The co-determination rights of works councils

The German Whistleblower Protection Act (Hinweisgeberschutzgesetz, or HinSchG) has been in force since last summer. This Act obliges employers with more than 50 employees to set up an internal reporting center. Neither the underlying EU directive nor the Act address the involvement of works councils. As a result, the co-determination of works councils can only be derived from general works constitution law.

What does the German Works Constitution Act say?

It is surely beyond dispute that employers must inform works councils of the establishment of an internal reporting center under § 80 of the German Works Constitution Act (Betriebsverfassungsgesetz, or BetrVG). In addition, approval rights for any hires or transfers may arise if the internal reporting office is not outsourced but – despite various disadvantages that this entails – is staffed with the company’s own employees. The works council may also have to be involved to the extent that the company’s own employees designated for this purpose will be taught the specific knowledge required by law during in-house ­training courses.

The issues just mentioned generally should not pose any problems in practice. The question of whether co-determination rights exist regarding the organization of internal reporting channels, however, is more controversial. This is highly relevant because the measure is otherwise invalid under individual employment law. This results from what is called the theory of effectiveness requirement. If the reporting center is deemed to be a technical facility for monitoring the performance or behavior of employees, co-determination rights result from § 87 (1) 6 BetrVG. However, we do not believe this is the case. A ­reporting center does not do any monitoring itself; instead this is done by the persons who process the reported facts. The law does not consider this case.

Order or organization of the company

It is questionable whether the regulation of an internal reporting office is a matter of the order of the company. For such a matter, § 87 (1) 1 BetrVG provides for co-determination. In this context, the Federal Labor Court ruled on 22 July 2008 (1 ABR 40/07) that this is the case if an employer wishes to commit its employees to report certain facts.

The co-determination of a works council is not strictly necessary when implementing the German Whistle­blower Protection Act if the employer has no obligation to report violations. For a similar case, namely the staffing of a complaints department pursuant to § 13 of the General Equal Treatment Act, the Federal Labor Court explicitly ruled on 21 July 2009 (1 ABR 42/08): The works council has no right of co-determination when organizing the complaints department in more detail and staffing it, since this does not concern the order, but the organization of the com­pany. This also applies when arranging the internal repor­ting office so that a right of co-determination will lapse here.

Organization of the notification procedure

The question that follows is whether the organization of the reporting procedure is subject to co-determination. This should certainly not be the case if the employer has decided at its own discretion to transfer the internal ­reporting office to a service provider outside the company. This removes the issue from the company sphere, and in turn eliminates the right of determination. The Federal Labor Court has only assumed a right of co-determi­nation if the position is located within the company (1 ABR 42/08).

No compulsion to use anonymous reporting channels

An employer cannot be forced by the works council or by a conciliation committee to allow anonymous reporting. This is expressly regulated in § 16 (1) 5 HinSchG. Due to this clear legal provision, no obligation to provide anonymous reports can be established by a conciliation com­mittee. This already follows from the introductory sentence of § 87 of the Works Constitution Act, according to which a right of co-determination does not apply if a statu­tory regulation exists.

Voluntary involvement of the works council advisable

A voluntary works agreement with the works council to implement the Whistleblower Protection Act may be ­advisable in any case, regardless of whether the works council has any co-determination rights. This has several advantages. First, it promotes acceptance among the workforce. Second, it reduces the risk of legal proceedings or the judicial appointment of a conciliation committee. Finally, it can form the basis under data protection law for measures taken by the employer if these are not yet ­covered by law.

Works council unsuitable as an internal reporting center

The idea of having the works council act as an internal reporting office, which is sometimes suggested, should be strongly discouraged. Apart from the fact that the aptitude required by law is unlikely to be present everywhere, it does not have the necessary independence required by law to fulfil its statutory mandate.

There is also the further problem that the works council has no right to refuse to testify with regard to the facts that are communicated to it by the workforce – often with the presumption of confidentiality. However, in the event of official proceedings, for example before the public prosecutor’s office or court, the works council must testify about what employees have confided to it. Works council ­members do not have a statutory right to refuse to testify – unlike doctors, lawyers, or similar persons subject to professional secrecy. This fact is often misjudged.