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Dr. Lorenz Mitterer on

Which Works Council is responsible for Recruitment and Transfers in Matrix Structures? (BAG, decision of 12.06.2019 – 1 ABR 5/18)

In corporate groups and companies with different establishments, there are often cross-company and/or cross-establishment functions. It is not uncommon, for example, that the head of a department who is assigned to the head office of the company and also has his actual workplace there at the same time is the direct supervisor of a manager assigned to another establishment and thus indirectly also is authorized to give instructions to the employees subordinated to this manager. Such a cross-company or cross-establishment organization is also called a matrix structure.

The Federal Labor Court (Bundesarbeitsgericht – BAG) recently had to deal with the question of which works councils are to be involved in accordance with sec. 99 of the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) if an employee assigned to the head office is promoted to a division manager assigned to the head office and at the same time also becomes the supervisor of employees assigned to another establishment with an own works council.

The BAG’s decision contains the following key statements:

  • A recruitment/transfer according to sec. 99 para (1) sentence 1 BetrVG can also be given if an external employee becomes supervisor of employees assigned to another establishment with an own works council. The consequence of this is that all works councils – in this case the works council of the head office and of all establishments affected by the authority to issue directives – must be involved.

In its decision, the BAG joins the legal view of the pre-instance and various Instance Courts (Landesarbeitsgerichte) and regards the mere possibility of issuing instructions to the employees of another establishment to be sufficient for recruitment in the sense of works constitution law. Thus the supervisor is integrated into the work processes of the other establishment, in particular into the fulfilment of the operational tasks which can be completed there. He thus realizes the technical purpose of this establishment. The BAG, on the other hand, considered it irrelevant how often activities to achieve the operational purpose were carried out or how much time they took.

  • The BAG considers the local works councils at the head office and at the establishment to be responsible. A responsibility of the central works council is rejected on the ground that no regulation concerning a matter affecting the company as a whole or two or more of its establishments is given from an objective point of view.

This is because the two local works councils are responsible for
safeguarding the interests of their respective employees. Any
“competition problems” – like in case of a permanent transfer of an
employee from one establishment to another – would have to be
accepted on the basis of the legal requirements.

  • According to the BAG, the works council of the location, on which the management activity merely has an effect, is not entitled to refuse approval because the vacancy was not advertised internally, sec. 99 para (2) No. 5, sec. 93 BetrVG. This is because in such a case neither a new job is created nor a vacancy is filled in this establishment.

In this context, the BAG emphasizes that the decision as to where the
workplace of a manager with cross-company / cross-establishment
activities is to be located is part of the entrepreneurial freedom of
decision.

In practice, this Decision has the following consequences:

1. In matrix and branch structures, in particular, the scope of tasks and
responsibilities must be precisely defined before. This should be
recorded in a job or function description, above all for reasons of
proof.


2. If the authority to issue directives extends to employees of other
establishments, their works councils must be consulted on the
recruitment or transfer of the employee, sec. 99 BetrVG.


3. The local works councils must be consulted, not the central works
council.


4. There is no right of the works council of the location to which the
manager is not assigned according to the employer’s will to refuse
recruitment or transfer due to a lack of advertisement for the
vacancy in the establishment.


5. The BAG did not decide whether 






  • The manager concerned
is also entitled or eligible to vote in all establishments,





  • He is to be counted
in the determination of threshold values – in particular the Works Constitution
Act and the Dismissal Protection Act, and 





  • The works council of
the location to which the manager is not assigned must be consulted in the
event of dismissal.









In our view, however, the answer to each of these questions is ‘no’. This
is supported on the one hand by the fact that the BAG explicitly rejects
an assignment of the manager to several establishments within the 
meaning of sec. 102 BetrVG in its decision. It can therefore hardly be 
argued that the manager should also be represented by the works 
council of the establishment only affected by the authority to issue 
directives. On the other hand, the BAG explicitly denies the existence of 
a job and thus of an employment relationship with this establishment 
with reference to the entrepreneurial freedom of decision regarding 
the workplace.





