I. History of the Term "Arbeitgeber" *
II. Concept and Idea of the "Employer" *
1. Individual Labour Law *
2. Social Security Law *
3. Income Tax Law *
4. Collective Labour Law: Collective Agreements *
E. Collective Labour Law *
1. Constitution and Co-Determination of Works Councils *
2. Co-determination at managerial level *
1. Home Work Act of 1951 (HAG) *
2. Act on (Temporary) Employment Businesses/Agency Work (AÜG) *
B. Indirect Employment Relationship *
1. Social Security Contributions *
2. Employment Rights and Obligations *
C. Employment in an Economically Dependent Company/ Group of Companies *
1. Party to the Contract *
2. The Parent Company as Reference for Employment Rights *
3. Co-Determination and Works Councils *
B. Safeguarding of Rights and Transfer of the Contract *
C. Information and Consultation *
Arbeitgeber – Betrieb – Unternehmen:
The Concept of the "employer" in German law
And labour law is not labour law. It is rather a bunch of rights on the one side and duties on the other side. There is no reason why the obligations and responsibilities cannot be assigned to different persons, even to more than one person at a time. We should keep this in mind when later on considering cases where different entrepreneurial functions of an enterprise are splitted among various legal and natural persons.
At closer look, German legal language does acknowledge the fact that "employing employees" is a series of functions rather than a personal attribute and offers more than just one term to describe the various functions having to do with employing and using other people’s workforce. The terms Arbeitgeber (employer), Betrieb (establishment), Unternehmen (meaning "company" as well as "enterprise", "entrepreneur" and "undertaking") all indicate different entrepreneurial functions. Consequentially, the concept of "employer" can be defined differently according to the context.
For the establishment of a certain level of social protection in employment law German law focuses on the concept of the employee/worker ("Arbeitnehmer"). "Arbeitgeber" or employer as the complementary concept is defined in a negative way: Wherever there is an employment relationship, the employer is the one who employs employees. The other party to the employment contract and employment relationship, the one who has been given, by way of contract, the power to direct and instruct the employee, to receive the employee’s performance and fulfill the contractual obligations towards him or her. The question of who owns the commanding power to direct and instruct the worker is of such decisive importance for the definition of the employer because the whole concept derives from the concept of what is an employee, and the "employee" is defined by referrence to personal subordination. In consequence, the deriving obligations are assigned to who created the personal subordination, not to the one who uses and takes the profit of the work.
This is basically a contractual concept and result of the development from status to contract. In the 20s and 30s of last century, a different concept predominated, the more factual and institutioinal concept of the so-called "Eingliederungstheorie". It stated that an employment relationship could be assumed depending not on the conclusing of a contract, but on the integration of a worker in an organisational context of dependent labour. Furthering these ideas Nikisch developped the concept of functional concept of employer ("funktioneller Arbeitgeberbegriff") and divided the functions he saw into financial obligations and personal obligations and responsibilities, among the latter especially mentioning controlling and caring. These are concepts that relate more to labour law concepts of status than to modern employment law which relies on contractual notions. Not even this theory went as far as to say that it was only the factual competence of direction that made a person employer. But Nikisch who defended this theory ended up saying that several persons could be employers of one employee, and that the position could be splitted according to the splitting of functions. The now predominating contractual theory, to the contrary, only knows of one employer: the party to the employment contract.
The contract also answers the question of who should be the employer of a group of employees. If it was the employer who put the group together, there is no problem. But even in case the group themselves offered their work as a group we will have to assume individual employment contracts. The idea of a team employment relationship which had been defended in the 30s isn’t compatible with the modern focus on legal personality. We could only think of a second employer in case the group is organized as legal person itself. In this case, we might be able to apply the notion of indirect employment relationship I will explain later on.
This notion is not a functional one, but a purely formal one, looking at the contractual positions. According to the contractual concept, the employer’s identity is a matter for the parties and one employer cannot normally be substituted for another without the consent of the parties to the original contract and the consent of the new employer. However, the exercise of contractual competences, especially the right to direct and control, can be delegated onto several levels with the effect that employers‘ functions can be shared among or shifted between various persons and even companies.
We use the same notion of "employer" when determining the liability for the calculation and payment of social security contributions. It is the legal employer as party to the employment contract who has to respect obligations of registering her employees (§ 28a SGB IV – Social Security Act Consolidated, Vol. IV) and pay the complete contributions in her own name as well as those in the name of the employee ("Gesamtsozialversicherungsbeitrag", § 28e SGB IV).
