22.11.2024 Newsletter

Focus on Labor Law – 4th Quarter 2024

This last issue of Focus on Labour Law for the year contains our usual overview of the most important labour court decisions of recent months as well as new legislation.

Many of the “traffic-light” coalition government’s labour law proposals that were envisaged in the 2021 coalition agreement were not implemented in the legislative period now coming to an end. What we can expect here in the years to come will largely depend on the outcome of the federal elections in February 2025. As always, labour law remains thrilling!

We wish you and your families all the best for 2025!

1. New case law

1.1 Same procedure as every year - target agreement or target stipulation?

Variable remuneration components are regularly linked to the achievement of certain targets. These can be agreed or stipulated unilaterally by the employer. A clause that grants the employer the right to unilaterally stipulate targets in the event that a joint target agreement fails is invalid if this clause enables the employer to unilaterally undermine the contractually agreed order of priority (German Federal Labour Court [Bundesarbeitsgericht – BAG], judgement of 3 July 2024 - 10 AZR 171/23).

The plaintiff employee asserted a damage claim due to lost bonuses. The bonus had been made dependent in the employment contract on the achievement of certain targets to be agreed prior to the assessment period. The employer had simultaneously reserved the right to also unilaterally stipulate the targets if no amicable agreement could be reached. The targets envisaged by each side were indeed so far apart that the employer unilaterally stipulated them for the assessment period - without prior agreement - and ultimately did not pay any bonus. The employee argued that no target agreement had been reached and that the employer was not entitled to set targets unilaterally.

The BAG ruled that a unilateral shift from the primary ranking target agreement to a subordinate target stipulation would unreasonably disadvantage the employee according to Section 307 (1) of the German Civil Code [Bürgerliches Gesetzbuch – BGB]. This would de facto allow the employer to undermine the agreed ranking. For this reason, according to general principles, the employer bore the responsibility for the failure to conclude the target agreement as it had not negotiated sufficiently. On the one hand, genuine negotiations presuppose that the employee can substantially influence the proposed targets; on the other hand, it requires that the employer seriously puts the core content of the proposed target agreement up for discussion and grants the employee leeway regarding its design in order to safeguard the employee’s interests.

Combined clauses consisting of a primary target agreement and a subordinate target stipulation envisaged as an "emergency exit" can be found widespread in practice. Employers should therefore review their variable remuneration agreements in the near future, primarily for two reasons:

The assessment period for target agreements is regularly based on the calendar year. In addition, target agreements must be concluded in good time before the start of the reference period. As the start of year 2025 is approaching, urgency is required.
The BAG has consistently taken the full target figure as the basis for the damage calculation. It proceeds on the basis that employees achieve their targets unless the employer presents special circumstances to the contrary. Although the BAG fundamentally recognises that, in exceptional cases, the employee can be held partly at fault in accordance with Section 254 (1) BGB if no target agreement is reached, the proportion of contributory negligence is only restrictively taken into account with a claim-reducing effect of up to 10 percent (see BAG, judgement of 17 December 2020 - 8 AZR 149/20).

Employers are advised to increasingly rely on target stipulations in future. This is certainly the case if, possibly due to time constraints, the negotiation and implementation of target agreements cannot be guaranteed with legal certainty. If employers insist on adhering to the combination, it is vital to specify the conditions under which the negotiations may be deemed to have failed.

Dr. Johannes Kaesbach

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1.2 Group privilege or covert temporary employment? Why "and" actually means "or".

In its ruling of 12 November 2024 - 9 AZR 13/24, the BAG called into question the practice arguably implemented by a multitude of companies: According to the BAG, the so-called group privilege for temporary employment does not only apply if an employee is both recruited and employed for the purpose of temporary employment - it already suffices if one of the two conditions is met. For employers, this means that anyone who sends employees to affiliated companies must now check even more closely whether this constitutes a case of temporary employment that requires a permit.

The plaintiff had been employed by S-GmbH for twelve years and worked from the outset at the business premises of the defendant, an affiliated company of S-GmbH. He was of the opinion that he had been covertly deployed as a temporary worker and therefore sought a declaration to the effect that he had an employment relationship with the defendant.

An employment relationship arises between the company deploying the worker [“Entleiher”] and the temporary worker if the contract between the company hiring out the worker [“Verleiher”] and the temporary worker is invalid for one of the reasons specified in Section 9 (1) of the German Temporary Employment Agreement [Arbeitnehmer-überlassungsgesetz – AÜG]. However, if the assignment takes place between two group companies, an employment relationship is only established between the deploying company and the temporary worker if employees have been recruited and employed solely "for the purpose of the temporary employment assignment" (so-called group privilege, see Section 1 (3) No. 2 AÜG, underlining only here).

