Co-determination rights of the works council in Germany on the example of PSA's takeover of Opel
When first rumours about a potential takeover of Opel by PSA came up in mid February, the joint works council (Gesamtbetriebsrat) of Opel as well as the union IG-Metall reacted with a sense of outrage. They accused Opel of an unprecedented violation of German and European co-determination rights as they were not informed about any negotiations about the planned takeover. A serious accusation - true or false?
We have now learnt that PSA is not only acquiring certain assets from Opel, but the shares of the German holding entity of Opel. Contrary to an asset deal, which might result in significant operational changes, the co-determination rights of the works council in Germany are rather limited when a share deal is on hand.
Operational change as a requirement for co-determination rights
The mere sale of shares does not have any influence on the operational structure of the legal entity and therefore does not trigger any co-determination rights of the works council. Only in case of a so-called operational change (Betriebsänderung) the company is obliged to inform the works council in good time and to consult with the works council on such measures before implementation.
Operational changes, which are subject to the information and consultation rights of the works council, are:
- Reduction or closure of operations or significant parts of it;
- Relocation of the entire operation or significant parts of it;
- Merger or split of operations;
- Major changes to the organisation or the purpose of the operation;
- Introduction of new working methods.
Generally speaking, the company is only obliged to inform and consult with the works council if a significant number of employees are affected by the operational change. Case law uses the thresholds for mass redundancies as a rough guide as to when the obligation to inform and consult arises (20–59 employees: more than 5 employees affected; 60–500 employees: 10% or more than 25 employees affected; more than 500 employees: at least 30 employees affected). There is no obligation to consult with the works council in operations of less than 20 employees.
If the threshold is met the company and works council have to negotiate a so-called balance-of-interests (Interessenausgleich) and a social plan (Sozialplan). The balance-of-interests describes the restructuring measure (e.g. relocation to a different city, dismissal of a specific number of employees). The social plan sets out the compensation for the employees affected (typically severance payments, but may also include other benefits such as relocation expenses). The works council has to be informed at an early stage, so that it has the opportunity to influence the business decision of the company. However, the works council cannot prevent the implementation of the operational change as planned by the company, but has the ability to heavily delay the implementation.
Coming back to the Opel takeover, there was no obligation for the company to inform the works council or to consult with the works council on the mere sale of shares. However, it is likely that there will be significant operational changes in the future which then result in an obligation to consult with the works council.
Information of the economic committee
Only the economic committee (Wirtschaftsausschuss), which has to be established in businesses with more than 100 employees, has to be informed in time and properly about the sale of shares resulting in a change-of-control over the company. But the economic committee has no further co-determination rights.
In companies, where an economic committee has not been established (not applicable for Opel), the works council has to be informed about the sale of shares instead.
No co-determination rights of the European Works Council
Unless otherwise explicitly agreed, any established European Works Council has no co-determination rights, but only information and consultation rights.
Conclusion
Much ado about nothing. A violation of any co-determination rights of the German works council(s) or the European Works Council is not evident in the Opel takeover.