On the other hand, statutory accident insurance for the employees relies on the "Unternehmer" (§ 136 III SGB VII). Liable for these contributions is the one who directly or indirectly takes the profit.
In income tax law, we rely on the notion of employer as party to the employment contract. Employer here also defines in opposition to the notion of employee (§ 1 Abs. 2 LStDV – Salary Tax Regulations): She who employs employees is liable for the registration and payment of income tax on her employee’s salaries (§§ 38 ff EStG (Income Tax Act).
The liability for the payment of Value Added Tax, on the other hand, lies with the entrepreneur or company ("Unternehmer") § 2 UStG (Turnover Tax Act). This shouldn’t come of a surprise: Unternehmer or entrepreneur (as we will see) is defined in relation to a company’s function on the markets of goods and services, that is, its economic activities and outcome, in contrast to its workforce-organising function as an "employer".
The binding and normative effect of a collective agreement for an employment relationship depends not only on the employee’s membership to the relevant trade union, but also on his or her employer’s membership to the relevant employers‘ association. The concept of employer in this context is the same as in individual labour law: It refers to the legal entity and formal party to the employment relationship.
In the context of Works Councils‘ Constitution and their co-determinating powers we need to watch out for the person who is the negotiating partner of the works councils. It is in this area of German labour law that we find a sophisticated concept and functional notions of establishment, undertaking and company in order to distinguish employees’ representatives’ rights.
The concept of employer as the party to the employment contracts hasn’t been important in the context of the Works Councils Act of 1972. More important and more fundamental for the understanding of co-determination on shopfloor/plant level is the concept of establishment ("Betrieb"). Co-determination as regulated in the 1972 Act relates to the establishment as organisational and functional unit. The person entitled to the competences and liable for the obligations of the Works Councils Act is the one who runs the unit "Betrieb".
"Establishment" has to be distinguished from the concepts of company or undertaking ("Unternehmen"). There is only one term for these two notions in German law. In its meaning of company, it describes a legal entity, in its meaning of undertaking, it refers to a factual organisation. Establishment on the one and undertaking on the other side are seen as partly identical organisational units serving different purposes or functions: In the case of an establishment as organisational unit, the employer together with her employees constantly pursues aims relating to the technique of working (e.g. production or sale of items, supply of services). We look at the material outcome. In the function as undertaking, the entrepreneur pursues an objective, in general an economic one, which goes beyond that of fulfilling certain purposes related to working techniques (profit, gaining a share of the market). We look at the economic outcome. Undertakings may consist of several establishments (e.g. for administration, production, sales). Companies may own several establishments.
Legal participation and co-determination on the plant level deals primarily with so-called social matters concerning the employees. It uses the establishment as point of reference while the representation at management level and in economic and entrepreneurial matters relates to the undertaking or company. In the latter mentioned entrepreneurial matters, there is hardly any real co-determination. The competences of works councils in economic and entrepreneurial matters is limited to information and consultation.
A clear expression of the functional concept of the establishment that we find in the context of co-determination on the plant level can be found in the determination of who among the employees are electors as well as eligible to a works council. In terms of individual labour law, executive staff and high-rank managers can be employees. Employing, engaging or dismissing other employees does not make them an employer. They do this only in the exercise of the employer’s delegated powers by delegation. In the context of co-determination on the plant level, however, their functional powers can disqualify them as employees.
Usually, the employer of the individual employees and party to the individual employment contracts will be the legal entity that owns the business or undertaking and operates or owns the establishment. This is what the Federal Labour Court (BAG) meant in a decision of 15.1.91, where it hat to decide whether one company partner had become entrepreneur and co-employer. The respondent had recently acquired majority in the company and thus could legally exerce ruling influence. The company and immediate party to the individual employment contracts in the establishment had been almost stripped of its assets ("Ausbluten"). The court now stated as alwas that changes in the partnership and ownership of a company didn’t affect its identity. Only in exceptional cases (I will come to this later on) the corporate veil could be be lifted. Concerning the notion of employer, the BAG then stressed, that §§ 111-113 of the Works Councils Act, when talking about "Unternehmer" and "Arbeitgeber", were relating to one single identical unity. The terms only indicated different functions, activities and legal relationships of one and the same legal or natural person, e.g. the person that runs the establishment and is the employer of the workers employed in the establishment or plant.