The lower courts dismissed the action on the grounds that the group privilege would only not apply if the plaintiff had been both recruited by S-GmbH for the purpose of the temporary employment assignment and employed there - both conditions would have to be met cumulatively. This was not the case here. The BAG took a different view: According to the legislator’s intention the "and" in Section 1 (3) No. 2 AÜG should rather be understood as an enumeration. The group privilege therefore already does not apply if employees are recruited "or" employed for the purpose of the temporary employment assignment. This is regularly the case if employees have been continuously employed as temporary workers for several years since the beginning of their employment.

The BAG referred the case back to the Regional Labour Court [Landesarbeitsgericht – LAG] of Lower Saxony for a new hearing and decision. The latter now has to assess whether the plaintiff was indeed integrated into the defendant's work organisation and bound by the defendant’s instructions.

Companies should urgently ensure that employees are either not assigned to an affiliated company from the very start of their employment relationship or that the assignment is clearly limited in terms of time and content, for example by making the assignment specific to a certain project. Companies who nevertheless recruit or employ employees for the purpose of assigning them to an affiliated company must comply with all requirements for the provision of temporary workers. In this context, reference is made to the judgement of the LAG Düsseldorf (dated 24 April 2024 - 12 Sa 1001/23, not final). This court ruled that the long-term and repeated limitation of an assignment is invalid and leads to an indefinite assignment. The flexible personnel deployment within the matrix and group is becoming problematic.

Dr. Alexander Willemsen

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1.3 Suspected faked incapacity for work? Surveillance of employees by a private detective agency as a last resort

The surveillance of an employee by a private detective agency constitutes an intensive encroachment on the employee's personal rights and is therefore only permissible under very strict conditions. Employers are therefore required to only instigate the surveillance of an employee as a "last resort". Otherwise, the employee may be entitled to claim damages in accordance with Art. 82 (1) GDPR. This was decided by the BAG in its judgement of 25 July 2024 - 8 AZR 225/23.

Following the relocation of his workplace to another city, the employee increasingly reported himself unfit for work. Most recently, he submitted a certificate of incapacity for work covering a period of several weeks. After receiving the certificate, the employer suspected that this was just a pretext and that the employee was actually carrying out sideline employment activities. The employer then had the employee secretly monitored by a private detective agency over a period of two weeks. The employee viewed this as an unauthorised processing of his personal data and asserted an immaterial claim for damages pursuant to Art. 82 (1) GDPR.

The BAG affirmed a corresponding damage claim of the employee. It held that the strict requirements for monitoring the employee had not been met. In the BAG’s opinion, the monitoring of the employee concerned in public spaces and on his private residential property for several days constituted a processing of health data pursuant to Art. 9 (1) GDPR, Art. 4 No. 15 GDPR. This is because the data collected by the private detective agency also documented the employee's visible state of health. Such a surveillance measure mandatorily requires fulfilment of the criterion of "necessity" within the meaning of Art. 9 (2) lit. b) GDPR. This “is met if the evidential value of the certificate of incapacity for work submitted by the employee is completely shattered and, furthermore, the milder means of an assessment by the medical service of the health insurance fund is not available to the employer”. The court negated the fulfilment of the aforementioned requirements in the specific case. The employee had suffered immaterial damages due to the loss of control and security in his private environment as a result of the surveillance. As a consequence, the employee was entitled to damages under Art. 82 (1) GDPR.

With this judgement, the BAG emphasises the strict conditions under which the surveillance of employees by a private detective agency is possible and provides further guidance for employers.

The decision is of considerable practical importance, as it highlights the risks associated with the unlawful monitoring of employees. In order to avoid impermissible encroachments on the personal rights of employees concerned and the resulting damage claims, employers should carefully examine the specific circumstances of the case. Furthermore, it is imperative that employers ensure that the planned surveillance measure is not disproportionate to the reasonable grounds for suspicion.

Kathrin Vossen

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1.4 Malicious failure to seek work during default of acceptance

In the event of an invalid dismissal, an employee is entitled to compensation for default of acceptance. To be taken into account in this respect is the amount that they could have earned if they had not maliciously failed to accept reasonable work. In its judgement of 11 September 2024 - 4 Sa 10/24, the LAG Baden-Württemberg stated that the criterion for making a deduction is not sufficiently met if the employer only informs the employee of reasonable jobs after expiry of the period of default. With this, the LAG deviates from the previous case law of the BAG.

