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"Monthly Dose" Employment Law: August 2023

Current case law in employment law

The August 2023 edition of our Monthly Dose Employment Law on current case law explains the judgments of the German Federal Labour Court (Bundesarbeitsgericht, BAG) dated (1) 30 November 2023 (5 AZR 336/21) on the effectiveness of a transfer abroad ordered by the employer, (2) 28 February 2023 (2 AZR 227/22) on the legality of a termination for operational reasons due to the transfer of tasks to a sister company, (3) 31 May 2023 (5 AZR 143/19) on the effectiveness of lower collectively agreed remuneration of temporary workers, (4) 20 June 2023 (1 AZR 265/22) on the reimbursement of a recruitment commission by the employee and (5) of the German Federal Administrative Court dated 4 May 2023 (5 P 16.21) on the co-determination of the staff council to social media with a comment function.

1. Cross border relocation may be covered by the employer's directive right pursuant to Section 106 GewO (BAG judgment of 30 November2022, 5 AZR 336/21)

In its judgment dated 30 November 2022 (5 AZR 336/21), the BAG had the opportunity to further specify the limits of the employer's directive right pursuant to Section 106 sentence 1 of the German Trade Ordinance (Gewerbeordnung, GewO) with regard to its workplace scope.

In the case underlying the decision, the plaintiff was employed as a pilot by the defendant and its legal predecessor (each an international airline with its registered office in another European country). According to the employment contract, the plaintiff received originally an annual gross salary of EUR 75,325. On the basis of a collective bargaining agreement concluded by the defendant (for all airport bases of the airline in Germany), the plaintiff most recently received a gross monthly salary of EUR 11,726.22. The plaintiff's airport base was Nuremberg Airport. The employment contract included a transfer clause entitling the defendant to station the plaintiff at other flight locations and corresponding airport bases as well. At the end of November 2019, the defendant made the entrepreneurial decision to close the Nuremberg location as airport base and to transfer the plaintiff to Bologna Airport as of May 2020. In the alternative, the defendant issued a notice of termination.

A collective bargaining social plan provided that pilots who were transferred to a foreign location would continue to be employed under the working conditions applicable there (including collectively agreed salaries). The plaintiff's transfer therefore resulted not only in a change of location but also in a significant reduction in pay. The plaintiff filed a lawsuit and objected to the validity of the employer's transfer, as he was convinced that the defendant was exceeding its right to issue instructions. At the very least, the transfer would be unfair, as he would be deprived of his entitlement to remuneration under the collective agreement.

The BAG confirmed the decisions of the courts of instance to dismiss the action and established the validity of the transfer and also the associated reduction in salary. In particular, the BAG emphasized that the employer's directive right is not limited to work locations in Germany, but also includes transfers to foreign locations.

A restriction of the right to issue instructions to work locations in Germany is not inherent in the employment contract as such. This only applies if a provision in the employment contract provides for a local restriction or if this was at least implied by the circumstances. The exercise of the right to issue instructions is only subject to an equitable review in individual cases.

Taking into account the standard of review set out by the BAG, the BAG decided that the transfer - against the background of the closing of the home base at Nuremberg Airport and the lack of vacancies at other locations in Germany - was in accordance with equitable discretion. The BAG stated that if the instruction is based on an entrepreneurial decision, this decision is accorded particular weight without the entrepreneurial concept having to be reviewed for its expediency. The decisive factor is whether the employer's interest in enforcing its organizational decision justifies the instruction in the specific individual case, despite the disadvantages incurred by the employee. Since in the present case the transfer is already effective on the basis of the employer's right to issue instructions, the precautionary notice of termination was no longer relevant.

Consequences for practice

The decision of the BAG further substantiates the already existing territorial scope of the employer's right to transfer pursuant to Section 106 sentence 1 GewO. In principle, employers can use their (employment contract) right to issue instructions to transfer employees to a workplace abroad without having to issue a notice of termination without notice, provided that the possible work locations are not limited to Germany by employment contract, works agreement, collective bargaining agreement or statutory provisions.

