Volkswagen Ordered to Justify Works Council Pay Cuts in Landmark Case

The Bundesarbeitsgericht ruled that Volkswagen must prove the validity of its compensation reductions, remanding the case to a lower court for further review.

• The Bundesarbeitsgericht ruled that Volkswagen carries the burden of proof to justify reductions in works council members' compensation.
• The case was sent back to the Landesarbeitsgericht Niedersachsen due to procedural errors in the initial ruling.
• Volkswagen reduced the plaintiff's monthly pay from €7,093 to €6,454 and demanded repayment of €2,600, citing overpayment issues.
• The ruling follows a 2023 Bundesgerichtshof decision warning executives of breach-of-trust risks for granting excessive compensation to works council members.
• The outcome of this case has broader implications for labor relations and corporate governance, with dozens of similar disputes pending at Volkswagen and other companies closely monitoring the case.

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