Co-determination of the Works Council regarding the deployment of intra-group managers in international matrix structures

The deployment of intra-group managers – in particular in international matrix structures – does not automatically trigger a co-determination right of the works council under Section 99(1) of the Works Constitution Act (BetrVG). Even in cross-company and cross-border matrix constellations, the classical requirements of the concept of “integration” continue to apply. Decisive is a – at least partial – integration of the manager into the establishment of the deploying company.

Facts of the case

The employer is part of an internationally operating US group. In Germany, it operates an establishment with approximately 500 employees. The group is organized in a matrix structure that spans across companies and countries. Four managers work in the said establishment, but are employed by a foreign group company. They assume management and coordination tasks from abroad via video conferences. They are responsible for the employees in a functional sense, conduct target agreement discussions with them, and are to be involved in vacation and absence matters. They are also involved in decisions regarding the continuation of employment relationships after the probationary period, in the issuing of warnings, the giving of terminations, as well as the rejection/approval of part-time requests.

The works council considered the deployment of the managers to be hirings requiring consent within the meaning of Section 99(1) of the Works Constitution Act (BetrVG) and, due to the lack of prior involvement, requested the revocation of the measures. In the works council view, by performing their activities, the managers were integrated into the establishment.

The decision

According to the BAG, the previous findings do not support the assumption of a hiring requiring consent. It referred the matter back to the Higher Labour Court (LAG) Bremen. According to established case law, a hiring within the meaning of Section 99(1) of the Works Constitution Act (BetrVG) requires that a person is integrated into the establishment in order, together with the employees, to realize the operational purpose of the establishment through an activity subject to instructions. In this context, it is not the existence of a contractual relationship with the establishment owner that is crucial, but rather the actual integration into the operational work organization. Integration is only present if the establishment owner has, at least in part, an instruction right typical of an employment relationship with regard to the content, place and time of the activity. (According to the BAG, nothing different shall apply in this respect compared to the deployment of external personnel on the basis of service or work contracts.)

According to the BAG, these principles also apply without restriction to the determination of the integration of managers from other group companies into an establishment in Germany. The mere appointment as superior or the formal exercise of purely functional or disciplinary authority is not sufficient for this purpose. The conducting of target agreement discussions, the coordination of vacations or participation in meetings likewise do not in themselves justify integration. Rather, what is essential is the actual involvement in the performance of the operational tasks to be completed in the establishment or in the operational work processes. For this purpose, the BAG requires concrete findings on the operational purpose and on the activity actually performed, as well as an overall assessment of all circumstances of the individual case.

For integration, it is not relevant how often or how intensively the corresponding activities are carried out; also a (minimum) physical presence on site is not required. The integration into several establishments is possible. It is furthermore irrelevant which law governs the employment relationship of the manager.

Implications for practice

The BAG thus maintains that the works council cannot use Section 99 of the Works Constitution Act (BetrVG) to shape the mere coexistence of parts of the workforce of different group companies within one establishment. Accordingly, in the case of the use of matrix managers, the principles on third-party personnel deployment apply.

For companies with matrix structures, two criteria are decisive:

1. Is the manager (at least partially) subject to instructions of the German establishment owner regarding the content, place, or time of the activity?
2. Is the manager actually integrated into the operational work organization and operationally active?

If both requirements are met, a co-determination right exists in principle – unless the individuals are executive employees within the meaning of Section 5(3) of the Works Constitution Act (BetrVG) or perform purely strategic or advisory functions without integration into the establishment.

Practical tip

Employers should precisely klare define group-wide instruction and role structures and, at an early stage, assess how the deployment of foreign intra-group managers is organized and whether Section 99 of the Works Constitution Act (BetrVG) applies. The documentation of this assessment can help to avoid later conflicts with the works council.

The distinction between mere intra-group coordination and integration requiring co-determination remains a question of the individual case, for which legal advice is recommended.

Note: We would like to thank our trainee lawyer Laetitia Hoppe for her contribution to this article.