	


	







	


	

		
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			 Dr. Lorenz Mitterer on 		

		
Which Works Council is responsible for Recruitment and Transfers in Matrix Structures? (BAG, decision of 12.06.2019 – 1 ABR 5/18)
	


	

		

In corporate groups and companies with different establishments, there are often cross-company and/or cross-establishment functions. It is not uncommon, for example, that the head of a department who is assigned to the head office of the company and also has his actual workplace there at the same time is the direct supervisor of a manager assigned to another establishment and thus indirectly also is authorized to give instructions to the employees subordinated to this manager. Such a cross-company or cross-establishment organization is also called a matrix structure.









The Federal Labor
Court (Bundesarbeitsgericht – BAG) recently had to deal with the question of
which works councils are to be involved in accordance with sec. 99 of the
Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) if an employee assigned
to the head office is promoted to a division manager assigned to the head
office and at the same time also becomes the supervisor of employees assigned
to another establishment with an own works council.





The BAG’s decision
contains the following key statements:





  • A recruitment/transfer
according to sec. 99 para (1) sentence 1 BetrVG can also be given
if an external employee becomes supervisor of employees assigned to another
establishment with an own works council. The consequence of this is that all
works councils – in this case the works council of the head office and of all establishments
affected by the authority to issue directives – must be involved.





In its decision, the
BAG joins the legal view of the pre-instance and various Instance Courts
(Landesarbeitsgerichte) and regards the mere possibility of issuing
instructions to the employees of another establishment to be sufficient for
recruitment in the sense of works constitution law. Thus the supervisor is
integrated into the work processes of the other establishment, in particular into
the fulfilment of the operational tasks which can be completed there. He thus realizes
the technical purpose of this establishment. The BAG, on the other hand,
considered it irrelevant how often activities to achieve the operational
purpose were carried out or how much time they took.





  • The BAG considers the
local works councils at the head office and at the establishment to be
responsible. A responsibility of the central works council is rejected on the
ground that no regulation concerning a matter affecting the company as a whole
or two or more of its establishments is given from an objective point of view. 





          This is because the two local works councils are responsible for   
          safeguarding the interests of their respective employees. Any
          “competition problems” – like in case of a permanent transfer of an
          employee from one establishment to another – would have to be 
          accepted on the basis of the legal requirements.





  • According to the BAG,
the works council of the location, on which the management activity merely has
an effect, is not entitled to refuse approval because the vacancy was not
advertised internally, sec. 99 para (2) No. 5, sec. 93
BetrVG. This is because in such a case neither a new job is created nor a
vacancy is filled in this establishment.





         In this context, the BAG emphasizes that the decision as to where the
         workplace of a manager with cross-company / cross-establishment  
        activities is to be located is part of the entrepreneurial freedom of
        decision.





In practice, this Decision has the following consequences: 

1.     In matrix and branch structures, in particular, the scope of tasks and  
         responsibilities must be precisely defined before. This should be 
         recorded in a job or function description, above all for reasons of  
         proof.


2.     If the authority to issue directives extends to employees of other
         establishments, their works councils must be consulted on the
         recruitment or transfer of the employee, sec. 99 BetrVG. 


3.      The local works councils must be consulted, not the central works
          council. 


4.      There is no right of the works council of the location to which the
         manager is not assigned according to the employer’s will to refuse
          recruitment or transfer due to a lack of advertisement for the   
          vacancy in the establishment. 


5.        The BAG did not decide whether 










  • The manager concerned
is also entitled or eligible to vote in all establishments,





  • He is to be counted
in the determination of threshold values – in particular the Works Constitution
Act and the Dismissal Protection Act, and 





  • The works council of
the location to which the manager is not assigned must be consulted in the
event of dismissal.









In our view, however, the answer to each of these questions is ‘no’. This
is supported on the one hand by the fact that the BAG explicitly rejects
an assignment of the manager to several establishments within the 
meaning of sec. 102 BetrVG in its decision. It can therefore hardly be 
argued that the manager should also be represented by the works 
council of the establishment only affected by the authority to issue 
directives. On the other hand, the BAG explicitly denies the existence of 
a job and thus of an employment relationship with this establishment 
with reference to the entrepreneurial freedom of decision regarding 
the workplace.