The acquittals for four former VW HR managers overturned by the Federal Court of Justice (BGH) are likely to force the group to restructure its works council payments – and may have consequences far beyond the case. “Volkswagen AG has taken note of the reasoning behind the verdict,” it said on Friday from Wolfsburg. “The company will take into account the findings on the scale of works council remuneration.” The BGH had previously published the details of its decision at the beginning of January.

According to this, “hypothetical” assumptions about the career development of a works council member alone should not be used as a benchmark for their payment. Essentially, when it comes to salary classification, only comparisons with colleagues who hold similar activities and positions when they start work in the employee representative body are permissible.

The judge’s verdict could also have consequences for the remuneration of works councils in many other German companies. Because the interpretation of the highest criminal court comes into conflict with several earlier judgments of labor courts. In addition, provisions of the relevant Works Constitution Act are considered vague by a number of lawyers.

What salary is appropriate for works councillors?

In the specific case, the question was whether those responsible at VW had approved unreasonably lavish salaries and bonuses for senior staff representatives between 2011 and 2016. Ex-works council chief Bernd Osterloh, for example, came to over 700,000 euros in some years. The subject, which was already complicated in terms of labor law, led to a sensational criminal case at the Braunschweig Regional Court in 2021.

The public prosecutor filed charges of breach of trust because excessive remuneration would have reduced profits and thus also reduced income taxes. The district court could not see any intentional breach of duty and acquitted the men – which the BGH collected.

If career paths in the direction of management-like tasks should no longer be the basis for salary classification, then not only high-earning works councils would have to expect cuts, according to insiders. The tariff-bound remuneration would probably also have to be partly rebuilt. And that would also trigger uncertainties elsewhere.

There will probably have to be changes

“This decision can have far-reaching effects on co-determination in Germany and thus on the competitiveness of Germany as a whole,” believes Volkswagen. It is hoped that “a rapid establishment of legal certainty, predictability and reliability for everyone”.

From the group environment it was said that a higher two-digit number of members of the VW AG works council were affected by the narrow interpretation of the BGH – across all salary levels. There is no getting around changes. A working group had already responded to the justification and held talks with the works councils.

The employee representatives themselves spoke of a “scandalous verdict that is tantamount to a nationwide frontal attack on co-determination”. With its reading, the BGH brushed aside “years of supreme court practice by the Federal Labor Court. As a result, what is now illegal under labor law is now permitted under criminal law. Of course, the affected works council members will use all legal means to defend themselves against this BGH ruling.” The company pointed out that lawsuits about remuneration are pending before labor courts – this makes the situation even more confusing.

Can the mere prospect of higher tasks be a factor in how much works council members earn? After taking up their “honorary” role, they may not be favored or disadvantaged compared to other colleagues. However, the BGH calls for a strict standard: “This prohibits taking into account the hypothetical salary development of the works council in the case of a special career. It is only comparable if, at the time of taking office, they were performing similar, essentially equally qualified activities and in the same way as the works council professionally and personally qualified.”

The Works Constitution Act dates back to the 1970s

Heads are spinning behind the scenes. The judges’ point of view is already met with open incomprehension among trade unionists. “The judgment has not reduced the uncertainty,” said the DGB. “The legislature is now asked to stop this situation quickly.” The IG Metall fears a deepening of the “gap between the labor law assessment of an appropriate works council remuneration and a deviating criminal law”.

A central problem also beyond Volkswagen: The Works Constitution Act, which in principle regulates the payment of employee representatives, dates from the 1970s. According to him, it is necessary to estimate what career level a person would be at today if they held a comparable management position. However, there are often no clear specifications for the comparison groups.

Attempts at reform have so far come to nothing. IG Metall sees an urgent need for action. “The traffic light government must now state unequivocally by law: The qualifications and experience that the job requires and the responsibility assumed are the right benchmark for the payment of works councils,” she demands – “as with all other groups of employees also”.

Whether the Braunschweig criminal court, which gets the case back, can be influenced by such appeals? Regardless of the actual factual issue, the federal judges gave their colleagues in Lower Saxony a very blunt indication that they also want the assessment of the lack of intentional breach of duty to be thoroughly examined. For example, bonuses were “completely disregarded,” although these in particular would have increased income to sometimes high six-figure annual sums. “These payments, which are unusual for employees, can be a strong indicator of intent.”