conditions (Section 307(1) s. 2 BGB.

Consequences for practice

The decision is of great practical relevance for cross-border employments and/or employments with a non-German choice of law clause in the employment contract, in that the BAG defines the law governing general terms and conditions as mandatory law within the meaning of Article 8 (1) s. 2 Rome I Regulation, and thus subjects the relevant employment contract provisions to the control of the terms and conditions if, in accordance with the criteria set out in Article 8 (2) to (4) Rome I Regulation, German law would apply. In this case, employers must take into account the relevant case law of the BAG when specifically designing the provisions of the employment contract, which, in addition to the repayment agreements for further education/training costs in the area of remuneration that are the subject of the dispute here, also includes, among other things, the strict formal requirements of the BAG for effective reservation of the voluntary nature of payments, revocation clauses or lump-sum compensation clauses for overtime worked. Also relevant in practice are the considerations set out by the BAG obiter dicta on the requirements for the choice of law clause arising from the transparency requirement in GTC law, which, according to this view of the BAG, must contain a clarifying reference to Article 8 (1) sentence 2 Rome I Regulation for a design that is compliant with the law on general terms and conditions.

3. Late provision of information under the GDPR does not entitle to compensation (Higher Labour Court Düsseldorf judgment of 28 November 2023, 3 Sa 285/23)

On 28 November 2023 (3 Sa 285/23), the Higher Labour Court (Landesarbeitsgericht, LAG) Düsseldorf had the opportunity to decide on the question of whether the delayed or incomplete provision of information under the GDPR constitutes grounds for a claim for non-pecuniary damages.

In the employment underlying the decision, the defendant had only provided the plaintiff with information about the personal data it had processed in accordance with Article 15 GDPR for the first time in 2020, in response to a corresponding request from the plaintiff. On 1 October 2022, the plaintiff repeated his request for information under Article 15 GDPR and again requested detailed information and a copy of the data on the basis of Article 15 GDPR. The plaintiff objected to the information initially provided by the defendant on 27 October 2022 as being late and insufficient in content. The defendant thereupon provided the plaintiff with full information on 1 December 2022. Following the provision of the information, the plaintiff demanded monetary compensation of EUR 2,000 for non-material damage resulting from the delayed provision of the information in accordance with Article 82 GDPR.

In its judgment of first instance (dated 23 March 2023, 3 Ca 44/23), the Labour Court Duisburg ruled that the plaintiff was entitled to compensation of EUR 10,000 under Article 82 GDPR in view of the delayed provision of information. The LAG Düsseldorf allowed the defendant's appeal against the judgment of first instance and dismissed the action. It ruled that a violation of the obligation to provide information under Article 15 GDPR in the context of delayed or incomplete data access does not constitute data processing within the meaning of Article 4(2) GDPR and therefore does not fall within the scope of Article 82 GDPR. Claims for damages under Article 82 GDPR could only arise from data processing that violated the GDPR and could not be based on late or incomplete data access under Article 15 GDPR. The supervisory authority under Article 83(5)(b) GDPR is functionally responsible for sanctioning such violations of the right of access, but not civil law on damages. Furthermore, there is no causal link to any damage in the event of delayed or incomplete data disclosure. The plaintiff has not suffered any demonstrable non-material damage beyond general annoyance. However, annoyance and frustration as such do not constitute a specific non-material damage. Finally, the information as such was not the cause of any impairment or material or non-material disadvantage to the plaintiff, but rather the failure to provide complete information in a timely manner. However, the plaintiff had not sufficiently demonstrated that the inadequate provision of information had led to a significant loss of control or any other relevant non-material damage. With regard to the information not provided immediately by the defendant, the court stated that, in view of the potential for conflict and the necessity of internal coordination, this could not be regarded as culpable hesitation. The plaintiff had not suffered any legal disadvantage from the repeated provision of information that would justify compensation.

Consequences for the practice

From the employer's point of view, the – helpful – judgement fits in with the existing higher court case law of the LAG Baden-Württemberg of 27 July 2023 (3 Sa 33/22), in which the court came to the same conclusion. The plaintiff's appeal against the judgment before the BAG (8 AZR 61/24) is pending. Regardless of the distinction to be made between incomplete/late and incorrect information from a data protection perspective, employers should – as before – have a process in place that enables the information to be provided in full and in due time in accordance with Article 15 GDPR.

4. Remuneration of works council members released from their operational work duties – burden of presentation and proof in the light of Section 37 (4) BetrVG (LAG Niedersachsen judgment of 8 February 2024, 6 Sa 559/23)

In its judgment of 8 February 2024 (6 Sa 559/23), the LAG Niedersachsen had the opportunity to further refine the case law on the remuneration of released works council members aligning with customary company development in accordance with Section 37 (4) 4 BetrVG – taking into account the judgment of the Federal Criminal Court (Bundesgerichtshof, BGH) of 10 January 2023 (6 StR 133/22), which has been widely discussed in practice, on the parameters to be applied for the customary development of works council’s carrier at the employer.

