A young start-up entrepreneur from Berlin is threatening to single-handedly bring down a pillar of Germany’s corporate culture – and has won few friends in the process.
Konrad Erzberger, 30, has lodged a complaint at the European Court of Justice against employee co-determination in German labor law on the grounds that the practice contravenes E.U. law.
In German corporations, employees can elect a number of representatives at company boards. If a firm has more than 2,000 employees, half of the supervisory board seats are reserved for representatives of the workforce. This tradition, enshrined in German law since 1976, gives personnel a say and is hugely popular in the country. At a celebration commemorating 40 years of co-determination last year, President Joachim Gauck called it “an essential part of Germany’s cultural heritage.”
But Mr. Erzberger disagrees. His objection is that the law only takes personnel based in Germany into account, while employees of foreign subsidiaries are entirely disregarded. This infringes on the principle of free movement of workers and amounts to discrimination within the E.U., the entrepreneur argues.
A law graduate who has co-founded several start-ups in Berlin since 2010, Mr. Erzberger is taking on travel company TUI in court. The multinational headquartered in the northern German city of Hanover employs 76,000 people, 80 percent of whom are based abroad and have no representation at the board. Mr. Erzberger is a TUI shareholder.
The current situation is not fair for employees abroad Konrad Erzberger, Senior Business Development Manager, SolarisBank
The hearing in Luxembourg started Tuesday and many believe the case has merit.
The European Commission initially expressed sympathy for the plaintiff's reasoning that German employees lose voting rights when they switch to a foreign subsidiary of their employer, which restricts their freedom of movement.
But the 28-member executive body of the E.U. has since come out in support of the existing co-determination principle.
"Employee participation is an important political objective. Any resulting restriction on the free movement of workers may be justified by the need to protect the system of participation and its social objectives. Consequently, the Commission considers that existing German rules can be considered compatible with E.U. law," the Commission told the ECJ Tuesday.
If the court ends up upholding the case, this would mean, according to horrified stakeholders all the way up to Germany’s ministry for economic affairs, nothing short of the end of co-determination.
The ministry has issued a dire warning against "massive and possibly unpredictable consequences" a decision in favor of the plaintiff could entail and underlined the social peace was at stake.
Trade union leaders have billed Mr. Erzberger “an enemy of workers’ rights” and “a wolf in sheep’s clothing.”
The entrepreneur, however, has insisted he had no grudge against Germany's employee participation principle per se and that there was no political motivation behind his complaint.
Mr. Erzberger said he acted out of idealism and simply wanted "a change for better corporate governance," because the current situation is "not fair for employees abroad."
The ECJ’s verdict is expected in the summer.
Jean-Michel Hauteville is an editor with Handelsblatt Global in Berlin. To contact the author: [email protected].