Germany: Right Of Co-Determination Of The German Works Council On Stock Options Of U.S. Parent?

Last Updated: 5 October 2018
Article by André Zimmermann LL.M.

The German Federal Labor Court (judgment of March 20, 2018 – 1 ABR 15/17) has recently clarified a matter of considerable practical relevance for U.S. companies offering stock options to employees of their Germany-based subsidiaries: Does the German subsidiary's works council have a right to be involved when it comes to offering stock options?

In its judgment, the German Federal Labor Court held that it was not necessary for the information to be provided. The works council had not explained which of its specific responsibilities under the BetrVG required the provision of this information. The required information related to the grant of stock options etc. by the group parent as well as their number. Moreover, the Federal Labor Court held that the legal principle of equal treatment under labor law was only directed at the employer.

The Case

The German group company belongs to an international group headquartered in the U.S. Each year, the parent company allocates, among other things, stock options to the employees of the German subsidiary based on a long-term incentive program, for instance a stock option plan. The German company is neither involved in the structuring of the program nor the specific allocations. The stock options are not mentioned in the employment contracts of the employees of the German subsidiary, but regulated by a spate agreement between the U.S. parent and the employees.

The works council elected at the German subsidiary would like to be involved in the procedure to select the employees and the allocation of the number of stock options in accordance with section 87(1) no. 10 of the German Works Constitution Act (Betriebsverfassungsgesetz, "BetrVG").

Inconsistent Case Law of Regional Labor Courts

There is considerable debate among employment law scholars whether there is a right of co-determination in such constellations. The case law of the Regional Labor Courts (Landesarbeitsgericht, "LAG") is not yet consistent either.

LAG of Hesse: No Right of Co-determination

If the German subsidiary in its capacity as the employer does not have its own decision-making right and no say in which employees will participate in the option program and to what extent, there is nothing for the works council to have a right of co-determination about, as the LAG of Hesse recently found in its judgment of August 3, 2017 (5 TaBV 23/17).

LAG of Baden-Württemberg: No Right of Co-determination, but Right to Information

While the LAG of Baden-Württemberg (judgment of 17 January 2017 – 19 TaBV 3/16) agreed in principle, it did however hold that the German works council had a right to be informed by the Germany subsidiary as to which employees were granted stock options and the scope of such grant in order to allow the works council to fulfill the responsibilities incumbent upon it pursuant to section 75(1) BetrVG to monitor compliance with the principles of good faith and, in particular, non-discriminatory treatment. The LAG Baden-Württemberg held that, if necessary, the employer was obligated to obtain this information from the parent company if it was not aware of the details of the allocation.

But in the view of the LAG, too, the works council did not have a right of co-determination in accordance with section 87(1) no. 10 BetrVG. It is not an act of wage-setting if an employee enters into an agreement on the grant of stock options with another group company rather than with his or her employer; such claims do not become part of the employment relationship. Instead a legally independent contract has been entered into between the employee and the parent company; this does not involve any remuneration paid by the employer and, according to the LAG, therefore, there is no right of co-determination of the works council. A possible link between the granting of stock options and the employment relationship did not suffice in the view of the LAG; these only constitute remuneration if the third party (i.e. the parent company) granted the options in accordance with the provisions of the employment contract either instead of or in addition to the agreed remuneration for the employment. The LAG held that there is no room for maneuver since the standards set out by the group's parent company were mandatory and thus constituted the limit of co-determination. A different conclusion could only be reached if representatives of the subsidiary had played a part in the decision on the allocation of the options and had their own scope for deciding how the stock option plan should be structured in detail.

German Subsidiary Ordered to Provide Information to Works Council

The LAG Baden-Württemberg, however, held that the conditions for a right to information pursuant to sections 80 and 75 BetrVG of the German subsidiary were met. The court ordered the German subsidiary to provide information to the works council as to which employees were granted how many stock options by the U.S. parent company in a particular period of time.

The LAG said that only if this information were provided would the works council be able to carry out its general obligation of monitoring that all people working in the company were treated in accordance with the principles of good faith, that there was no discriminatory treatment and that the principle of equal treatment was complied with.

Federal Labor Court: No Right to Information of the Works Council

The Federal Labor Court quashed the judgment of the LAG. This means that the employer did not engage in any conduct which could be assessed on the basis of the standards of the general principle of equal treatment and in relation to which the requested information would be required. The court found that section 75(1) BetrVG did not contain a more extensive, comprehensive monitoring obligation of the employer, which included measures taken by the parent company regarding any allocations in the context of contracts entered into between the parent and the employees.

Good Practice Advice

If an application of co-determination rights is to be avoided, the involvement of the German subsidiary in the allocation and distribution of stock options should be avoided at all cost. There must be no involvement beyond a mere right to make recommendations; notably, the German company may not include any information on the stock option package in the employment contract.

Offer letters, if they are to be signed by the German company, should not make any mention of such packages either. Instead, the U.S. parent company and the employee should enter into a separate agreement. The employer is well advised to point out vis-à-vis works council and employees that it did not take the decisions in question but that it, too, had merely requested to be provided with the information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Oct 2019, Speaking Engagement, New York, United States

Orrick’s Lisa Lupion will serve as a panelist for an upcoming CLE program hosted by the New York County Lawyers Association entitled, “New Strategies in Sexual Harassment Investigation.”

25 Oct 2019, Speaking Engagement, New York, United States

A joint program of the American Arbitration Association and the Center for Labor and Employment Law at NYU School of Law

29 Oct 2019, Other, Portland, United States

Orrick is hosting an evening reception for Dive/In Day on October 29, 2019 in Portland, OR.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions