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Latest news on (external) managing directors – Maternity protection and age discrimination

In the past, the courts assumed that the executive position of managing directors ruled out having employee status. Now, owing to the influence of European law, the focus of German courts and law making is, increasingly, on determining which of the laws that protect employees should also be applied to external managing directors. One of the more recent decisions concerned the applicability of the German General Equal Treatment Act, which prohibits age discrimination, for example.

Age discrimination

The General Equal Treatment Act (Allgemeine Gleichbehandlungsgesetz, AGG) prohibits discrimination on the basis of an employee’s age. Contract provisions that infringe this prohibition are invalid. The Federal Court of Justice (Bundesgerichtshof, BGH), in its ruling from 26.3.2019 (case reference: II ZR 244/17) decided that, in the specific case and in compliance with European law, the AGG was applicable and the external managing director should be regarded as an employee. The agreement of termination upon reaching the age of 61 years was an invalid provision. In order for the termination to be effective the defendant would have to demonstrate that the unequal treatment on the basis of age was justified on grounds of legitimate interest, such as appreciable business-related or company-related interests.

Maternity protection for female managing directors

The application of the German Maternity Protection Act also to external female managing directors has been mandatory since 1.1.2018. Once this topic became the focus of intense debate, the legislators in Germany specified that the German Maternity Protection Act, including the employment restrictions, also applied to pregnant and nursing external female managing directors before as well as after the birth.

The new German Maternity Protection Act makes reference to the social security status of external female managing directors as dependent employees within the meaning of Section 7 of Volume IV of the German Social Security Code. For shareholding managing directors it is therefore crucial whether or not, through the votes allotted to them in the shareholders’ meeting, they are able to stave off all resolutions, without exception, that would be disadvantageous for them. This can be ensured through a comprehensive blocking minority or a position as the controlling shareholding managing director. If that is the case then the German Maternity Protection Act will not apply.

Please note: In the case of external managing directors it would appear that through the influence of European law their status is increasingly converging with that of German employees. It is likely that this development will continue.

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