After successfully suing for protection against dismissal, the employee claimed compensation for default of acceptance for the period July 2021 to August 2022. It was only on 22 September 2022 that the defendant requested information from the plaintiff about his income during the period of default of acceptance. The plaintiff stated that he had only received unemployment and sickness benefit. At the same time, the plaintiff had informed the Federal Employment Agency that he was interested in returning to the defendant and therefore refrained from endeavouring to seek work. As a result, the agency did not submit any placement proposals to him.

The LAG awarded the plaintiff the compensation for default of acceptance. The defendant could not plead any offsetting of remuneration. Despite it being established that the plaintiff had maliciously failed to seek reasonable work, the court lacked evidence to the effect that the plaintiff would otherwise have actually earned money elsewhere.

What primarily stands out about the LAG’s judgement is its assessment of the causality between malicious failure and the lack of other earnings. According to the LAG, causality is not proven if an employer only points out possible jobs after the expiry of the period of default. With this, the LAG expressly contradicts the case law of the 5th Senate of the BAG (judgement of 7 February 2024 - 5 AZR 177/23), which deemed the subsequent official notification by the employment agency of vacant and reasonable jobs to be sufficient. The LAG argues that employees would otherwise be obliged to seek work on their own more strictly than in the context of social security law. Furthermore, an employee could not be criticised for not responding to job offers of which they had no knowledge.

An appeal on points of against the judgement has been permitted. If the BAG confirms the LAG’s decision, this will have an impact on strategic litigation in unfair dismissal proceedings. Specifically, employers should check at an early stage whether there are reasonable job offers available for the employee and communicate these actively and verifiably. A proactive indication of reasonable employment alternatives can be advantageous for several reasons. Firstly, it reduces the risk of the employee being able to claim compensation for default of acceptance, as they would then be accused of breaching their obligation to seek work. Secondly, such an indication also opens up a negotiation option: the prospect of alternative employment can significantly increase the employee's willingness to negotiate, which increases the chances of amicably resolving the conflict - for example in the form of a settlement.

Roman Braun

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1.5 No entitlement to continued employment pursuant to Section 102 (5) BetrVG in case of dismissals during the waiting period

The Labour Court [Arbeitsgericht – ArbG] of Hamburg (judgement of 4 July 2024 - 29 Ca 110/24) has rejected the right to continued employment under shop constitution law for employees during the probationary period. An appeal against the decision has been lodged with the LAG Hamburg (docket No. 2 SLa 21/24).

The employer, a housing association, consulted the works council on the dismissal of a commercial employee during the "6-month probationary period". The works council objected to the dismissal, referring to the possibility of continued employment in a specifically named position in the company. In a letter dated 7 March 2024, the employer duly terminated the employment relationship during the waiting period. The employee then filed an unfair dismissal action in due time. She also asserted her right to continued employment in accordance with Section 102 (5) of the German Shop Constitution Act [Betriebsverfassungsgesetz – BetrVG] until the legally binding conclusion of the unfair dismissal proceedings.

The ArbG Hamburg dismissed the action in its entirety. The German Unfair Dismissals Act [Kündigungsschutzgesetz – KSchG] did not apply to the plaintiff as she had not fulfilled the waiting period requirement pursuant to Section 1 (1) KSchG. In addition, there was no entitlement to continued employment pursuant to Section 102 (5) BetrVG in the event of a dismissal during the waiting period.

The question of whether a claim to continued employment under shop constitution law can arise in the event of a dismissal during the waiting period has not yet been clarified by the highest court with respect to the legal situation applicable since 1 January 2004. While employees previously only had to assert at the labour courts within the three-week period that the dismissal was socially unjustified, through the amendment of the law the legislator has now extended the preclusion period pursuant to Section 4 sentence 1 KSchG to also cover other grounds for invalidity. According to the ArbG Hamburg, this also unintentionally covers the right to continued employment under shop constitution law, for Section 102 (5) BetrVG, according to its express wording, presupposes the applicability of the KSchG.

In the opinion of the ArbG Hamburg, however, this leads to irresolvable inconsistencies in interpretation. Firstly, the grounds for objection in Section 102 (3) BetrVG are modelled on the grounds in Section 1 (2) KSchG for the social justification of a dismissal. However, the works council cannot object for reasons that are irrelevant in the case of dismissals during the waiting period (see already BAG, judgement of 13 July 1978 - 2 AZR 798/77). Secondly, the claim to continued employment also cannot be based on other grounds of invalidity within the meaning of Section 4 KSchG. This is because the right to continued employment is linked to the objection of the works council. Finally, this assessment is also in line with the small-company clause pursuant to Section 23 (1) sentence 3 BetrVG, according to which the KSchG and thus also the right to continued employment under shop constitution law do not apply to companies that generally employ ten or fewer employees. Thus, the right to continued employment under shop constitution law cannot arise during the probationary period.