There can be cases where the employer and the owner of the establishment can fall apart. I will treat these hard cases later on.
The duality establishment/company, e.g. plant level/management level in the Works Councils Act of 1972 leads us to the concepts of co-determination at plant level and at management level. Co-determination at management level relates to those matters where works council don’t have more than mere consultation rights.
Co-determination at that level is an institution of corporate law, employees being represented besides representatives of shareholders in the supervisory board of the company as legal entity . The relevant unit is the company.
A third party to the Employment Relationship?:
Splitting and Shifting of Employer’s Functions
Let me shortly summarize: We see, the concept of "employer" is defined as a complementary concept to the one of "employee". It is a conctractual concept that searches for the person that is party to the individual employment contract and thus entitled to the contractual rights and obligations. The most important entitlement to look for is, according to the predominant concept of employment relationship, the power to direct the employee.
We find a more functional concept in the area of co-determination on the plant level and constitution of works councils, when defining the establishment ("Betrieb") in contrast to the company or undertaking ("Unternehmen"). The first one looks at the factual control over the work – who orders? - , the second one looks at the profit of the work – who decides about the economic goals and utilization? We see that there are various different functions or rather a hierarchy of functions a company that employs and uses employees fulfills. Decisions on the undertaking and economic level will usually determine decisions on the plant and workforce level. If we want to look rather at the functions than at the formal contractual status, we ought to ask ourselves: Which function should be connected with the provision of social protection?
The lesson of the "Betrieb/Unternehmen"-divide is: Co-determination of employees in Germany takes place in relation to the organizational and technical issues influencing their immediate working conditions. Up to date, employees get only minor influences on economical decisions. This is one of the reasons why the separation of employer’s functions into function on the level of establishment and functions on the level of undertaking can give us a problem of social protection.
The formal and contractual definition of the employer can also be a problem in relation to social protection. Companies can pursue their economic goals in various legal forms and can easily organize them in their own interest. It is even easier to split contractual positions than functions and distribute them rather arbitrarily, without respecting the idea of greatest possible social protection.
There are always new strategies and organizational forms of distribution of entrepreneurial functions being developed. They have gained importance especially in cases of economic dependences among companies, connections, fusions, splittings, conversions, transformations, e.g. all forms of modifications and cooperation on the company level. Besides the formation of financially connected groups of companies we also and increasingly know of "mere" economic dependences between companies that have only contractual commercial relationships, for example of supply and production. If we look at the level of social protection, we will especially find problems where important functions and financial obligations are shifted to smaller, less efficient companies with less financial ressources which can provide less social protection.
As an example I would only like to mention one typical form of splitting up a company into a group of companies. It used to be common to split up in one company owning the assets and property on one side on the other side in various administrative and productive companies. For example, in the process of reorganization of coal-mining in the Ruhr area (in 1968/69), the employment contracts had been concluded with the parent company Ruhrkohle AG (RAG), but it were the various subsidiary mining companies that directed the workers.
Also quite interesting, although atypical, are the more recent examples of the former public railway company (Deutsche Bahn) which has been privatized, and the parallel example of the privatized Post and Telecommunications companies. A considerable part of their employees were and are civil servants (Beamte) whose employment is governed by public administrative law. As the status of the civil servants had to be maintained, but the newly founded private companies could legally not employ them, a new construction had to be found. A company for the administration of the assets of the former public railway company as well as for the administration of its civil servants was created ("Bundeseisenbahnvermögen") which now entrusts the employees to the privatized railway company.
A. Statutory Provisions: Temporary Employment and Home Work
How do we treat this cases? Which company is accountable for employer’s duties and obligations in these three-and-more-party-relationships where there might be an "employer behind the employer"? I will first explain some statutory provisions and concepts in German law, before addressing the general problem of employment relationship in a group/concern related company.
In the case of home work, manufacturers that give away work to be done at home typically use intermediate supervisors ("Zwischenmeister"). This construction can be seen as an example of splitting of employer’s functions. And there is a statutory provision in this exceptional case. In case the manufacturer should give payments to a supervisor knowing that it won’t be enough to pay the necessary salaries to the home workers, he will be held jointly and severally liable for the payment. The same liability applies if he pays to an intermediate supervisor whom he knows to be unreliable.