The decision is particularly relevant for globally active companies that want to deploy their employees across borders. It should be noted, however, that a broad transfer clause also requires an extended assessment of continued employment in the event of (operational) terminations. In addition, prior to transfers abroad - in particular if this does not take place due to a plant closure or location discontinuation - the justified interests of the employee concerned must be weighed against the interests of the employer in the transfer, which may result above all from the family's private living environment (above all school-age children).

2. Dismissal for operational reasons due to transfer of tasks to another group company is effective (BAG judgment of 28 February 2023, 2 AZR 227/22)

In its judgment of 28 February 2023 (2 AZR 227/22), the BAG once again had the opportunity to substantiate and continue its case law on urgent operational requirements to justify a termination for operational reasons in accordance with Section 1 (2) of the German Dismissal Protection Act (Kündigungsschutzgesetz, KSchG).

In the facts underlying the decision, the parties disputed the validity of an ordinary termination for operational reasons. The plaintiff was employed as "Vice President & Country Manager Germany" in the sales department of the defendant, the German subsidiary of a foreign parent company. He managed a sales team of six employees, each of whom acted as "Sales Directors" and were also employed by the German subsidiary. In his function, the plaintiff was required to report to an employee of a London-based further group company of the defendant. In May 2020, the defendant employer made the entrepreneurial decision to shorten reporting lines and to instruct the sales directors to report directly to the sales manager of the group company. The latter took over the duties of the plaintiff, so that the position of "Vice President & Country Manager Germany" was eliminated without replacement as of 1 July 2020. The defendant therefore terminated the plaintiff's employment in May 2020 for operational reasons.

The plaintiff objected to the termination on the grounds that there was no operational reason because the defendant's entrepreneurial decision was only aimed at dismissing him. The plaintiff was convinced that an internal transfer of positions would lead to a change of employer, so that the employment requirement would not cease to exist. The defendant argued that the parent company uses a matrix organization and that the defendant's departments are managed by matrix managers outside Germany. The corporate decision to change the reporting line led to the loss of the plaintiff's position at the defendant without replacement.

The BAG confirmed the dismissal decisions of the lower courts and rejected the plaintiff's appeal. Taking into account the limited standard of review of the entrepreneurial decision by the courts, the termination was legally valid due to the entrepreneurial decision of the defendant in this case to eliminate the position of "Country Manager Germany" and to assign the tasks to an affiliated company within the group, since the entrepreneurial decision was neither unobjective nor unreasonable or arbitrary. An urgent operational requirement for a termination for operational reasons pursuant to Section 1 (2) KSchG exists if the implementation of the decision is expected to lead to a permanent discontinuation of the employee's need for employment by the end of the notice period at the latest and the forecast is objectively justified at the time of the termination. In principle, an employer is not required to retain jobs or workers that are no longer needed; against this background, the entrepreneurial decision - which is subject to the constitutional rights protection of Articles 12, 14 and 2 (1) of the German Constitution (Grundgesetz, GG) - cannot be reviewed for its economic viability, provided that the limit of arbitrariness is not exceeded. The courts therefore have only a limited right to review corporate organizational decisions or concepts.

The entrepreneurial freedom protected by Articles 12, 14 and 2 (1) GG also includes, among other things, the right to determine whether certain activities are outsourced. Due to the limited reviewability of an entrepreneurial decision, actual cost savings are not relevant. Since Section 1 (2) KSchG only covers the possibility of continued employment in the business or company and does not apply to the entire group, the transfer of an activity within the group has no legal significance. The constitutionally required protection is guaranteed by Section 613a of the German Civil Code (Bürgerliches Gesetzbuch, BGB) and Section 322 et seq. of the German Conversion Act (Umwandlungsgesetz, UmwG) are guaranteed.

The BAG also clarified once again that in such a lawsuit the employee bears the burden of presentation and proof regarding the circumstances which show that the organizational measure is unobjective, unreasonable or arbitrary. From such circumstantial evidence, it must be examined in the factual instance whether these permit the conclusion that the organizational decision underlying the termination exceeded the limits of Articles 12, 14, 2 (1) GG. Facts proving that the corporate decision merely served as a pretext to force the plaintiff out of the company were not presented, especially since other employees of the defendant also lost their jobs. According to the findings of the pre-instance court, the plaintiff's position at the defendant was not refilled. The BAG is also convinced that it is not relevant to the dispute which person took over the plaintiff's task at the further group company.