The decision has great practical relevance for employers. Were the right to continued employment under shop constitution law to already arise during the probationary period, then - in view of the average duration of labour court proceedings over two instances of approximately one year - employers would be exposed to considerable financial risks. In addition, this would severely restrict the flexibility provided by the legislator for employers to terminate an employment relationship during the probationary period solely on the basis of their subjective judgement.

Marko Vraetz

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1.6 Calculation of entitlements to a release from work for unevenly distributed working hours

If an agreement on a release from work (leave) is linked to the regular weekly working days, this can lead to calculation uncertainties in the event of a changing work rhythm. The BAG has now ruled that the average number of working days and not the regular working time is decisive for the scope of the entitlement to leave (judgement of 21 August 2024 - 10 AZR 190/23). Fractions of days of leave are also to be granted.

In the underlying case, the industry-wide collective agreement applicable to the employment relationship stipulated that shift workers with a regular weekly working time of at least 35 hours were entitled to paid leave instead of a collectively agreed additional allowance. With a regular working week of 5 days, the leave entitlement is 8 days according to the collective labour agreement. As the plaintiff worked in shifts of 6 working days and 4 days off (i.e. an average of 4.56 days per week), the employer granted the plaintiff 7 days of leave and a time credit of 0.3 working days to his working time account. The plaintiff was of the opinion that he was entitled to 8 days of leave, as this entitlement for shift workers was linked to a regular weekly working time of at least 35 hours.

The labour court and regional labour court dismissed the claim and agreed with the employer's opinion.

The employee's appeal on points of law was only partially successful. The BAG came to the conclusion that the plaintiff was not entitled to 8 days of leave. The interpretation of the industry-wide collective agreement shows that the entitlement to 8 working days' leave is linked to a regular 5-day week. If the working time is spread over fewer or more days, the entitlement increases or decreases. The purpose of the leave is to give the employees concerned additional leave for their recreation or personal affairs. It therefore makes sense to link the number of days of leave to the number of working days and not to the regular working hours. The BAG also came to the conclusion that the partial entitlement of 0.3 days of leave was not fulfilled by crediting the working time account. The claim to leave of 0.3 days still existed. The days of leave can neither be equated with statutory or collectively agreed holiday nor with a credit balance on the working time account. It is therefore not possible to convert fractions of a day of leave into working time credit.

The decision shows that employers should always check the amount of the claim in case of an agreement on a release from work that is linked to regular weekly working days. If the calculation results in fractions of days of leave, these may not simply be converted into working time credits. Applicable collective agreements and shop agreements should be checked for any gaps. The parties to collective agreements and shop agreements must agree on a final regulation on how to deal with fractions of days of leave in order to avoid subsequent legal disputes.

Fatoumata Kaba

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1.7 Passive phase of partial retirement - entitlement to the inflation adjustment bonus?

If employees in the passive phase of partial retirement (as block time) are excluded from a collectively agreed inflation adjustment bonus, this constitutes an invalid discrimination against part-time employees. Instead, these employees may also be entitled to an inflation adjustment bonus.

Following the dismissal of the action twice in the lower courts, the plaintiff's appeal on points of law to the BAG was successful (judgement of 12 November 2024 - 9 AZR 71/24; press release). The bonus to be paid in the case in question had its legal basis in a collective agreement provision that also provided for the exclusion of certain groups of employees from the payment. This included employees who were in the passive phase of partial retirement at the time of its disbursement. The plaintiff affected by the exclusion was of the opinion that the regulation constituted an unjustified unequal treatment of part-time employees. He argued that the inflation adjustment bonus was paid solely for the purpose of mitigating the rise in consumer prices.

The BAG awarded the plaintiff a payment claim - in full. Its reasoning was that the unequal treatment had not been based on an objective reason and therefore violated Section 4 (1) of the German Part-Time and Fixed-Term Employment Act [Teilzeit- und Befristungsgesetz – TzBfG]. The conditions for entitlement and the recognisable purpose of the benefit were such that they left no room for justifying the unequal treatment. In particular, it was neither recognisable that the inflation adjustment bonus was intended to compensate for work performed, nor had the parties to the collective agreement made the entitlement dependent on future loyalty to the company.

