Constitutional complaint relating to opt-in municipalities only successful to a limited extent

Press Release No. 87/2014 of 07 October 2014

Judgment of 7 October 2014
2 BvR 1641/11

The rules relating to the legal status of the so-called Optionskommunen (Opt-in Municipalities – municipalities having been granted the right to provide services in the field of basic provisions for job-seekers) introduced in 2010 are mainly compatible with the Constitution. This was decided by the Second Senate of the Federal Constitutional Court in a judgment rendered today. By adopting Art. 91e of the Basic Law (Grundgesetz - GG), the legislature, acting under its power to amend the Constitution, has created a special regime in the field of basic provisions for job-seekers. The amendment has established financial relations between the Federation and the Optionskommunen. At the same time, it provides for a specific competence of the Federation to exercise financial control. In addition, Art. 91e GG vests the Federation with an extensive legislative mandate. To a large extent, the federal legislature is free in how to organise the process of granting the legal status of the Optionskommunen. However, it is not competent to regulate the internal decision-making process in municipalities by prescribing a majority of two-thirds in favour of an application to become an Optionskommune. The respective rule may no longer be applied. Admissions already granted remain valid.

Facts of the Case:

The municipal constitutional complaints lodged by 15 municipalities and one county concern the legal status of the so-called Optionskommunen as newly regulated in 2010. [Translator’s note, based on the German press release no. 64/2013, released 24 October 2013:

They challenged several provisions of the Second Book of the Code of Social Law (Sozialgesetzbuch II - SGB II):

§ 6a sec. 2 sentence 3 SGB II, in as far as it requires a majority of two thirds in the competent representative decision-making body in favour of an application to become an Optionskommune,

§ 6a sec. 2 sentence 4 SGB II, in as far as it limits the number of potential Optionskommunen to 25 % of those authorities potentially responsible for these tasks,

§ 6b sec. 3 SGB II, in as far as the Federal Auditors’ Office (Bundesrechnungshof) is competent to exercise financial control with regard to the Optionskommunen , and § 6b sec. 4 SGB II, in as far as the Federal Ministry of Labour and Social Affairs has been given the right to audit the budget of the Optionskommunen.

The Fourth Law Relating to Modern Services at the Labour Market (Viertes Gesetz für moderne Dienstleistungen am Arbeitsmarkt vom 24. Dezember 2003 - "Hartz IV") merged unemployment assistance (Arbeitslosenhilfe) and social assistance for job-seekers fit for work (Sozialhilfe für erwerbsfähige Arbeitslose) under the category of basic provisions for job-seekers (Grundsicherung für Arbeitssuchende) in order to offer them as joint services "under a single roof". This entailed fundamental changes in the organisation of the administration of social services. On the one hand, joint teams (Arbeitsgemeinschaften) were created, in which the Federal Employment Agency and the municipalities carried out their tasks together. On the other hand, some municipalities were granted the status of so-called Optionskommunen, which, in addition to carrying out the municipal tasks in the field of basic provisions for job-seekers, also carry out all tasks of the Federal Employment Agency and therefore are solely responsible to provide basic provisions for job-seekers.

In its judgment of 20 December 2007 (Decisions of the Federal Constitutional Court, Entscheidungen des Bundesverfassungsgerichts - BVerfGE 119, 331), the Second Senate of the Federal Constitutional Court decided that the obligation to establish joint teams and their function were not compatible with Art. 28 sec. 2 sentence 1 and 2 in conjunction with Art. 83 GG, as there was no rule in the Basic Law providing for this type of shared administrative responsibilities (Mischverwaltung). As a consequence, it was decided to amend the Basic Law in a way to allow both for integrated cooperation between the Federal Employment Agency and the municipalities, and for maintaining the possibility of granting the status of Optionskommunen as well as for extending their use. In addition, Optionskommunen were to be placed under federal supervision to the extent they were replacing the Federal Employment Agency in its tasks. By federal law of 21 July 2010 (Federal Law Gazette, Bundesgesetzblatt - BGBl. I p. 944), the new Art. 91e was inserted into the Basic Law. At the same time, the Bundestag adopted the Law on Development of the Organisation of Basic Provisions for Job-Seekers (Gesetz zur Weiterentwicklung der Organisation der Grundsicherung für Arbeitssuchende of 3 August 2010, BGBl. I p. 1112). This law amended the SGB II resulting in the version of the SGB II relevant for the proceedings at hand.

In total, 77 municipalities and counties applied for the status of an Optionskommune, competing for one of 41 authorisations (this constituted 25 % out of 439 prospective service providers, less 69 Opt-in Municipalities which had already been granted the status in 2005). Complainant no. 1 belonged to this group, but failed to achieve the requisite majority of two thirds in the municipal council. Complainants no. 1 to 15 were not granted the status of Opt-in Municipality; complainant no. 16 had already been granted the status on 1 January 2005.

