There was a great deal of attention when the Braunschweig Regional Court made a long-awaited judgment in the proceedings against several ex-HR managers of the Volkswagen Group in autumn 2021.

The public prosecutor's office had accused them of infidelity - they are said to have approved works councils such as the former labor leader Bernd Osterloh too high salaries.

The Braunschweig court acquitted the accused.

But now the Federal Court of Justice (BGH) has overturned the judgment due to errors on the part of the chamber, without taking a more precise position on the question of the allegation of breach of trust.

The legal struggle over the fundamental question of how employee representatives are to be remunerated correctly is entering a new round.

Katja Gelinsky

Business correspondent in Berlin

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Christian Muessgens

Business correspondent in Hamburg.

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750,000 euros;

that's how much the former VW works council chief Osterloh earned at the top.

Prosecutors found it too much.

They went to court against the two former personnel directors of the VW Group, Horst Neumann and Karlheinz Blessing, the former personnel manager of the VW brand, Jochen Schumm, and his successor Martin Rosik, today on the board of the group company MAN Energy Solutions.

In total, according to the allegation, they are said to have caused damage of more than 4.5 million euros through excessive payments to employee representatives.

Osterloh was only a witness in the matter.

Separate investigations are underway against him, which are currently on hold due to the legal ambiguity in the process against the manager.

VW as a special case

The core problem in the legal dispute is that the legislature does not make any clear specifications as to how the remuneration of works councils, especially their top representatives, should be determined.

The Works Constitution Act, which has been in need of reform for a long time, only states that the members of the works council hold office “free of charge as honorary posts”.

Therefore, no remuneration may be paid for the activity itself.

The legislature also stipulates that the members of the works council are to be released “without reducing their wages”.

They should not be disadvantaged or rewarded for their work.

But it remains unclear what that means in concrete terms for the amount of remuneration.

The BGH also gave only scant information on this in its press release on Tuesday.

The exact reasons for the judgment are not yet available.

In any case, it is certain that the top criminal judges share the view of the regional court on one important point.

In their opinion, the offense of breach of trust can in principle be fulfilled “if a board member or authorized officer of a stock corporation grants a member of the works council excessive pay in violation of the works constitution prohibition on preferential treatment”.

The Braunschweig court had emphasized this point, but had concluded that the defendants did not act intentionally.

They said they relied on consultants and used decision-making processes that had been established in the group for a long time.

Important topic for many companies

In order to assess whether the disputed remuneration was actually too high, information is needed that the district court did not provide in its judgment, according to the BGH.

"The Senate is therefore unable to assess whether the approval of the monthly wages and bonus payments contradicts the principles of works constitution law and whether the regional court has correctly denied the accused's intent."

The top criminal judges complained that the judgment did not state the system by which the remuneration of VW employees was generally regulated and which criteria applied for the classification into different salary groups.

It also remains unclear according to which rules a promotion to higher “salary groups” and the various “management circles” was provided and which standards were used for the decisions on bonus payments.

The Federal Court of Justice also assessed the district court's assessment of the evidence as to whether the managers intentionally breached their duties as incomplete and therefore incorrect in law.

Another white collar crime chamber at the district court should now create clarity.

The topic is relevant for many companies in Germany, but is particularly explosive in the case of Europe's largest car manufacturer.

VW is repeatedly criticized for the unusual closeness between management, employee representatives, the state of Lower Saxony as the major shareholder and the Porsche and Piëch families.

There is talk of a "VW system" that makes the group susceptible to felt.

After the first investigations became known five years ago, the Wolfsburg company checked their payment practices.

Several employee representatives, including Osterloh, were downgraded in their basic salary - "moderately", as was emphasized at the time.

Since then, the group and the works council have felt that they are on the safe side, but they have unanimously emphasized that the around 50-year-old legal basis for works council remuneration must be renewed.