In the facts underlying the decision, the plaintiff had been a fully released member of the defendant's works council since May 2002. Following his release, he initially continued to receive remuneration in accordance with wage group (WG) 13 due to his works council activities. A commission established by the employer periodically informed the plaintiff of wage increases, which were subsequently implemented. In 2014, the plaintiff received a letter notifying him that his remuneration would be adjusted to WG 20 in line with the remuneration of comparable employees. The plaintiff subsequently received further letters from the defendant's HR department regarding this and, specifically, his further salary development according to WG 20. In October 2015, the plaintiff was offered a position as a production coordinator in WG 20, for which he did not apply due to his work on the works council. According to the judgment of the BGH dated 10 January 2023 (6 StR 133/22), inter alia on the extremely restrictive application of the guiding principle of hypothetical career development (in essence, as consideration taking into account also higher-paid positions offered to the works council member by the employer during the leave of absence in view of his qualifications and professional experience, which the works council member rejected solely on the basis of his works council activities), the defendant reviewed the employee classification and downgraded him to WG 18. In addition, it demanded repayment of the excess remuneration paid from September 2022 to January 2023 in relation to the classification in WG 20 instead of WG 18.

The employee filed a lawsuit against the downgrading of the classification and, in addition to the payment of the difference in remuneration between WG 18 and WG 20 that had already become due during the legal dispute, sought a declaration that his employment relationship with the defendant was to be carried out in accordance with WG 20.

The LAG Niedersachsen largely upheld the claim, ruling that the entitlement to remuneration in accordance with WG 20 was based on Section 611a (2) BGB in conjunction with Section 78 s. 2 BetrVG due to the fact that the works council member would otherwise be disadvantaged due to his works council activities.
The court decided that claim does not initially arise from the defendant's provision of standard information to the employee regarding the specific decisions on adjustments in the defendant's company. This standard information did not contain any legally binding offer by the defendant within the meaning of Section 145 BGB regarding the conclusion of a corresponding amendment agreement to the plaintiff's employment contract regarding the plaintiff's remuneration, and the plaintiff could only understand the remuneration payments following the notifications as implementation or fulfilment of his claim for adjustment in accordance with Section 37 (4) BetrVG, in conjunction with Section 611a (2) BGB. The defendant's adjustment notice refers exclusively to Section 37 (4) BetrVG, and does not establish any corresponding legitimate expectations. This also applies if the works council member may generally trust in the correctness of the evaluation and assignment process, since the principles would not apply in terms of their meaning and purpose if the employee could only base their trust on one element of the previous collective agreement evaluation by the employer, but if further legal considerations were necessary that could lead to the claimed pay group. The determination of the group of comparable employees and the determination of their customary development in the company are necessary prerequisites for the remuneration of a works council member in accordance with Sections 611a (2) BGB and 37 (4) BetrVG. The challenge here is not the mere adjustment of remuneration by grouping it into a collective agreement system. Rather, the comparable employees and their customary professional development in the company must be determined in advance. Neither the various letters nor the subsequent remuneration payments answered these preliminary questions. The principles of corrective re-grouping were not applicable in this case in the context of Section 37 (4) BetrVG. The plaintiff could not have had any legitimate expectations in this regard. The plaintiff's claim to remuneration in accordance with WG 20 was based instead on Section 611a (2) BGB in conjunction with Section 78 s. 2 BetrVG, according to which a claim for remuneration may arise if the payment of a lower remuneration constitutes a disadvantage for the works council member due to his works council activities. A works council member who has not been promoted to a position with higher remuneration solely because he has taken up office may therefore claim the higher remuneration directly from the employer. In the opinion of the LAG Niedersachsen, it is the responsibility of the employee to demonstrate and prove that, had he not been a member of the works council, he would have been entrusted with a task that would have entitled him to the sought-after remuneration according to WG 20. The plaintiff had satisfied this burden of demonstration by credibly demonstrating that he had not advanced further in his career to become a production coordinator due to his works council activities. The plaintiff would therefore be entitled to the remuneration corresponding to WG 20 from the point in time at which his promotion to production coordinator would have materialised, i.e. when the position would have been assigned to him. The legal principles established by the Federal Court of Justice in its ruling of 10 January 2023 do not preclude the application of the legal principle of the hypothetical career and remuneration development of the released works council member, which is still possible in this respect. In its judgment, the BGH had rejected a hypothetical career solely in the determination of the comparators within the framework of Section 37 (4) BetrVG and had not decided the case in dispute regarding the concrete possibility of taking up and commencing employment in a position with higher remuneration.