This construction repeats the Home Work Act of 1934. It is an example for the then predominant non-contractual theory I have explained before, which accepted the idea that in case of a splitting up of directional powers, there could be more than only one employer in the legal sense of the term.
Apart from these formalized examples of splitting of employer’s functions, there are a number of typical cases where the employer is an employee to another employer him- or herself or otherwise bound by contractual duties to both sides, and the work is performed exclusively in the interest of the ultimate company. In these cases, the intermediate person or sub-contractor is not only economically, but also legally dependent on the company.
In order to describe these problems, the term "indirect employment relationship" ("mittelbares Arbeitsverhältnis") is popular in Germany. It was developed in 1938 by the "Akademie für Deutsches Recht" (Academy for German Law) which worked out a bill (on the issue of liability) and has since been used for the following constellations:
Among the leading cases are one where the conductor of an orchestra acted as employer of the musicians but also as intermediate person for the broadcasting company, his own employer. There is also the case of a caretaker/janitor who was employed by two house owners, who themselves most of the time were represented by a company administrating real estate. There are other cases of caretakers who employed charwomen to clean the object they were responsible for.
The concept of indirect employment relationship to the company who employs the intermediary person has first been developed in social security law. The indirect employer will be held ancillarily liable for these contributions.
He or she will come under other duties of public law as well, such as guaranteeing occupational health and safety standards.
Employer, in these cases, will primarily be the immediate party of the employment contract. He or she will be liable for the contractual obligations as well as entitled to the contractual rights and competences, especially the power to direct the worker.
But what has been discussed is the acceptance of an ancillary liability, e.g. a second-grade liability of the "indirect employer", the employer of the employer. The Federal Labour Court has first introduced such a concept in 1957 referring to the straw man concept of the Home Work Act. The employer of the employer may be held liable especially for the performance of duties of mutual trust and confidence and, more important in practice, for the payment of wages and salaries. The ancillary liability can be assumed provided that work has been performed with the knowledge of the indirect employer directly in her service. She will only be held liable if it is found that the immediate employer withdraws of his or her obligations. Interestingly, the Federal Labour Court in this context has used the terms "Zwischenmeister" (intermediate supervisor) and "Unternehmer" (company) that the Home Work Act uses for parallel constellations.
But after this decision, there have been few precedents where the court actually found that the presuppositions had been fulfilled. In the second leading case, the case of the janitor employed by house-owners, but directed by the company administrating real estate, the court couldn’t find that the administrative company should be considered indirect employer. Consequentially, the janitor couldn’t claim unfair dismissal, because the house-owners didn’t employ the required minimum number of workers (the janitor was their only employee). Another example: The Regional Labour Court in Berlin had to decide a case where a university teacher and professor had employed an assistant for a specific research project with the financial means of a scientific research institution. Because the university had no power to instruct the university teacher in these affairs, the court couldn’t see that it could be considered indirect employer.
Later, in 1982, the Federal Labour Court itself took some distance to its own ideas, though without relating to the former decision. In the decision of 1982 it found that the choice of who was to be the contractual employer should be objectively justified. But, interesting is what the court saw as a justifying reason: Wherever the intermediate employer could make entrepreneurial decisions and obtain profit out of an own undertaking, this could be seen as justifying reason to let him be appointed employer. Only if the direct employer was chosen deliberately in such a way as to avoid the incidence social protection, for example to avoid the incidence of unfair dismissal law, the contractual construction would be treated as a misuse. This actually means that the court is now employing a different concept, not the one of the straw man employer, but one that only looks out for abuse. In the end, this new concept gives companies more room.
in an Economically Dependent Company/
Group of Companies
The cases of indirect employment relationship have to be distinguished from a different form of dependence and utilization of intermediate employer: The one where the intermediate employer is not employee of the parent company, but in other ways legally and economically dependent in relation to it. This is especially important wherever the intermediate employer is a legal and not a natural person. The Joint-Stock Companies Act (AktG) contains legal definitions of a group of companies in its §§ 15 and 18. Among the so-called connected companies ("verbundene Unternehmen") that mutually own majority shares, groups of dependent and ruling companies under the joint direction of one ruling company are given special attention.
