Artificial intelligence and employee co-determination

The rapid development of artificial intelligence (AI) has had far-reaching implications for the world of work. Not only can AI systems perform repetitive tasks, but also support complex decision-making processes, such as selecting job applicants or implementing complex social selection processes.

The cases in which AI is misused are of more trivial importance. One example is the case of an editor-in-chief who had an alleged interview with Michael Schumacher luridly advertised on the cover of a tabloid magazine but ­conducted this supposed interview with an AI. This resulted in claims for damages from the Schumacher family and also the dismissal of the editor. This, however, was deemed to be ­unfounded by Munich Labor Court, in particular because the court found the publisher to be highly complicit in the publication (ArbG Munich, ruling of 29 February 2024 – 13 Ca 4781/23; see also F.A.Z. of 22 May 2024).

There are still many unresolved issues in labor law, particularly regarding employee co-determination, because the use of AI can affect the organization of work and the working conditions of employees.

Since the reform brought in by the Works Council Modernization Act in 2021, explicit reference has been made to AI in several places in the Works Constitution Act (BetrVG). However, the BetrVG does not contain a separate definition of what is meant by AI. The explanatory memorandum to the Act also contains no definition, meaning that disputes can be expected in future as to when the works council’s participation rights are relevant.

A first court ruling was issued in 2024 by the Labor Court in Hamburg (ruling of 16 January 2024 – 24 BVGa 1/24), which is discussed in more detail below.

The following AI-related constellations are explicitly regulated in the Works Constitution Act, although they do not relate to the subject matter of mandatory co-determination, but are located in the area of information and participation rights.

Consultation of experts [§ 80 (3) 2 BetrVG]

In order to provide works councils with the necessary expertise on the impact of AI in the operational environment, § 80 (3) 2 BetrVG stipulates that an expert can be consulted on issues relating to the introduction and use of AI in a company. In this respect, the law assumes that such an expert must be consulted in these cases. In principle, an in-house expert (e.g., an employee of the IT department) should be consulted first and an external expert can only be commissioned if there is insufficient in-house expertise. In any case, however, the involvement of an expert requires an agreement with the employer, so the works council may not act on its own authority. If such an agreement exists, the employer must bear the costs of such an expert.

Information and consultation rights [§ 90 (1) 3 BetrVG]

An employer must inform the works council about “the planning of work processes and workflows, including the use of artificial intelligence” and submit the necessary ­documents (§ 90 (1) 3 BetrVG). This information must be provided at an early stage, i.e., as early as the planning stage and before the actual start of deployment in the company.

Selection guidelines [§ 95 (2a) BetrVG]

The consent of the works council is required in connection with selection guidelines (i.e., regulations on uniform ­requirements that affect personnel selection in the event of recruitment, transfer, regrouping or dismissal). Pursuant to § 95 (2a) BetrVG, the works council’s approval requirement also applies in the event that AI is used to draw up such guidelines.

Co-determination facts pursuant to § 87 (1) 1 and 6 BetrVG

In addition, the co-determination facts pursuant to § 87 (1) 1 and 6 BetrVG are particularly relevant. These genuine co-determination rights are characterized by the fact that the works council can demand the conclusion of a works agreement and thus employers may not unilaterally introduce and operate the corresponding measures (here: introducing AI systems) (subjects of mandatory co-determination). Measures taken by an employer without the proper involvement of the works council are invalid. The introduction of AI in a company in violation of co-determination can therefore be prohibited by the works council – if necessary, by way of an interim injunction.

Right of co-determination pursuant to § 87 (1) 1 BetrVG (regulatory behavior)

Employers who draw up regulations on the order and conduct of employees in their company must involve the works council in accordance with § 87 (1) 1 BetrVG and conclude a works agreement on this. By contrast, measures relating to work behavior, i.e., regulations that determine how work is to be performed in the exercise of the right to issue ­instructions, are not subject to co-determination. Corres­ponding specifications of the work obligation do not lead to a co-determination right of the works council (see BAG, ­ruling of 23 August 2018 – 2 AZR 235/18). Accordingly, the instruction to deploy or not deploy AI to perform the work would not be subject to co-determination (see ArbG Hamburg, ruling of 16 January 2024 – 24 BVGa 1/24).

Right of co-determination pursuant to § 87 (1) 6 BetrVG (technical monitoring equipment)

According to the case law of the Federal Labor Court, this co-determination requirement is to be understood in a broad sense, so that not only the introduction and use of technical equipment intended to monitor the behavior and performance of employees leads to the right of co-determination, but also such technical equipment that is suitable for such monitoring (see BAG, ruling of 10 December 2013 – 1 ABR 43/12). AI systems are designed to input and process data, whereby it can be assumed that this (user) data will also be stored. The data thus stored is then also suitable to be used to monitor employees (e.g., when did who provide which input?).

However, the employer must also be able to access the data stored by the AI.

There is no such possibility of access if the AI system is not set up on the employer’s servers, but the employees access the AI via their own (private) access points (see ArbG Hamburg, ruling of 16 January 2024 – 24 BVGa 1/24).

This decision has led to the theory among experts that a trend reversal may be taking place in case law. While the right of co-determination has been interpreted extensively in recent decades, as described above, it is now assumed that the ruling of the Hamburg Labor Court could make co-determination more employer-friendly, especially with regard to the use of AI.

However, there are concerns as to whether a fundamental change in case law on the introduction of technical equipment can be derived from this ruling, which was issued in interim injunction proceedings. The ruling was made against the background that the employer and works council had already concluded a works agreement on the use of browsers, so the Labor Court referred to the fact that the works council had already exercised its right of co-determination.

The use of ChatGPT was then made possible via these browsers, but the AI programs were not installed on the employer’s computer systems. The Labor Court considers this to be a decisive fact, as it means that the employees themselves have to create an account with ChatGPT and bear any costs incurred. In this respect, the employer does not receive any notification of when and for how long the employees have used the AI system – typically an essential aspect for the assumption of a monitoring possibility and thus the co-determination obligation, which therefore does not apply. The only question that the Labor Court still had to answer was whether the guidelines and instructions on the use of ChatGPT, which were provided by the employer, were subject to co-determination. The Hamburg Labor Court answered this question in the negative, arguing that, for example, a handbook with regulations on use should be considered as instructions on the manner of work performance and work behavior that do not require co-determination. The Hamburg Labour Court also considers the ­obligation imposed by the employer to label work results created with AI to be exempt from co-determination, ­because this labeling is not automated by the system, which is a prerequisite for the co-determination obligation, but is carried out by the employees themselves.

In the context of this ruling, other co-determination facts were also examined by the Hamburg Labor Court and ­rejected as a result. The works council had argued that the introduction of ChatGPT would create a two-tier society because some of the workforce would use AI and others would not. The Labor Court rejected this argument, which was aimed at regulatory behavior pursuant to § 87 (1) 1 ­BetrVG, because the decision for or against AI lies with the employees and is not dictated by the employer. A (health) risk to employees through the use of AI, which the works council claimed, was also rejected by the Labor Court as unsubstantiated.