Consequences for practice

The defendant's appeal against the judgment at BAG (7 AZR 46/24) is pending – and will give the BAG the opportunity to classify the legal principles established by the BGH in its judgment of 10 January 2023 on the very restrictive application of the principle of hypothetical career and remuneration development in its previous case law and thus to provide practitioners with (a little more) legal certainty when assessing the remuneration of works council members who have been released from their normal duties over time – and here in particular in the context of hypothetical career and remuneration development. In terms of content, the court's legal considerations on taking into account specific possible activities in a higher-paid position as a hypothetical career and remuneration development are convincing, as is the burden of presentation and proof attributed to the released works council member for the relevant activities, both with regard to the qualifications and professional experience he has acquired for the specific activity and with regard to the fact that the employer would have selected the released works council member for the specific function. The works council member can fulfil this burden of presentation and proof in particular by documenting the relevant communication with the employer regarding the filling of the relevant position (‘paper trail’).

5. Granting of vacation entitlements – requirements for the declaration of vacation LAG Mecklenburg-Vorpommern, judgment of 19 March 2024, 5 Sa 68/23)

In its judgment of 19 March 2024, the LAG Mecklenburg-Vorpommern had the opportunity to further specify the requirements for an employer's declaration of exemption for granting (statutory minimum) leave in accordance with the Federal Vacation Act (Bundesurlaubsgesetz, BUrlG).

In the facts underlying the decision, the defendant employee was employed by the plaintiff employer as a hairdresser in a barbershop from November 2020 until 30 June 2022. The employment contract stipulated a weekly working time of 24 hours with a monthly gross salary of EUR 1,000 and 20 vacation days – based on a 5 working day week. The defendant terminated the employment for personal reasons as of 30 June 2022 and then tried to clarify the outstanding holiday entitlements and overtime accrued at the time of termination in a meeting with the plaintiff. Following the conversation, the plaintiff transferred the defendant remuneration for 145 hours of overtime worked with the purpose ‘overtime’ in the amount of EUR 875.47. At the end of July 2022, the plaintiff mistakenly transferred an identical amount to the defendant. The purpose of the transfer was labelled ‘July salary’, although the defendant had not performed any work in July 2022. After an unsuccessful request for repayment of this overpaid amount, the plaintiff filed a lawsuit for repayment of the amount transferred at the end of July 2022 with the purpose of ‘July salary’. The defendant, in turn, raised a counterclaim and requested that the plaintiff be ordered to pay the defendant EUR 11,911.28 gross as compensation for overtime worked and EUR 1,178.40 gross as holiday pay. He claimed to have worked a total of 1,001 hours of overtime in the calendar year 2021 and a total of 359 hours of overtime in the calendar year 2022. In addition, he claimed to be entitled to vacation pay in the amount of 30 days, as he did not take any vacations during the term of the employment. The vacation pay entitlement had not expired because the plaintiff had not fulfilled its obligation to cooperate in order to grant the vacation. The defendant had also not received any vacation pay. The plaintiff had only paid compensation for 145 hours of overtime work. The plaintiff claims that the overtime worked by the defendant was paid in full, unless it was compensated by time off. The plaintiff had fully satisfied the defendant's vacation entitlement and paid the remaining holiday with the payment of 145 hours of overtime work. The defendant claims that he received compensatory time off for overtime worked on these days or worked in another barbershop for his superior or his uncle to compensate for a staff shortage.

The Labour Court allowed the plaintiff's claim for repayment, dismissed the counterclaim for overtime pay and awarded the defendant the vacation pay, as the plaintiff was unable to provide sufficient evidence as to when she had granted leave. The plaintiff appealed, claiming that all holiday entitlements had been fulfilled either by granting holiday days or by paying holiday allowance. The defendant disputed this and argued that the plaintiff could not provide evidence of the vacation days.

The LAG Mecklenburg-Vorpommern ruled that the defendant had a claim against the plaintiff for the granting of 30 vacation days for the years 2021 and 2022. The claim had not expired in accordance with Section 362 (1) BGB. This is because a declaration of exemption from the employer is required to fulfil the holiday entitlement. An exemption from the obligation to work is not necessarily to be understood as the granting of vacation, but can have various causes. Rather, a declaration of leave with the purpose to fulfil vacation entitlements of the employee is required, on the basis of which the employee can and must recognise that the employer wants to release him from the obligation to work in order to fulfil the entitlement to holiday leave. This intention must be sufficiently clear. The mere declaration by the employer that the employee can stay at home does not meet these requirements. In particular, the beginning and end of the vacation must be clearly defined. In the event of a dispute, it would have been up to the employer to prove that it had made a declaration to the employee that met the requirements. The plaintiff had not fulfilled this. It is possible that the employee was actually released from work on some days. However, whether this was vacation or merely compensation for overtime was not documented in writing, electronically or in any other way, nor was it explained who made which declarations and when. If the vacation has not been granted by the end of the employment, the employee has a claim for payment against the employer in accordance with Section 7 (4) BUrlG). In the present case, this claim has not expired as a result of payment either.

Consequences for practice

This very clear judgment makes employers aware of the fact that they have to ensure in the established processes for granting leave that the declaration of exemption is clearly directed to the relevant leave entitlement of the employee and that this is also documented in the system. Relevant HR software-based processes usually take this into account.