In the past, however, it was precisely these aspects that prompted the LAG Düsseldorf, for example, in its judgement of 19 July 2024 (7 Sa 1186/23) to consider the unequal treatment between full-time and part-time employees to be justified due to the "at least also" remuneration character of the inflation adjustment bonus assumed by it. In the opinion of the LAG Düsseldorf, the proportionate payment to part-time employees was a strong indication of this.

The publication of the reasons for the decision is eagerly awaited. In particular, the differentiation criteria deemed decisive by the BAG for the payment modalities are of great interest. In order to avoid inappropriate unequal treatment of (part-time) employees in the context of special payments and bonuses, sensitivity is required when drafting the corresponding regulations. Even minor deviations can lead to different payment obligations of the employer.

Lisa Striegler

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1.8 Requirements for the notification letter pursuant to Section 613a BGB - (further) improvement in sight?!

Due to the consequences that can result from an improper notification letter pursuant to Section 613a (5) BGB (including an unlimited right to object to the transfer of business, return to the former employer), it is and remains essential that employers follow the developments of the BAG in this area. It is therefore all the more pleasing to see that the BAG has relaxed its case law on the right to object in its decision of 21 March 2024 - 2 AZR 79/23.

The BAG ruled that a notification letter could “not be subject to requirements that are almost impossible to fulfil in practice to the effect that the notification letter may contain no legal errors". The decision fails to specify what is meant by "no legal errors". It can be surmised that only minor inaccuracies are meant by this. In cases in which the acquiring company is yet to be renamed, this could be, for example, the incorrect designation of a managing director with the simultaneous correct designation of the name and other details of the company (registered office, competent commercial register and commercial register number if applicable). This is because this information is regularly irrelevant for the employee when exercising their right of objection.

The 2nd Senate of the BAG had already hinted at this paradigm shift from the previous strict case law of the 8th Senate in its decision of 22 July 2021 - 2 AZR 6/21. There, it states that a "differentiated approach" is required, "according to which the start of the one-month objection period is certainly not affected by errors that are regularly irrelevant to the employee's decision-making process". From the decision, it can be inferred that which errors are significant for the individual employee is not important, but rather those errors that are typically important for their decision to exercise the right to object. In its most recent decision, the BAG makes it clear that the employee should be able to "get an idea" of the situation in order to inform themselves and, if necessary, also seek advice. However, comprehensive legal advice for each individual employee is not necessary.

In practice, the decision means that, in the context of the sale of a company, a precise risk assessment must be carried out with regard to the inaccuracies found in the notification letter in order to correctly present the risk of subsequent objections. Documents relating to previous transfers of business should definitely be requested.

The following points can be taken from the BAG's decision for use in practice:

Demands that can hardly be met in practice may not be placed on the notification.
In the case of information on disputed legal issues, a legally defensible position is sufficient.
Insignificant errors do not lead to invalidity. In this context, the following control question is useful: Would the employee's decision to exercise the right to object have been different if the correct information had been included in the notification letter?

Katharina Schäffer

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1.9 The grouping or regrouping of works council members released from their work duties does not establish a right of co-determination pursuant to Section 99 BetrVG

The works council has no right of co-determination in the grouping/regrouping of works council members released from their work duties pursuant to Section 99 (1) BetrVG. This was recently decided by the BAG in its ruling of 26 November 2024 - 1 ABR 12/23, thus providing clarity for the first time with regard to the highly controversial legal issue of the scope of the works council's right of co-determination.

The employer had retroactively paid the chairman of the works council according to a higher remuneration group without involving the works council. The works council viewed this as a violation of its right of co-determination pursuant to Section 99 (1) BetrVG. The grouping of the works council member in the collectively agreed remuneration system constituted a legal regrouping that required the prior involvement of the works council. The employer countered the works council's view with the argument that the remuneration of works council members was governed by the special provisions of Section 37 (4) and Section 78 sentence 2 BetrVG and that the works council’s involvement was not necessary due to the lack of applicability of Section 99 (1) BetrVG. The applicability of Section 99 (1) BetrVG was also precluded by the fact that there is already no grouping/regrouping subject to co-determination, as the promotion of a works council member released from his work duties to a higher remuneration group does not lead to the required "change in activity".

