Fundamental Classification: Principle of Equal Treatment and the Role of Managing Directors in the GmbH
The issue of protection against discrimination in the context of managing director service agreements in a GmbH has been the subject of legal debate for years and had not been definitively resolved until the decision of the Federal Court of Justice (BGH, judgment of April 23, 2012 – II ZR 163/10). While protection against discrimination is firmly established for employees, it was unclear whether executive body members such as managing directors are also covered by the protective mechanisms of the General Equal Treatment Act (AGG). The decision of the BGH has now provided significant new clarity and is of considerable importance both for practice and for the drafting of executive contracts.
Scope of Application of the AGG and Special Features Regarding Executive Body Members
According to § 1 AGG, the AGG serves to prevent and eliminate disadvantages based on, among other things, race, ethnic origin, gender, religion, philosophy, disability, age, or sexual identity, in particular in working life. The application of the AGG in traditional employment relationships is undisputed; however, the inclusion of executive body members – and thus especially managing directors of a GmbH – has been legally contested.
The special feature is that managing directors in a GmbH are not employees in the strict sense. Rather, they assume a dual role: On the one hand, as representatives of the shareholders, they serve as executive bodies of the company and are vested with extensive decision-making authority; on the other hand, under their service agreement, they share similar needs for protection as employees – for example, with respect to prohibitions against discrimination.
BGH Judgment: Managing Director Entitled to Protection against Age Discrimination under the AGG
With its landmark decision of April 23, 2012, the Federal Court of Justice confirmed that GmbH managing directors can also rely on the protections of the AGG if they are disadvantaged on the grounds of age within the context of their service relationship. This represents an important turning point for the handling of terminations, contract renewals, and re-advertising of managing director positions.
Legal Reasoning of the Court
The BGH bases its decision particularly on a reference to EU law: the relevant EU Directive 2000/78/EC basically provides for comprehensive protection against discrimination in the context of employment, which is not limited to classic employment relationships. National law—in the form of the AGG—must be interpreted in conformity with EU law. In addition, the AGG itself, pursuant to § 6 (3) AGG, expressly provides for its applicability to executive body members. Thus, in the court’s view, the scope of protection of the Act is open to managing directors, provided that the act of discrimination is connected to an activity as an executive body member and thus relates to the establishment, execution, or termination of the service contract.
Practical Implications
For corporate practice, this case law means that all shareholder resolutions and contractual provisions regarding the appointment, removal, and non-renewal of managing director service agreements must be reviewed for compliance with the AGG. Age-related selection decisions or contract terminations must be critically examined, especially if objective indications of discrimination on account of age arise. Otherwise, the affected executive body member may assert claims for damages, compensation, or even continuation of the service agreement.
Differentiated Consideration: Limits and Scope of Protection against Discrimination
Although the BGH clarifies that managing directors are generally covered by the AGG, there are boundaries and considerations to be balanced in its concrete application.
Contract Drafting and Justification of Differentiations
Unequal treatment on the grounds of age is not always unlawful. § 10 sentence 1 AGG provides the possibility to justify different treatment on grounds of age if it is objectively and reasonably justified by a legitimate aim. For the appointment of managing directors, this means that age-related selection may still be permissible in exceptional cases—for example, to ensure a certain level of experience or to comply with corporate law requirements—but the requirements for justification must be especially strictly observed.
Interface with General Corporate Law
The protection against discrimination under the AGG, however, does not directly affect corporate law: serving as an executive body is subject to principles of corporate law, especially the possibility of revocation at any time. Nevertheless, shareholder resolutions must not violate the prohibition of discrimination under the AGG, which must also be considered at the level of the articles of association or within corporate governance guidelines.
Significance for Companies and Executive Body Members – Outlook
The clarification by the Federal Court of Justice lends the principle of equal treatment within the internal affairs of the GmbH a new quality. Especially for internationally active corporate groups and in more complex holding structures, there arises the need to structure managing director contracts and decisions on appointments in conformity with the requirements of the AGG and the related court rulings. This also applies in respect of liability risks for company directors and shareholders as well as the associated compliance requirements.
For this reason, it is advisable to analyze and review the need for adjustments when restructuring or modifying contracts and corporate law documents in light of current case law. Companies, investors, and executive body members find themselves balancing the pursuit of business interests with the need to avoid incidents of discrimination.
If questions arise regarding potential discrimination in connection with the appointment or removal of managing directors, it may be beneficial for companies and executive body members to examine the current legal situation in detail. The lawyers at MTR Legal are available for a thorough review and discussion of specific individual cases.
