Number of employees in Germany alone decisive for co-determination on Supervisory Board

The Higher Regional Court of Frankfurt ruled that only the number of employees employed in Germany decides whether a Supervisory Board is subject to the German Co-determination Act (“Mitbestimmungsgesetz”); employees of foreign subsidiaries are not to be counted (decision dated May 25, 2018 - Ref.: 21 W 32/18).

Legal background: The decisive factor for the number of employees represented on the Supervisory Board is the number of employees employed in the company. With more than 2000 employees, the Co-Determination Act applies and equal representation is mandatory. If the number of employees is between 500 and 2000, one third of the members of the Supervisory board must be employees according to the One-Third-Participation Act (“Drittelbeteiligungsgesetz”).

In the case decided by the court, the defendant's number of employees only exceeded the 2000 threshold if the employees of the defendant's foreign subsidiaries were taken into account in addition to those employed in Germany. The Higher Regional Court of Frankfurt has rejected such addition.

Even if criticism continues with the argument of circumventing employee participation by relocations abroad, this decision again shows that the legal prerequisites (at least still) permit such constructions. At the same time, many prominent examples show that neither investors nor family-run companies are really afraid of co-determination.