The BAG agreed with the latter view and ruled that the determination of the remuneration of works council members released from their work duties lay solely within the decision-making power of the employer. Agreeing with the statements made by the employer, the competent senate stated that there was no grouping/regrouping as required for the applicability of the provision of Section 99 (1) BetrVG. A grouping/regrouping consists of the assignment of the work to be performed by an employee to a specific group of the relevant pay scale. In contrast, when the remuneration of a works council member released from his work duties is increased in accordance with Section 37 (4) and Section 78 sentence 2 BetrVG, no such grouping takes place, but rather an adjustment of the remuneration of the works council member in accordance with the statutory provisions set out in these standard provisions. A right of participation of the works council pursuant to Section 99 (1) BetrVG is also ruled out because the works council already has no right of co-determination regarding the assessment of an employee’s customary professional development. A right of co-determination pursuant to Section 99 (1) BetrVG must especially be denied if it merely concerns the increase of a remuneration group without this being associated with any change in activity.

With this decision, the BAG clearly rejects the previous decision of the LAG Saxony (decision of 21 February 2023 - 3 TaBV 26/21). The BAG's view is convincing, as a salary increase in accordance with Section 37 (4) BetrVG only involves an adjustment of the remuneration and not a change in activity. The BAG's decision is of considerable practical significance, as it clarifies a long-disputed legal issue.

Isabel Hexel

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1.10 Between listening and eavesdropping - co-determination in the workplace regarding headset systems

Even if conversations are not recorded or stored, the use of headsets for internal communication between employees can be considered a monitoring tool, meaning that their use is subject to co-determination by the works council (BAG, decision of 16 July 2024 - 1 ABR 16/23).

The employer is a retail company with a branch structure. It planned to introduce headsets in its branches for internal employee communication. The devices enabled (only) the employees on site to follow all conversations live without these being recorded. The headsets were also not allocated to individual employees, but were redistributed on each shift. The underlying system transmitted various data to the IT centre in Ireland and was also controlled from there. The works council of one of the German branches saw this as a means of monitoring employee behaviour and performance and considered the introduction of the headsets to be subject to co-determination.

The BAG agreed with this assessment in principle, but nevertheless rejected the works council's complaint, as the responsibility for co-determination does not lie with the local works council, but with the general works council. The BAG recognised the live transmission of all conversations as an opportunity for superiors to monitor the behaviour of employees using the headsets. This monitoring pressure also exists if employees remove the headset or mute it, as this also allows conclusions to be drawn about their behaviour and therefore constitutes a form of performance monitoring. The fact that the headsets are not assigned to a specific employee does not lead to a different assessment. Identification is certainly possible via the voices - if necessary with the help of the duty rosters. Whether conversations are recorded or not, however, was deemed irrelevant by the BAG.

Due to the uniform roll-out of the system in all of the employer's branches and the central control by the IT centre in Ireland, a company-wide regulation was absolutely necessary, meaning that the original responsibility for co-determination of the system does not lie with the local works council, but with the general works council.

The decision clarifies the scope of the works council's right of co-determination pursuant to Section 87 (1) No. 6 BetrVG. A subjective monitoring intention on the part of the employer is irrelevant. The protective purpose of Section 87 (1) No. 6 BetrVG is already affected if part of the monitoring process is carried out using a technical device. Which body is responsible for the co-determination must always be carefully examined in practice. As soon as a cross-company deployment is intended and this is controlled uniformly from a central office, without there being any possibility of any different deployment in individual companies, the responsibility of a general or, if applicable, group works council is established. Once again, this decision by the BAG makes it clear that when introducing technical systems, co-determination rights should be closely examined and the responsible bodies involved at an early stage. In this respect, IT framework shop agreements can be helpful for fixed procedures.

Alexandra Groth

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1.11 Eligibility of matrix managers to vote in works council elections

The next round of works council elections will take place in spring 2026. In connection with the execution of these elections, the question regularly arises as to which employees at the particular business establishment are eligible to vote. This especially applies in case of matrix managers, albeit that the regional labour courts are still divided on this issue.

Since the decision of the BAG of 12 June 2019 (1 ABR 5/18), it has been clear that both the works council of the place of office and the works council of the business establishment at which the employees reporting to the manager work must be consulted before a matrix manager is hired. Nevertheless, it has not yet been clarified at highest court level whether matrix managers are also entitled to vote at several business establishments or only at the principal business establishment within the meaning of Section 7 BetrVG. According to this, employees who are in an employment relationship with the proprietor and who perform dependent work within the employer's business organisation are eligible to vote. The decisive factor is that the employer pursues the work-related purpose of the business establishment with the help of the employees, i.e. the employees are integrated into the business establishment.

