Remuneration of works council members remains a hot topic – German Federal Labour Court provides more guidance

 

The remuneration paid to works council members remains a hot topic – not least due to the extensive case law on the Volkswagen cases all the way up to the German Federal Court of Justice (judgment of 10 January 2023, Case 6 StR 133/22) and legislative amendments made in 2024 (Second Act to Amend the German Works Constitution Act (Zweites Gesetz zur Änderung des Betriebsverfassungsgesetzes), German Federal Law Gazette I 2024, no. 248). In last year’s article on the topic of works council remuneration, we set out the basics on works council members’ pay and reported on four new German Federal Labour Court (Bundesarbeitsgericht) judgments of 20 March 2025. The court recently ruled on works council pay again in one judgment handed down on 13 August 2025 (Case 7 AZR 174/25) and three given on 5 November 2025 (Cases 7 AZR 185/24, 7 AZR 186/24 and 7 AZR 187/25). The grounds for these judgments have meanwhile been published. Once again, they contain important new developments and clarifications for HR practice.

Consideration of knowledge, abilities and qualifications acquired during terms of office when determining hypothetical careers

Up to these judgments, it had been unclear whether skills acquired during a works council member’s term of office (knowledge, abilities and qualifications) could be taken into account to determine their hypothetical career under section 611a(2) of the German Civil Code (Bürgerliches Gesetzbuch – BGB) read in conjunction with section 78 (specifically the second sentence) of the German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). This includes:

• skills that arise from activities on the works council but can be viewed as additional, independent knowledge, abilities and qualifications and
• additional skills acquired through further training during their term of office.

The German Federal Labour Court has now confirmed that such skills may be taken into account:

• It began by stating that while there is a causal link between a position on the works council and the skills acquired, this does not breach the prohibition on preferential treatment under section 78 or the principal of honorary work under section 37(1) of the German Works Constitution Act. It said that what is rewarded is the works council member’s specific individual professional knowledge, abilities and qualifications, the condition always being that the skills for the vacancy in question within the sense of a hypothetical career in accordance with section 611a(2) of the German Civil Code read with section 78 of the German Works Constitution Act are relevant for their career and remuneration.
• It also held that functions exercised in connection with the works council (e.g. chairperson) are generally not eligible for consideration, nor are skills that are merely an expression of the works council member’s official duties (e.g. “negotiating on an equal footing with management”).

The German Federal Labour Court emphasised that this case law is only applicable to hypothetical careers under section 611a(2) of the German Civil Code read with section 78 of the German Works Constitution Act, and not to minimum remuneration under section 37(4) of the German Works Constitution Act. Thus the specific works council member’s increased skills are not to be a determining factor for minimum remuneration under section 37(4) of the German Works Constitution Act.

The court’s statement regarding minimum remuneration is only partly convincing: it is correct that in section 37(4) (see the first clause of the third sentence) the point in time the office was assumed is used when determining the reference group, meaning that skills acquired after assuming office cannot be relevant. However, the second clause of the same sentence allows the reference group to be redefined on objective grounds. The court does not explain why skills acquired by the works council member in question should not play a role in this case.

Burden of proof and presentation of evidence in connection with hypothetical careers

A works council member wanting to claim higher pay from their employer before the labour courts due to a hypothetical career pursuant to section 611a(2) of the German Civil Code read in conjunction with section 78 of the German Works Constitution Act faces a graded burden of proof and presentation of evidence:

• At the first stage, the works council member has to substantiate and where necessary prove that (i) a specific vacant post existed, (ii) they applied for it, and (iii) the job requirements set by the employer were met. They also have to and may (iv) assert (without having detailed knowledge of this) that the failure to consider the application was due to their activities on the works council or their exemption from work to perform this role.
  • If the works council member did not apply, they must additionally assert that they refrained from applying precisely because of their works council role or their exemption from work.
  • If the works council member did not meet the job requirements, they have to substantiate and where necessary prove that their lack of qualifications or the inability to ascertain their qualifications was due to their role on the works council or exemption from work.
• At the second stage, the employer must respond to the works council member’s submissions. If the employer believes that the person was not the (hypothetically) best candidate for the post, it must substantiate its (hypothetical) decision to select another applicant, providing evidence where necessary.