In employment law, the constellations that can give problems are at least twofold. First, the employee may have an employment contract with the parent company, but is working for the dependent company. Secondly, the employee may have an employment contract with the dependent company, whether he or she be working for other companies of the group as well or not. Apart from the liability for contractual obligations, what can also be interesting in the latter cases is whether the property and regulations of the group as a whole can be taken into account when establishing the level of social protection.
As usual, employer will be the formal party to the employment contract with the power to direct. Only in exceptional cases the concept of indirect employment relationship can be used as shown. The power to direct the worker can be delegated or transferred to any other person, which means it can also be delegated to another company without the other company becoming employer in the formal sense of the word. The group of companies itself cannot be employer because it doesn’t own legal personality.
The scope of application of collective agreements depends on the contractual employer as well. Recently, there have been serious problems of social protection due to this principle. For example, the Burda company divided up into a group of several mutually dependent companies. Only the parent company maintained membership to the employers’ association, while all the other companies, where the employment relationships were transferred to, didn’t become members. As a result, most of the employment relationships at Burda aren’t covered by collective agreements any more.
In relation to the liability for specific duties, especially financial obligations, corporate law has developed some rules on when a creditor can "reach through" to the parent company ("Durchgriff"). This means that the corporate veil will be lifted to impose a liability upon the controller of the company or otherwise disregard the company’s separate legal personality. The principle is used in cases where the partner has used her capacity as a partner to withdraw capital. These principles are valid in employment law as well. Lifting the corporate veil doesn’t mean that the parent company or person will become employer herself. It just means that a company partner who isn’t personally liable will not be allowed to refer to this quality with the effect that he or she will be exceptionally be held personally and jointly liable.
In groups of companies, employment contracts usually contain clauses under which the employer reserves the power to transfer the employee to other companies of the group. The Act on Temporary Employment Agencies exempts these forms of employees’ mobility from the provisions of the Act (§ 1 III Nr. 2 AÜG). The parent company will be considered formal contractual employer if it has retained any power to direct the employee.
In exceptional cases, one single employment contract of one employee can be assumed with various employers on the other side. The employers will then be held jointly and severally liable for all contractual obligations. The employers needn’t be connected one with the other, they needn’t even operate a joint establishment either. What is necessary to assume a joint employment relationship is a legal connection between the contractual relationships and a functional connection making it impossible to comply with one contract without the other one. I have found only one case where this construction was actually applied.
The fact that the employment contract is concluded with a company that is part of a group of companies can nevertheless have consequences for the construction of contractual obligations in specific cases. For example, if there are group criteria for the treatment of employees, these criteria will have to meet the standards of parity of treatment, thus comparing employees of different companies. The same happens if there are parts of wages and salaries being payed in accordance to group standards, such as occupational pension schemes or other forms of extra payments as well as social plans that provide for awards in case of redundancy. The principle of equal treatment will have to be applied.
In some exceptional cases, the reference for calculating the financial ability of the employer may be the group and not just the employing company ("konzernbezogener Berechnungsdurchgriff", for example in § 16 BetrAVG – Act on Occupational Pension Schemes). It would have to be found that there is a contract between the companies that gives the parent company the power to influence or to withdraw profit, and that these rights had been used without respect to the interests of the subsidiary company, thus causing the financial hardship. This means of taking the group as reference for calculating financial ability can be seem as a kind of substitute for the corporate rule that wherever there is a contract providing for the withdrawal of profit, the parent company will have to pay compensation to the company (not directly to the creditors, §§ 304, 305 AktG). But it can only be used for the calculating of payments that are calculated in accordance with the company’s return and results. It won’t usually be used for the calculation of wages.
A different question is being asked in redundancy cases: Unfair dismissal and redundancy law requires that a dismissal ought to be the ultimate means and should only be used when the employer is convinced that there are no more possibilities to employ the worker anywhere in the company ("Ultima ratio-Prinzip"). Now, this obligation only relates to jobs in the company, not to job in the group.
But there are some exceptions to this principle. If the employee has an employment contract with a contractual clause that asks for mobility inside several companies of the group, the employer will be held responsible for providing a job in other companies of the group as well. However, we need to look for such a clause or an equally valid agreement between the partners of the employment contract. The relationship between the companies is not to be considered if employees are just factually subordinated to another company of the group.
This group-oriented approach has been questioned. The main problem that doctrine mentions are the legal limits of one company to order employment in another company. Therefore, the Federal Labour Court restricts applicability of the principle to cases where the decision about the actual engagement or the actual transfer can be made by the contractual employer on her own without being subject to the consent of the receiving company.