The LAG Hesse ruled at the beginning of 2024 (decision of 22 January 2024 - 2 BV 860/22) that employees who work at several business establishments are also entitled to vote at all of these establishments. It is irrelevant whether they are predominantly tied to one establishment. Rather, it is necessary and sufficient for the work performed to be assigned to the objectives of several business establishments. In this respect, the "concept of integration", which the BAG specified in its decision of 12 June 2019 on Section 99 BetrVG, is to be transferred to Section 7 BetrVG. Also for reasons of legal certainty, the term should be interpreted in the same way.

In its decision of 13 June 2024 (3 TaBV 1/24), the LAG Baden-Württemberg diametrically opposed this by stating that the concept of integration in Section 99 BetrVG is not the same as that in Section 7 BetrVG, as the meaning and purpose of the provisions are different. Section 99 BetrVG primarily serves to consider the interests of those already employed at the business establishment, whereas Section 7 BetrVG is intended to allow employees to determine the composition of their representative body. A multiple right to vote would also result in unjustified multiple representation on the general and group works councils.

An appeal on points of law against both decisions has been lodged with the BAG (7 ABR 7/24 and 7 ABR 28/24). The respective outcome is eagerly awaited, as this will have a significant impact on the upcoming works council elections in spring 2026. If the opinion of the LAG Hesse is followed, the number of employees entitled to vote at business establishments with matrix structures would increase significantly. This in turn would lead to an increase in the size of works council bodies (Section 9 BetrVG) and corresponding releases from work duties (Section 38 BetrVG), and thus to a significant increase in costs for employers. In addition to this, works council members are entitled to training measures (Section 37 (6) BetrVG) as well as time off work for necessary works council activities (Section 37 (2) BetrVG), which have an impact. It is currently unclear which path the BAG will take here.

Annabelle Marceau

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1.12 Company pension scheme - limits to the principle of equal treatment under labour law in the case of a pure enforcement of standard provisions?

The principle of equal treatment under labour law is - by way of Section 1b (1) sentence 4 of the German Company Pensions Act [Betriebsrentengesetz – BetrAVG] - a standardised component of occupational pension law and - as in labour law as a whole - under certain conditions sets limits to the employer's power to design the pension scheme. The application of the principle of equal treatment is in turn not limitless, but rather is ruled out if the employer merely applies collective agreements (enforcement of standard provisions), as stated by the BAG in a recent decision (judgement of 2 July 2024 - 3 AZR 244/23).

The plaintiff sought from the defendant - based on the principle of equal treatment under labour law - the application of an in-house collective agreement on company pensions concluded between the defendant and ver.di. In its scope of personal application, this in-house collective agreement covered all employees previously insured by the defendant via the Pension Institution of the Federal and State Governments (Versorgungsanstalt des Bundes und der Länder - VBL). In terms of time, the in-house collective agreement took into account the entire years of service of the employees concerned. However, the plaintiff had already previously exempted himself from compulsory insurance in the VBL - due to his membership in a medical pension scheme - and had based his pension provision mainly on two endowment insurance policies concluded by the defendant. These endowment insurance policies covered a period of years of service that was two years shorter than the in-house collective agreement on the company pension.

After the plaintiff had prevailed before the LAG Hamburg, the defendant was successful with its appeal on points of law to the BAG. The BAG was unable to establish a violation of the principle of equal treatment under labour law. In no way did the BAG call into question the claim-substantiating effect of the principle of equal treatment under labour law. Rather, its application presupposes that the employer grants benefits according to a certain recognisable and generalising principle on the basis of an abstract regulation and by means of formative conduct insofar. Conversely, it follows from this that the principle of equal treatment under labour law, which serves to protect employees, only becomes applicable if the employer creates its own (pension) scheme by means of formative conduct and does not merely implement a collective agreement. This applies to in-house and association-level collective agreements.

The BAG's decision is extremely positive as it creates legal clarity, in particular for the implementation - the enforcement of standard provisions - of in-house collective agreements. Employers who merely apply an in-house collective agreement concluded by them do not run the risk of being exposed to claims based on the principle of equal treatment under labour law simply due to this implementation of standard provisions.

Moritz Coché

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2. New legislation

Entry into force of the Platform Work Directive on 1 December 2024

After lengthy negotiations between the EU Parliament and the responsible committee of the EU Council, the European legislator has adopted common regulations on platform work. The Platform Work Directive (EU) 2024/2831 of 23 October 2024 ("Platform Work Directive") came into force on 1 December 2024. The member states now have two years to transpose the provisions of the Directive into national law.