The German Federal Labour Court has now adjusted this allocation of graded burden of proof and presentation of evidence for a specific set of circumstances, although the burden of proof and presentation of evidence still initially lie with the works council member:

• If the employer has promised the works council member a specific vacant post or has proactively offered them such a post, at the first stage it is sufficient for the member to present these facts and where necessary prove them. At the same time, the member must claim that they did not accept the post solely because of their position on the works council or their exemption from work to perform their role. They do not have to provide submissions on the extent to which they met the requirements of the specific vacant post.
• Instead, at the second stage the employer has to demonstrate that offering the specific vacant post constituted inadmissible preferential treatment (section 78 of the German Works Constitution Act) because the works council member was not qualified/sufficiently qualified for the position.
• In this context, employers should bear in mind that making such an offer to a works council member who is not sufficiently qualified may entail risks under both civil and criminal law. In particular, inadmissible preferential treatment within the meaning of section 78 of the German Works Constitution Act may, among other things, give rise to an initial suspicion of embezzlement (section 266 of the German Criminal Code (Strafgesetzbuch – StGB)), preferential treatment of the works council (section 119(1) No. 3 of the German Works Constitution Act) or tax evasion (section 370 of the German Tax Code (Abgabenordnung – AO)). This was also made clear by the Volkswagen cases.

Agreements on compensation with works council members

Amendments not prohibited

In addition to this, the German Federal Labour Court commented on agreements regarding remuneration with works council members. Employers and works council members may amend the terms of their employment contracts, including remuneration, both during and after the member’s appointment to the council or exemption from work to perform this role. There is no “contractual prohibition on amendments”.

Implications for burden of proof and presentation of evidence

If the employer enters into such an agreement on remuneration with the works council member, the employer will be bound by it. The member is able to claim the agreed pay from the employer directly under the agreement in accordance with section 611a(2) of the German Civil Code read with section 37(2) of the German Works Constitution Act. If the employer later argues that the agreement contravenes the relevant prohibition on preferential treatment within the meaning of section 78 of the German Works Constitution Act and is therefore void pursuant to section 134 of the German Civil Code, the burden of proof and presentation of evidence lies with the employer. Attention should also be paid to criminal law risks in this context.

Procedural structure

Minimum remuneration under section 37(4) (first sentence) of the German Works Constitution Act and the hypothetical career under section 611a(2) of the German Civil Code read in conjunction with section 78 of the German Works Constitution Act are different matters in dispute under procedural law. But as the German Federal Labour Court states, an agreement on remuneration between an employer and a member of a works council under section 611a(2) of the German Civil Code read with section 37(2) of the German Works Constitution Act is also a separate matter in dispute under procedural law. This means that if a works council member wishes to claim their remuneration before a labour court, they have to specify which of these matters forms the basis of their claim. It is also possible to assert several of these points of dispute in the same proceedings. But the works council member then has to specify which point of dispute forms the primary basis of the claim and which points only form a secondary or tertiary basis.

Significance and recommended actions for employers

In these judgments, the German Federal Labour Court provides more important guidance on works council members’ pay. Yet there are other questions that still need to be resolved.

Above all, it remains unclear whether section 5(3) of the German Works Constitution Act, which excludes senior executives from the scope of the German Works Constitution Act, sets a ceiling on minimum remuneration under section 37(4), first sentence of the German Works Constitution Act and/or and hypothetical careers under section 611a(2) of the German Civil Code read with section 78 of the German Works Constitution Act. Such a ceiling would mean that minimum remuneration and/or hypothetical careers could not result in works council members being paid in the same way as senior executives. This contentious issue, which was not addressed by legislative amendments of 2024, is likely to become even more relevant in future: as the German Federal Labour Court takes into account knowledge, abilities and qualifications acquired during the term of office when determining hypothetical careers within the meaning of section 611a(2) of the German Civil Code read with section 78 of the German Works Constitution Act, “hypothetical exceptional careers” of works council members to senior positions within the company are now a real possibility.

Employers should ensure that their works council remuneration arrangements are in line with the law in order to avoid compliance risks. A useful tool for this is the three-step plan outlined in last year’s article on the subject of works council remuneration.