Labor law: Equal representation on the supervisory board - temporary workers may also count!

If a company exceeds the threshold of 2,000 employees, its employees must be represented equally on the supervisory board. The Federal Court of Justice (BGH) ruled in its decision of June 25, 2019 that temporary agency workers can also be considered for the threshold’s calculation (Case No. II ZB 21/18).

Facts

The general works council of a limited liability company (GmbH) applied for a court ruling that a supervisory board with a parity representation must be formed in the company in accordance with the German Co-Determination Act (MitbestG). In addition to the actual defendant, it also filed a claim against the parent company. The defendant company employed a majority of its employees on a permanent basis, but about one-third of the workforce were temporary agency workers, the number of whom varied depending on the order situation. In the period between January 2017 and March 2018, the average total number of permanent employees and temporary agency workers amounted constantly to more than 2,000. However, if only permanent employees and temporary agency workers, whose actual or predicted duration of employment was more than six months, were taken into account, the average total number amounted to less than 2,000. The Regional Court rejected the declaratory motion. In response to the complaint of the general works council, the Higher Regional Court found that a supervisory board with equal representation must be formed in accordance with the German Co-Determination Act.

Reasons for the decision

The company's appeal to the BGH remained without success. Also the Second Civil Senate ruled in favor of the general works council. The reasons given in the press release published on August 20, 2019 are brief and concise. According to Section 1 para. 1 in connection with Sections 6, 7 MitbestG, a supervisory board with equal representation must be formed in companies operating in the legal form of a GmbH and generally employing more than 2,000 employees. As employees within the meaning of the German Co-Determination Act, in addition to permanent employees and salaried employees of a company pursuant to Section 14 para. 2 sentence 5 of the German Act on Temporary Employment (AÜG), temporary agency workers must also be taken into account. In determining the threshold value in accordance with Section 1 para. 1 no. 2 MitbestG pursuant to Section 14 para. 2 sentence 6 AÜG, however, this only applies if the duration of employment exceeds six months. This minimum period is not to be determined on the basis of the contractual relationship of an individual employee, but solely its actual workplace shall be significant. The determination must therefore not be based on the fact that the individual temporary agency worker is or will be employed by the company for more than six months, but on how many jobs in the company are regularly filled with temporary agency workers, including changing ones, over a period of six months. It is irrelevant at which specific workplaces the temporary agency workers are employed during this period. The decisive factor is rather whether the temporary agency workers are deployed constantly in such a way that they are just as influential for the permanent size of the company as the permanent jobs.

The BGH concluded from the above criteria that a supervisory board with equal representation must be formed at the company. On the basis of the available information, according to the Senate, during the period from January 2017 to March 2018 approximately one-third of the GmbH's staff of more than 2,000 employees were temporary agency workers, i.e. for a period of one year which is longer than the required six months. The number of temporary agency workers even increased. There are no indications that this deployment of temporary agency workers is caused solely by an unusual need for employees due to an exceptional situation. On this basis, a supervisory board with equal representation must be formed.

Practical advice

Until the last reform of the German Act on Temporary Employment in 2017, temporary agency workers were not included in the threshold values for co-determination. The case law of the Federal Labor Court (BAG), which had decided several times since 2013 in favor of taking temporary agency workers into account for the threshold values of the German Dismissal Protection Act and of the German Works Constitution Act, has had no effect so far. The new decision of the BGH will now require some companies to establish a co-determined supervisory board for the first time. Especially, companies with a co-determined supervisory board with one third of its members being employee representatives could be subject to equal co-determination due to BGH’s workplace-related view. Moreover, it is to be expected that the calculation of thresholds under the German One-Third Participation Act (DrittelbG), the German Act on Employees’ Participation in a Cross-Border Merger and the German Acts on the Participation of Employees in the European Stock Corporation (SE-Beteiligungsgesetz) and in the European Cooperative Society (SCE-Beteiligungsgesetz) will also change in line with the new rules of the Second Civil Senate.

In particular, companies with a number of employees close to the threshold values of 500 or 2,000 which regularly employ temporary agency workers should critically reflect whether the use of external staff leads to the circumstance that threshold values are exceeded.