Co-Determination Rights of the Works Council in Establishing an Internal Reporting Channel under the German Whistleblower Protection Act

Background

The employer operates a retirement and nursing home, employing more than 480 employees. It is part of a corporate group. Both a local works council and a group works council exist. In compliance with the German Whistleblower Protection Act, a central internal reporting channel has been established for all companies within the corporate group, outsourced to a third party. The employer has internally published a “Procedure Instruction for the German Whistleblower Protection Act,” which is also applicable to other group companies.

The local works council asserted a co-determination right regarding both the design and use of the reporting channel. The employer rejected the involvement of the works council, arguing that it was merely a matter of organizational decisions within the company, which it could decide independently. The employer also contended that a co-determination right was excluded because the use of the reporting channel was not mandatory.

Decision

The Labor Court of Zwickau held that the matter is at least partially subject to co-determination under Sec. 87 (1) No. 1 of the Works Constitution Act, specifically concerning the use of the internal reporting channel. It is irrelevant whether the use of the reporting channel is mandatory for employees. The decisive factor is that employee behavior is intended to be regulated. Sec. 87 (1) No. 1 of the Works

Constitution Act does not require binding, behavior-determining rules, as regulation can be achieved through non-mandatory guidelines. Furthermore, the works council has an initiative right, allowing it to demand the establishment of rules for the use of the internal reporting channel.

However, there is no co-determination right regarding the design – in terms of the organizational setup – of the reporting channel. For example, the employer can freely decide whether a third party, as defined in Sec. 14 (1) Sentence 1 Alternative 2 of the German Whistleblower Protection Act, should act as the internal reporting channel and who this third party should be. Such organizational decisions of the employer are thus free from co-determination.

Co-determination is also not excluded due to the legal reservation contained in the introductory sentence of Sec. 87 (1) of the Works Constitution Act. At least concerning the use and design of the internal reporting channel, the German Whistleblower Protection Act provides room for maneuver.

Ultimately, the statements of the Labor Court remained theoretical for the applicant local works council. In the present case, the co-determination right, according to the Labor Court, does not belong to the local works council but to the group works council under Sec. 58 (1) of the Works Constitution Act.

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