Nevertheless there are still scholars who defend other wider reaching approaches, stating that unfair dismissal and redundancy law should generally relate to the group. They say that in modern times where the notion of the employee is more and more seen in economical terms, the notion of "employer" should be adapted as well. Employer should be defined less in virtue of personal subordination and direction and more in virtue of the existence of economical and organisational facilities to direct the workers. At least in cases where the parent company caused the dismissal it should be held liable for alternative employment.
More recently, another question has arisen. A dismissal can only be attacked as unfair under German law if there are more than five full-time workers in the establishment where the employee has been working. There was a time (between 1996 and 1998) when this number had been elevated up to ten and when suddenly lots of employees in small establishments found themselves unable to claim unfair dismissal. The German Constitutional Court then limited the interpretation of the relevant provision of the Act on Unfair Dismissal (KSchG) by stating that it must not just relate to the number of employees in the establishment provided that the small establishment formed part of a larger company. Some scholars have subsequently tried to establish some kind of calculation of employees that took into account the number of employees in the whole company and even in connected companies (konzernbezogener "Berechnungsdurchgriff"). However, the German Federal Labour Court has not accepted this interpretation.
More common than the joint employment relationship I mentioned before (which has been accepted only once as far as I can see) is the joint establishment operated by various companies. The functional perspective of "establishment" in the context of co-determination on the plant level enables us to accept this notion more easily. All that is needed is a legally qualified agreement between the companies on the joint direction of the establishment as an organisational unit. The employees of the establishment will then have different employers. Different collective agreements can be applicable. Only rights deriving out of collective agreements on the plant level will be equal for all. And the general principle of parity of treatment also refers to the establishment as such. However, just the fact that the companies are connected as companies of one group is not sufficient to accept the construction of joint establishment. The creation of a joint direction is necessary. The proposals of the DGB for the reform of the Works Councils Act intend to loosen these presuppositions, thus making it easier to accept the idea of a joint establishment.
Apart from these exceptions, there are organisational provisions that allow the workforce to have representation via works councils not only on the plant level, but also on the company level ("Gesamtbetriebsrat") and on the group level ("Konzern-Betriebsrat", §§ 54 ff BetrVG). However, contrary to works councils on the plant level and on the company level, the representation on the group level is ancillary to the representation on the plant level.
A. Concept of Establishment and Company/Undertaking
The provisions regulating transfer of undertaking (Sec. 613a of the Civil Code) were introduced into German law by means of the Works Council Act of 1972 and thus refers directly to the concepts of establishment and undertaking represented by this Act.
Last year we already talked about the development that has taken place in the interpretation of "establishment" in this context. Since the ECJ’s Christel Schmidt- and Ayse Süzen-decisions, the German Federal Labour Court has been forced to give up its opinion that a transfer of tangible assets or at least a transfer of know-how-holders was required to assume a transfer of undertaking. The German labour courts now focus on the ECJ’s criterion whether the business or the undertaking in question retains its identity. In order to determine whether these conditions are met, it is necessary to consider all the facts characterising the transaction, including the fact if the majority of the employees have been transferred. The technology-centred and production sector-centred perspective of what constitutes a productive unit the German courts used to employ has now been modernized. The one restrictive formula now used is the statement that a mere transfer of activity or transfer of contract cannot as such constitute a transfer of undertaking.
What is interesting in any case is the fact that the functional concept of establishment is used to define the employer. Whoever takes over the establishment will have to take over the employment contracts, notwithstanding the fact that the contractual employer need normally not be the one who actually operates the establishment.
In a group of companies transfer of undertaking is identified in the same way. But note that transfer of employees can take place in a different way. In many cases there are contractual clauses allowing the transfer of employees to another company. According to the new interpretation of "establishment" stimulated by the ECJ, the mere transfer of a group of employees working on a certain task, can entail a transfer of contractual positions.
B. Safeguarding of Rights and Transfer of the Contract
Regarding the safeguarding of rights, Germany limited the period for observing terms and conditions to one year. A quite strange solution was found to the question of maintenance of collective rights. The normative parts of collective agreements would be, according to Sec. 613a of the German Civil Code, transformed into individual rights. In the Burda case where the employment contracts were transferred to companies that were not members of the employers’ association this safeguarding didn’t prove to be of much use once new employees were engaged.