Importance of platform work

The platform economy has become an important part of the global world of work over the last decade. Platform work refers to a form of work organisation in which a digital platform acts as an intermediary between clients and contractors.

This form of work brings with it numerous challenges, especially regarding the rights and social security of employees. In many cases, the workers are not directly employed by the platform operators, but are considered independent contractors. This distinction leads to problems in the application of labour law regulations.

Key content of the Platform Labour Directive

The Platform Labour Directive contains important innovations that will have a lasting impact on the business model of platform work:

A key element of the Directive in Article 5 (1) is a rebuttable presumption of the existence of an employment relationship. According to Article 5 (2) Platform Labour Directive, it is the responsibility of the member states to standardise an "effective" presumption regulation as a procedural simplification for platform workers. Here, the national legislator will also have to take into account the BAG's case law on crowdworkers (judgement of 1 December 2020 - 9 AZR 102/20), according to which the specific use of an app as a means of external control can establish personal dependence.

In addition, the Platform Labour Directive aims to increase transparency in the use of algorithms by platform operators. To this end, platform workers are granted comprehensive information rights vis-à-vis the platform operators (Article 9 Platform Labour Directive). Decisions made by automated systems are ultimately subject to the responsibility of a human being (Article 10 Platform Labour Directive). Furthermore, platform operators will in future be prohibited from processing sensitive personal data of platform workers through the use of automated monitoring or decision-making systems (in particular AI tools) (see Article 15 Platform Labour Directive).

Finally, Articles 22 and 23 of the Platform Labour Directive are intended to protect platform workers from disadvantages that they suffer as a result of the assertion of rights under the Directive. To this end, the member states are to provide for regulations that require platform operators to prove in the context of unfair dismissal proceedings that the termination of the contract is not due to the exercise of rights provided for in the Directive (Article 23 (3) Platform Labour Directive).

The new Platform Labour Directive represents an important step towards regulating the platform economy. While the provisions on transparency and data protection in the use of algorithms are an important building block for the creation of fair working conditions, the provisions on the burden of proof in Article 5 (2) and Article 23 (3) of the Platform Labour Directive overshoot the mark. The Platform Labour Directive does not provide for any retroactive effect. Nevertheless, platform operators should review their contractual models and the use of AI-controlled applications - especially in connection with an app – by the time the provisions are transposed into national law.

Marko Vraetz

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3. Miscellaneous

Antitrust law in the "war for talent" - what companies need to know now

Agreements that bind employees or restrict competition on labour markets are being targeted by antitrust authorities worldwide. Companies face high fines if they violate competition rules.

In times of a shortage of skilled labour, the "war for talent" is in full swing. Companies are not only competing for market shares, but also for qualified employees. HR departments around the world are increasingly coming under the scrutiny of antitrust authorities. The reason: illegal agreements on salaries or so-called "non-poaching agreements", in which companies undertake not to poach employees from one another, are on the rise.

At first glance, such agreements may appear to be a means of securing skilled labour, but in the opinion of the antitrust authorities, they are in clear conflict with EU competition rules. Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Section 1 of the German Act on Restraints of Competition (ARC) prohibit agreements that restrict competition.

Measures at the European level

National antitrust authorities are increasingly cracking down on this. In several European countries, including Portugal, France, Spain, Croatia, the Netherlands, Poland and Germany, measures have already been taken against no-poaching or wage-fixing agreements. Such practices have often been investigated in conjunction with price fixing, but are increasingly coming into focus in their own right. The European Commission is also taking active measures against anti-competitive practices.

Stricter rules in the USA and Canada

Action against such agreements is also being stepped up on the other side of the Atlantic. The US Department of Justice brought criminal charges for anti-competitive no-poaching agreements for the first time in late 2020 and early 2021. In 2023, the US Trade Commission announced a change in the law that could prohibit non-compete agreements and declare existing clauses null and void. In 2022, the Canadian government criminalised no-poaching and wage-fixing agreements.

What action companies need to take

Against the backdrop of these increasing dynamics, companies should be aware that agreements in the HR sector harbour considerable legal risks. It is therefore essential to review existing recruitment and contractual practices and to sensitise managers and HR departments to antitrust risks. No-poaching or non-compete clauses in employment contracts should always be legally scrutinised in order to avoid possible infringements.

Dr. Daniel Dohrn, our expert in our antitrust law practice, offers you a compact overview of the latest developments in a 30-minute training course (online or in person). He will explain in practical terms how you can recognise antitrust law infringements on personnel markets and effectively avoid them in your company. Please feel free to contact us.

Jörn Kuhn and Dr. Daniel Dohrn

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