No co-determination rights of the works council for stock options issued by a foreign parent company

In a judgment dated 3 August 2017, the Higher Regional Labour Court of Hessen has held that a works council’s co-determination rights do not extend to stock option plans by an employer’s foreign parent company (docket number 5 TaBV 23/17).

 

Under German law, works councils have a co-determination right regarding remuneration principles. In this case, the foreign parent company decided annually and independently from the local employing entity whether stock options were to be granted, which employees would receive these stock options and, if so, how many. Local employment documents of the German employees did not include any reference to the stock option award as part of their remuneration, and the German employing entity did not have any influence on the award process. The local works council claimed a co-determination right with regard to the award process based on the implementation of remuneration principles.

 

The Higher Regional Labour Court rejected this claim, stating that co-determination rights of the works council only applied if the employer had at least a certain amount of freedom to make an independent decision. Merely executing binding guidelines or decisions is not sufficient to trigger co-determination rights. Since the local employing entity had no say in the stock option award process, e.g., through a right to make proposals, there was no room for negotiations with the works council.

 

An appeal against this decision has been lodged with the Federal Labour Court under the docket number 1 ABR 57/17.