Special representative and managing director in the association: employee rights?

Association law makes it possible to appoint individuals as special representatives: as representatives with institutional power of representation alongside the executive board. But what does this mean for the employee status of a managing director employed by an association? The Federal Labour Court (BAG) ruled on this issue, with implications for the future structure of managing director contracts and powers of attorney.

The ‘special representative’ in association law according to Section 30 of the German Civil Code (BGB)

Association law has special features that do not apply to companies such as GbRs or corporations.

Section 30 of the German Civil Code (BGB) is one such special provision. According to Section 30 BGB, it is possible to appoint special representatives in addition to the executive committee of an association – this applies to all associations, including non-profit organisations.

What makes this special: This representative of the association holds statutory representative authority (organschaftliche Vertretungsmacht). He or she does not act merely on the basis of a granted power of attorney and is therefore not just “any authorised agent” of the association. Instead, the special representative is designated by the association through its bylaws (statutes). Ideally, those bylaws also define the scope of the representative authority – both externally (towards third parties) and internally (within the association). In addition, just like the board members, the special representative must be registered in the association register (Vereinsregister).

Last but not least: The special representative is generally bound by the instructions of the board.

The case before the court: Dismissal and parental leave of a female managing director in an association

The fact that the special representative is, on the one hand, bound by instructions, but on the other hand holds statutory representative authority, can be problematic under employment law: Does a managing director employed by an association, who is simultaneously a special representative, have employee rights or not?

The Federal Labour Court (BAG, decision of 11 July 2024, ref.: 9 AZB 9/24) dealt with this question in the case of a female managing director employed by an association. She was also a special representative of the association, but had only very limited powers in this role. The association, which had around 35 employees, had terminated her employment and did not approve the parental leave she had requested.

The woman did not accept this. She wanted the labor court to determine that both actions were unlawful. In addition, she demanded compensation for discrimination, claiming that the association had dismissed her solely because of her pregnancy. She argued that this constituted discrimination based on her gender. At the time the lawsuit was filed, the association had already revoked her representative authority. She was no longer a special representative at that point.

However, the labour court did not consider itself competent: legal recourse to the labour courts was not available – entirely in line with the association’s wishes. The reason for this was the fiction of § 5 (1) sentence 3 ArbGG: no employee status for representatives of organs. The Regional Labour Court took a different view. As the association again disagreed, the case was ultimately brought before the Federal Labour Court to clarify this issue of fundamental importance for associations.

Federal Labor Court decision: Employee rights despite former status as special representative

Ultimately, the managing director prevailed before the Federal Labor Court.

On the one hand, the rule “no employee status for corporate body representatives” applies only during the term of office. Once the status as special representative has ended, the normal rules apply – including the jurisdiction of the labor courts.

In addition, the overall impression was that the managing director was economically dependent on the association and therefore socially in need of protection, making her position quite comparable to that of an employee. After all, she held a full-time position at the association with a fixed salary. At the same time, she was subject to the instructions of the board, and her authority as a special representative was significantly limited. Taken together, this led the Federal Labor Court to conclude that, after the end of her role as special representative of the association, she was entitled to full protection under labor law – from the jurisdiction of the labor courts to claims for parental leave and compensation in the event of discrimination.

Practical consequences of the BAG ruling for associations and managing director contracts

Especially when it comes to drafting managing director contracts and a potential appointment as a “special representative” under Section 30 of the German Civil Code (BGB) is being considered, precision is now more important than ever — both in defining the responsibilities and in determining the scope of representative authority.

If what appears to be a corporate body representative turns out to be an employee-like position – especially after the authority under Section 30 BGB has been revoked – this can have significant consequences under employment law, as demonstrated by the recent case decided by the Federal Labor Court.