Consequences for practice

With its judgment, the BAG has strengthened the entrepreneurial (decision-making) freedom of business owners and confirmed that companies - up to the limit of arbitrariness - do not have to justify the economic necessity of organizational decisions in order to prove the legal validity of a termination. The burden of presentation and proof in a lawsuit is always on the employee with regard to unobjective, unreasonable and/or arbitrary considerations. However, in order to reduce any risks in the case of terminations for operational reasons despite the business-friendly case law, employers should continue not to include any extraneous considerations in their decision-making.

3. Equal-pay principle in the law on temporary work may continue to be overridden by collective bargaining agreements (BAG judgment dated 31 May, 2023, 5 AZR 143/19)

In its decision of 31 May 2023 (5 AZR 143/19), which is currently only available as a press release, the BAG had the opportunity to deal with the question of whether a collective bargaining agreement can deviate downwards from the equal pay principle and whether temporary workers are subsequently not entitled to the same pay as comparable permanent employees for the duration of their assignment. In a preliminary judgment, the European Court of Justice already answered the questions posed under EU law in the judgment of 15 December 2022 (C-311/21) in connection with the interpretation of the "respect for the overall protection of temporary workers" required by Article 5 (3) of Directive 2008/104/EC (Temporary Work Directive) and stated that collective agreements that stipulate lower pay for temporary workers than that of directly hired workers must provide for compensatory benefits.

In the facts underlying the decision, a temporary worker employed on a part-time basis for an indefinite period of time asserted a claim for differential pay for the months of January to April 2017. Comparable permanent employees had received a higher hourly wage than her at the hirer company. In support of her claim, the plaintiff invoked the principle of equality pursuant to Section 8 (2) sentence 2 of the German Act on Temporary work (Arbeitnehmerüberlassungsgesetz, AÜG)/ Section 10 (4) AÜG old. In her opinion, the collective bargaining agreement of iGZ and ver.di applicable to her temporary employment relationship by virtue of mutual collective bargaining obligations was not compatible with Art. 5 III of Directive 2008/104/EC and the respect for the overall protection of temporary workers required therein.

The action was dismissed in all instances. In the opinion of the BAG, the principle that temporary workers are entitled to the same pay as comparable permanent employees of the hirer for the duration of a temporary assignment ("equal pay") can be deviated from "downwards" by means of a collective agreement in accordance with Section 8 (2) AÜG. On the basis of the collective bargaining agreement applicable to the temporary employment relationship due to the fact that both parties are bound by the collective agreement, the defendant is only obligated to pay the collectively agreed remuneration pursuant to Section 8 (2) sentence 2 AÜG/ Section 10 (4) AÜG old. This means that the hiring company only has to pay the lower collectively agreed remuneration.

The relevant collective bargaining agreement in this case (of the Association of German Temporary Employment Agencies ("iGZ") and the trade union ver.di) satisfies the requirements of Article 5 (3) of Directive 2008/104/EC, at least in conjunction with the statutory protection provisions for temporary workers. It is true that the plaintiff suffered a disadvantage in this respect, since she received a lower remuneration than she would have received if she had been hired directly for the same job by the user company. However, such a worse position is expressly permissible - in particular in consideration of the preliminary judgment of the ECJ - pursuant to Article 5 (3) of Directive 2008/104/EC, provided that this is done with "respect for the overall protection of employees". In this regard, the ECJ stated that the unequal treatment must be neutralized by compensatory benefits. This could be, for example, the continued payment of wages even during periods when the employee is not on loan.

Such continued payment of wages even during non-hiring periods is included in the iGZ and ver.di collective bargaining agreement. This provision must be considered in conjunction with the provisions of Section 11 (4) sentence 2 AÜG and the general time limit on the deviation from the principle of equal pay pursuant to Section 8 (4) sentence 1 AÜG to the first nine months of the temporary employment relationship. In addition, the German legislator has ensured that the collectively agreed remuneration of temporary workers may not fall below the lower wage limits set by the state (cf. Section 3a AÜG) and the statutory minimum wage. Against this background, the BAG considers a balance to be given, so that the overall protection of the employee required in accordance with Art. 5 (3) of Directive 2008/104/EC is also to be assumed.

