05-30-2016  | Newsletter Employment Law June 2016

Reduction in personnel as business secret




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LAG Schleswig-Holstein, ruling dated 20.5.2015 –3 TaBV 35/14 (final and absolute)

A planned reduction in personnel is not automatically confidential. In the absence of corresponding precautions by the company, the works council is entitled to inform the staff extensively of this.

In cases of planned changes in business operations, in particular measures to reduce personnel, companies regularly have an interest in not informing the staff from the outset, but rather not until a specific time. But is a reduction in personnel automatically to be regarded as a company and business secret as defined in Section 79 BetrVG (Works Constitution Act)?

The State Labor Court Schleswig-Holstein (hereinafter referred to briefly as LAG) has denied this in a case, in which a pharmaceuticals company near Hamburg had declared information concerning a planned reduction in personnel as being strictly confidential. The management had threatened the members of the works council with civil and criminal-law consequences in the event of contravention.

Reduction in personnel not a “born” business secret

In the opinion of the LAG, the planned reduction in personnel did not in itself constitute a business secret as defined in Section 79 BetrVG. Consequently and contrary to the instructions of the employer, the works council was entitled to inform the staff of such measures. According to the LAG, Section 79 BetrVG also protects information that is not accessible to third parties, and thus the competitiveness of the company owner.

Risk of demotivated staff not sufficient

In the opinion of the LAG, the possible impairment of undisrupted operations through the expected unsettling of the staff could not by itself restrict the rights of the works council. Without further points of reference, the works council must be able to communicate extensively with the employees it represents fromthe beginning of the information process concerning planned changes to business operations, especially if they are affected. Otherwise, the works council cannot exercise its co-determination rights effectively and properly.

Details possibly confidential

According to the LAG, the fact that a company intends to carry out a reduction in personnel is not therefore subject to confidentiality as such. This applies even if the matter has been expressly marked as confidential. Nevertheless, details of the reduction in personnel can indeed constitute company and business secrets (e.g. the related outsourcing of certain business areas or the adaptation of technical procedures necessitating the reduction in personnel, etc.).

This also has effects in the court proceedings. Companies frequently do not wish to negotiate publicly concerning secrets. However, Section 52 ArbGG (Labor Court Law) does not offer the possibility of excluding the public if nothing is confidential.

Corporately secure scope of action

A company is therefore required to demonstrably mark confidential information as such with respect to the works council. The fact that the works council should not learn of confidential information on a planned measure may frequently stand in the way of forwarding. In cases of doubt, it will also hardly be possible to demonstrate later which member(s) of the works council has/have violated any obligations of confidentiality. To ensure trust-based cooperation with the works council, the management should unmistakably inform the works council of the background to a specific obligation of confidentiality, namely the existence of a company or business secret. Alternatively, the company will have to check the latest possible time for involving the works council (“The matter is starting now”), so as to keep the planned measures secret for as long and to as great an extent as possible.

Summary

The LAG Schleswig-Holstein has strengthened the rights of the works council concerning planned changes in business operations: accordingly, “confidential information” must not yet be kept secret. A Supreme Court decision on the duty of secrecy concerning personnel-reduction measures is still awaited. Until such time as the Federal Labor Court makes a differentiating assessment, the employer must (be able to) present objective criteria for the assumption of a business and company secret that go beyond the desire for undisrupted operations.

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