In relation to the transfer of the contract, the employees do have the right to object to the transfer. But if they object, they can be made redundant without further ado. Only if they can show a justifying reason for their objection, a comparison between all the employees eligible for redundancy ("soziale Auswahl", selection) will have to take place in accordance with social criteria.
In consequence of this construction, employees that are transferred need to decide themselves in favour or against the new employer. Contrary to this, Ulrike Wendeling-Schröder has suggested the possibility of maintenance of the "old" employment contracts in these cases. Because, as has been show, there is no legal need for a concordance of contractual employer and integration to a certain establishment. An employee can easily be employee of a person who does not run the establishment.
C. Information and Consultation
There has not been an implementation of the right of workers’ representatives to information and consultation on transfer of undertakings in Germany. It is said that the provisions on consultating rights of Works Councils in case of changes in the organisational structure of an establishments should be seen as the implementation (Sec. 111 Works Councils Act). But they don’t in fact expressly refer to transfer of undertakings. They explicitly only refer to cases where the identity of an economical entity is changed and not maintained. The German Federal Labour Court has stressed this difference several times. Wherever the organisational unit is maintained and thus can be object of a transfer of undertaking, there is no change.
The main Federation of German trade unions (DGB) therefore has proposed to adapt the relevant provision in order to include cases of changes in the partnership and ownership of the establishment.
But there are new developments, as well in groups of companies as merely economical dependences between companies that are linked by commercial contracts. Newer forms of economic connection and dependence are for example franchise work, just-in-time-production etc. In all these cases, economical influences on business policies of third companies create new risks for employees. Economic decisions weigh heavily on the employment relationship without there being any contractual links. This shows us that looking at the traditionally idea that function of directing workers may not be enough to identify the person accountable for employment obligations. Modern direction of workers is more and more an indirect control, manipulated by economic figures and frameworks.
Today, there are many rules for exceptional cases where we subsequently use factual or functional connections as a substitute for contractual links. At first glance, this seems to reflect a roll-back to the concept of status rather than contract, as reflected in Nikisch’s position who wanted to link the position of employer to the actual direction-giving person and, if necessary, even split the employment contract and accept the idea of two employers. However, in contrast to the old concept, the new ideas rather refer to functional connections within a working unit, not to one single direction-giving person like the status concept.
Why are we looking for the employer? What kind of social protection are we looking for? The answer to this questions depends on the area and purposes of the relevant social protection. We might have to develop different ideas depending on the relevant functional context and not look for one single concept for all kinds of constellations. Function is not a legal concept either, but a sociological one. Under a legal perspective, we should rather talk about the adequate distribution of rights and obligations.
Concluding, I would just like to mention some recent proposals on the creation of new balances between various persons acting as or influencing an employer. Some important proposals have been brought forward in connection with the fundamental reform of the Works Councils Act that is being envisaged at the moment.
The development from contract to institution I referred to before is may best reflected in Heide Pfarr’s proposal that there should be a legal presumption that persons working in an establishment are employees of the company operating the establishment. Furthermore, the DGB proposes that the notion of establishment be adjusted to also include construction sites and other places where employees of different companies work together without there being an agreement between the companies on a joint direction the way the Federal Labour Court demands. A joint establishment should be presumed if the companies belong to the same group.
Apart from this, the basic idea of most of the proposals is the demand that the economically influent "employer behind the employer" be jointly and severally liable for all obligations deriving out of the employment relationship.
Most of the more detailed proposals in this context, relate to co-determinatioin and the collective level. For example, it has been suggested that it should be possible to create a works council for a group of companies even without legal links between them, only along the "logistic chains". In any case, it should be possible to negatiate relevant representative structures. Companies should also be liable for obligations to consult, inform and establish social plans for any changes in the organisational structure of an establishment that are undertaken in their economic interest even if they themselves do not operate the establishment. This would mean they would become liable for the payment of compensations in a relevant social plan. Furthermore, the DGB suggests that any changes in the ownership of a company as well as for example a splitting up of legal personalities should be considered a change in the structure of the establishment for co-determinating purposes. And there is the proposal that rights deriving out of a collective agreement should be maintained in cases of a transfer of undertaking within a group.
These proposals take a closer look an economical influence beyond the legal organisation of ownership and contractual positions.
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