Consequences for practice

With its decision, the BAG has answered an extremely practice-relevant question and clarified that the principle of equal pay in the area of temporary employment can (still) be deviated from by collective agreement of the iGZ and ver.di, since a corresponding compensation for the worse position exists. This means for practice in general that a collective bargaining agreement that allows lower remuneration to the detriment of temporary workers must - in the opinion of the ECJ and now also of the BAG - grant the temporary workers advantages with regard to essential working and employment conditions that are suitable to compensate for their unequal treatment in order to deviate from the equal pay principle in a lawful manner.

How advantages with regard to essential terms and conditions of employment can look like remained unclear after the decision of the ECJ. With its judgment, the BAG provides initial guidance for further collective agreements in the temporary employment sector. According to this judgment, it is sufficient in conjunction with the statutory protection provisions for temporary workers if the collective agreement guarantees continued payment of wages even during periods when the worker is not on loan.

4. No reimbursement of a recruitment agency commission by the employee (BAG judgment dated 20 June 2023, 1 AZR 265/22)

In the decision of 20 June 2023 (1 AZR 265/22), which has so far only been published as a press release, the BAG clarified that an obligation of the employee agreed in the employment contract to reimburse an agency commission paid by the employer to a personnel service provider in the event of premature termination of the employment contract by the employee which takes effect before the expiry of a certain period of notice is invalid.

The parties concluded an employment contract in March 2021, which was concluded through a recruitment agency. The employer had to pay the latter part of the commission at the beginning of the employment relationship and another part after the successful end of the probationary period of 6 months. The employee started work on 1 May 2021 and terminated the employment relationship promptly after taking up the job with effect to 30 June 2021. His employment contract included a clause obliging him to reimburse the employer for the placement commission for the personnel service provider if the employment relationship did not continue beyond 30 June 2022 and - among other things - was terminated by the plaintiff himself for reasons for which he was responsible. The defendant then retained a partial amount of the plaintiff's remuneration for June 2021 - for the purpose of compensating the commission paid to the personnel service provider.

The plaintiff pursued payment of the withheld compensation amount with his lawsuit. The plaintiff claimed that the clause in his employment contract obliging him to make reimbursement was unreasonably disadvantageous to him and was therefore invalid. By way of counterclaim, the defendant sought reimbursement of the outstanding balance of the agency commission despite the fact that it had been withheld. It was of the opinion that the employment contract clause was effective and that it was therefore entitled to have the commission reimbursed by the plaintiff. Both lower courts upheld the claim and dismissed the counterclaim. The defendant's appeal to the BAG was unsuccessful.

The BAG ruled that the clause in the employment contract was a controllable one-time condition within the meaning of Section 310 (3) No. 2 BGB. This clause unreasonably disadvantaged the employee contrary to the principles of good faith and was therefore invalid pursuant to Section 307 (1) sentence 1 BGB. Pursuant to Art. 12 (1) GG, the employee has the right to freely choose his or her workplace. On the part of the employer, on the other hand, there were no weighty interests worthy of protection which would justify the validity of the clause. The fact that the employer had engaged a personnel service provider and thus incurred additional costs for the recruitment of the employer was accompanied by the risk that the expenses would not lead to success, i.e. a permanently existing employment relationship. However, the employer would have to bear this entrepreneurial risk himself. In addition, the plaintiff does not receive any advantage that could compensate for his limited freedom of job choice. The plaintiff's right is impaired by the clause without this being justified by justified interests of the defendant. Thus, the clause is invalid.

Consequences for practice

In view of this judgment, employers are well advised to consider in a differentiated manner whether they should enter into an agreement with an employee that is intended to obligate the employee, under certain conditions, to reimburse the employer for costs incurred by the latter in connection with the recruitment of the employee vis-à-vis an intermediary personnel service provider. It remains to be seen whether the BAG, in the context of the still outstanding detailed reasons for its judgment, will address the issue of which motives on the part of the employer can constitute an interest worthy of protection that justifies the use of such a clause. However, in view of the employee's constitutionally protected position with regard to his right to free choice of employment, the requirements for a justifiable interest are likely to be very high.

