How do I form legally compliant peer groups for works councils?

In the first article in our series of publications on the legally compliant handling of works council remuneration by employers, we address the central question of what needs to be considered when forming peer groups of works councils. Without a properly formed peer group, it is impossible to ensure that works council remuneration complies with the statutory requirements

Before we take a look at how comparative groups of works councils are to be formed in concrete terms, we consider when the comparative groups must be formed for the first time and under what conditions an adjustment of the comparative groups may be necessary.

I. Date of initial formation of the comparison group

Pursuant to Section 37 (4) sentence 1 BetrVG, the formation of the peer group must generally take place at the time of the first assumption of office.

However, if the works council member has already been a substitute member, the time at which the works council member first became a substitute member of the works council must be taken into account (BAG, judgment of 21.2.2018 - 7 AZR 496/16). However, this applies on the condition that there was no period of more than one year between the individual cases of replacement. Similarly, there must not have been a period of more than one year between the last replacement and the election as a works council member. If the period is longer than one year, only the date of taking office is decisive for the formation of the comparison group.

II. Subsequent adjustment of the comparison group

A subsequent adjustment of the peer group should only be made in exceptional cases if there is an objective reason for a new determination. A possible objective reason may be, for example, that employees comparable to the office holder are lost due to restructuring or departure from the company or that the areas of responsibility of the works council member or the comparators change significantly - for example due to a career advancement.

It follows from this rule-exception relationship that a new formation of the comparative group is only to be carried out in absolutely necessary cases. This is not the case if the work of the works council member does not change significantly in terms of content or if there is no other objective reason for a new formation. For example, a gradual reduction in the number of comparators due to a member leaving the company is also not a factual reason that would lead to the formation of a new comparator group (LAG Cologne, judgment of 06.04.2017 - 7 Sa 836/16).

Even a merely temporary change in the activity does not lead to the need to form a new comparative group. Instead, the permanent performance of a higher- or lower-value activity would be decisive (see BAG, judgment of 23.11.2022 - 7 AZR 122/22).

Finally, circumstances relating to the works council activity of the works council member are also irrelevant. For example, the start of a new term of office or the assumption of office as chairperson of the works council do not constitute objective reasons for a new formation of the peer group.

III. Standards for the formation of the comparison group

Now that it has been clarified at what point in time a comparison group is to be formed for the first time and - if necessary - newly formed, we now turn to the criteria for forming the comparison group. We will approach this question step by step.

1.

Let's start with the statutory provision in Section 37 (4) sentence 1 BetrVG. It states:

"The remuneration of members of the works council may not be set at a lower level than the remuneration of comparable employees with normal professional development, including a period of one year after the end of their term of office."

2.

When are employees "comparable"? Comparable in this sense are employees who, at the time of taking over the works office

• have performed an activity that is essentially objectively comparable to that of the works council member
• are also comparable in terms of personal and professional qualifications and performance.

The comparability in terms of activity and qualification must be objective. When determining the comparator group, however, it is very rare to find employees who are objectively comparable without restriction in terms of their activities and qualifications. Therefore, the employer must always be given a margin of appreciation when determining the comparators.

3.

The skills required and the task structure, difficulty and scope of the job are decisive for the comparability of the activity. The physical, mental and intellectual demands of the job must be taken into account. Finally, the level of responsibility associated with the job in question and the hierarchical level at which the job is located must be taken into account.

The employer's scope of assessment mentioned at the beginning also applies here: the employer only has to determine an essentially objectively comparable activity of another employee. This is certainly the case if the employees are interchangeable.

4.

In addition, the comparative employees must be comparable in terms of their personal and professional qualifications. The relevant characteristics and qualifications that can be taken into account in this respect are typically those that play a role in many recruitment decisions anyway.

Of importance here are, for example

• the type of vocational training (e.g. based on the German Qualifications Framework – DQR)
• the acquisition of specialist knowledge
• successful participation in internal and external training courses;
• foreign language skills
• but also so-called soft skills, such as teamwork and communication skills.

In any case, the aforementioned qualifications are to be included in the comparative group formation if they are suitable for an objective comparison of the works council member and possible comparative persons and at the same time relate to the specific activity. Individual achievements and skills that a works council member has demonstrated in the course of their previous professional activities may also be taken into account. Whether and, if so, how skills and knowledge acquired in the course of works council activities are to be taken into account when forming comparative groups is clarified in the second article in our publication series.

In addition to the objective consideration of personal and professional qualifications, any high or low performance of the works council member must also be taken into account in individual cases: For example, if a works council member is particularly qualified and has been above average in his professional activities, only someone with similar qualifications and above-average performance can be considered as a comparable employee (BAG, judgment of 21.04.1983 - 6 AZR). The same applies in the opposite case (BAG, judgment of 11.05.1988 - 5 AZR 334/87). This also shows that the legally prescribed comparative group formation is not black and white, but takes into account the employer's discretionary considerations.

5.

Finally, it must be clarified in which group possible comparators of the works council member are to be identified.

According to the statutory concept in Section 37 (4) BetrVG, the formation of peer groups is designed to be company-related. This means that the employees of the same company are considered as comparators. If there is a joint operation of two or more companies, the joint operation must be taken into account. In this case, employees of another company must also be included if and as long as this company forms a joint operation with the company where the works council member is employed.

If, in individual cases, no comparable persons can be determined in the works council member's company, it must be checked whether there are employees comparable to the works council member in another company in the company. If this also does not lead to a result, the usual development of the next comparable employee groups must be taken into account.