A recent decision of the LAG Baden Württemberg, the district labour Court for the state of Baden Württemberg, of April 9th, 2014 (19 TaBV 7/13) may have a significant impact on the inclusion of German employees into a foreign stock option plan.
The facts of the case were as follows:
Certain groups of employees of the German subsidiary of a US Corporation were entitled to participate in the US LTI-Plan (stock and stock options). The plan is published in the Intranet, the Corporation annually decided on the parameters for granting benefits. Superiors in the US and Germany can make changes to the plan participation and propose to grant more or less benefits to specific employees based on their annual performance evaluation. The US Corporation is free to follow the recommendation and does not inform the subsidiary about its decisions. There is no publication who receives which amount of stock/options. The local works council demanded information from the German subsidiary which employees were generally entitled and in which case the superiors made deviating proposals. Finally it wanted to know which benefits were actually granted.
The court conceded those information rights to the works council. Although it did not have to decide about co-determination rights it saw the equal treatments principle as legal basis for the claim. The German subsidiary thus must try to get all relevant information from the US Corporation. The decision is not yet a final one, since the Court has expressly allowed a review by the Federal Labour Court.
Foreign Group Companies with German subsidiaries, who grant stocks or options or similar benefits to German employees, should carefully monitor the further development. If the Federal Labour Court confirms the view of the lower instances this may have serious implications. The main impact will not only be the works council, who may ask for and be able to enforce information or even co-determination rights. More worrisome might be that individual employees may use information gathered by the works council to pursue equal treatment and/or damage claims. Especially if the foreign company does not comply with the information obligation this could be costly for their German subsidiary, which could have to compensate employees regardless of the validity of the equal treatment claim.