5. Co-determination of the staff council in the use of social media with comment function (BVerwG decision of 4 May 2023, 5 P 16.21)

Social media represent important communication and information media for public authorities and private companies, as a broad public can be reached with comparably little effort. On May 4 2023, the German Federal Administrative Court (Bundesverwaltungsgericht, BVerwG) ruled that social media pages or channels with a comment function operated by a public administration body may be subject to co-determination by the staff council.

The Statutory Pension Insurance (DRV Bund) maintains its own pages and channels on Facebook, Instagram and Twitter (partly together with other pension insurance institutions) as part of its press and public relations work and for recruiting personnel. Users have the option of commenting on the posts made there and also addressing the behaviour or performance of individual employees. Posts and comments are stored by the social media, but are not evaluated there for the department.

The applicant main staff council initially requested the DRV Bund to initiate a co-determination procedure in accordance with the German Federal Staff Representation Act (Bundespersonalvertretungsgesetz, BPersVG) because of the Facebook presence. The DRV Bund denied the duty of co-determination on the grounds that the comment function, which could not be disabled, could not enable monitoring of the employees' performance or behaviour for technical reasons. The social media also did not offer any statistical evaluations of the comments. Rather, the comments are checked daily by administrators for their appropriateness. While the administrative court of first instance had affirmed a right of co-determination of the personnel council, the Higher Administrative Court denied its existence.

The BVerwG ruled that a technical device for monitoring the behaviour and performance of employees that requires co-determination may exist if a public administration body maintains its own pages or channels with a comment function in social media. Pursuant to Section 80 (1) No. 21 BPersVG, the staff council has a right of co-determination regarding the introduction and use of technical equipment intended to monitor the behaviour or performance of employees. The statutory right of co-determination of the staff council is intended to ensure that the impairments and dangers to the protection of the personality of the employee at the workplace, which emanate from the mechanization of behaviour and performance monitoring, remain limited to the necessary extent. According to the BVerwG, the question of whether the establishment or use of pages or channels with a comment function is subject to co-determination by the personnel council can only be answered in accordance with the circumstances of the individual case. The BVerwG ruled that the protective purpose of Section 80 (1) no. 21 BPersVG requires that even the storage of user comments with behavioural or performance-related information is to be regarded as an independent (monitoring) service of a technical device. The storage of data already entails the risk that the department will also evaluate this data. This can create monitoring pressure on the employee.

The monitoring by the technical device can also be "intended" for monitoring the employee, whereby according to case law, contrary to the wording, it is sufficient that the data storage is objectively suitable for monitoring. Whether this is the case depends, due to the uncertain, only possible entry of corresponding behavioural or performance data by third parties, on whether, when viewed objectively in the specific case, there is a sufficient probability of the posting of corresponding user comments in accordance with the protective purpose of the co-determination provision. In this respect, the conception of the presence in the social media is of particular importance. If the department management itself reports on specific employees and their field of activity and thus directs the public's attention to the official conduct and performance of employees, user comments relating to this can be expected. If, on the other hand, information is provided in a factual manner in general terms and without reference to specific employees in the form of press releases about the tasks and activities of the department, there is no sufficient likelihood that corresponding comments will be made. If an appreciable number of behavioural or performance-related user comments only occur in the course of operations, the suitability for monitoring can also be affirmed at a later point in time, contrary to any original prognosis. On the other hand, monitoring pressure cannot generally be assumed if the department management deletes behaviour- or performance-related comments as quickly as possible without prior evaluation.

Consequences for practice

The BVerwG's decision not only has significance for the cooperation between public employers and staff councils. Since the provision of Section 80 (1) No. 21 BPersVG at issue is identical in content to Section 87 (1) No. 6 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), a transfer of the case law to the co-determination rights of works councils is obvious (see also the decision of the BAG of 31 December 2016, 1 ABR 7/15). Due to the comparable interest situation in private companies and public authorities, it is therefore advisable to once again consider the legally enshrined digital privacy protection of employees and the protection against permanent surveillance when using social media. The decision on the prior involvement of employee representatives will largely depend in individual cases on whether behaviour-related or performance-related user comments are to be expected under posts in social media. Even in the case of a factual conception of the presence without references to specific employees, employers should observe the actual behaviour of the users.


Published: August 2023

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