[…]

Key Considerations of the Senate:

1. The constitutional complaints are mainly admissible. Only in so far as one of the constitutional complaints challenges the budgetary control by the Federal Auditors’ Office, has the time limit of one year not been observed. The relevant provision (§ 6b sec. 3 SGB II) has been in force since 2004 and has not been amended since.

2. The constitutional complaint challenging § 6a sec. 2 sentence 3 SGB II, which prescribes a majority of two thirds in the municipal council applying for the status of an Optionskommune, is well-founded. On all other points, the constitutional complaints are unfounded.

a) aa) By inserting Art. 91e GG into the Constitution, the legislature has created an extensive special regime in the field of basic provisions for job-seekers. This was by reaction to a judgment of the Federal Constitutional Court of 20 December 2007, which declared the cooperation between [federal] Employment Agencies (Arbeitsagenturen) and municipalities in joint teams to be unconstitutional. The new provision was meant to maintain cooperation, which was politically deemed to be useful, and to place it on constitutionally sound footing.

Art. 91e sec. 1 GG constitutes an anomaly with regard to the general prohibition of shared administration, a prohibition that the Federal Constitutional Court had found to be based - among others - on the principle of democracy. An administrative entanglement of two state levels might render less effective or even counteract the value of the voters’ mandate at each level. Moreover, in the interest of effective legal protection, the rule of law requires a clear allocation of competences. Nevertheless, neither the principle of democracy nor the rule of law prohibits shared administration as such and without exception. Therefore, Art. 91e GG does not violate the fundamental guarantees of the „eternity clause“ of Art.   79 sec. 3 GG.

Within its scope of application, Art. 91e GG supersedes the general rules on executing federal law (Art. 83 et seq. GG) and on funding of administrative tasks (Art. 104a GG). The legislature, when changing the Constitution, obviously did not intend to create a rule that can be easily integrated into the existing system, but to put the then current practice of administrative cooperation on a solid legal basis. This can also be seen when looking at the specific rules on cost allocation (Art. 91e sec. 2 sentence 2 GG), which provide for direct funding of municipal administration by the Federation.

bb) Art. 91e sec. 2 GG establishes direct administrative and financial relations between the Federation and the Optionskommune. Legally, municipalities are a part of the Laender. Therefore, the regime does not adhere to the two-tier structure of the German state, even if only in certain cases. Art. 91e sec. 2 GG enables the Federation to exercise an effective financial control, which differs both from the general supervision by the Federation and the powers of the Federal Auditors’ Office.

cc) Art. 91e sec. 2 GG grants an opportunity to municipalities and counties to be solely responsible for providing services in the field of basic provisions for job-seekers. As already indicated by the wording that the Federation “may“ authorise a limited number of municipalities or counties to provide these services, this does not amount to a substantive right. When granting such an opportunity, the legislature is mostly free in creating the relevant framework. However, the principle of equal treatment of municipalities prohibits to disadvantage or favour individual municipalities or counties unless justified by objective reasons.

dd) To seize the opportunity to apply for the status of an Optionskommune falls within the scope of application of the guarantee of local self-government (Art. 28 sec. 2 GG). Municipalities and counties may invoke the guarantee of equal treatment of municipalities when in conflict with the state and may object to the violation of this principle by lodging a constitutional complaint.

ee) Art. 91e sec. 3 GG contains an extensive legislative mandate for the Federation including all legal relations that are relevant for granting the legal status of Optionskommunen.

b) The constitutional complaint challenging § 6a sec. 2 sentence 3 SGB II is founded.

aa) A municipal constitutional complaint can be used to object to a federal law violating the legislative competences of the Laender (Art. 70 GG), as the distribution of the legislative powers is one of the decisive factors of the constitutional guarantee of local self-government.

bb) § 6a sec. 2 sentence 3 SGB II states that the application for being granted the status of
an Optionskommune requires a majority of two thirds of the members within the competent municipal decision-making forum. In doing so, the rule limits the organisational autonomy of the municipalities and therefore interferes with the guarantee of local self-government. Compared to the general rules of municipality law, this rule complicates decision-making in the relevant municipal bodies. One complainant, the county R., was not able to make use of the opportunity offered by law as only 36 members of the county council out of 60 had voted in favour of such an application.

cc) § 6a sec. 2 sentence 3 SGB II violates the legislative competences of the Laender. The rules of internal decision-making within the municipalities and counties form part of municipality law. Otherwise, the Federation would be in a position to also regulate the decision-making process at the local level in all fields where it possesses legislative powers. If this was the case, the legislative competence of the Laender in the field of municipality law would become meaningless.

Neither does the concurrent legislative competence of the Federation in the field of public welfare (Art. 74 sec. 1 no. 7 GG) constitute an adequate legal basis for the challenged rule. While, according to the jurisprudence of the Federal Constitutional Court, the term “public welfare“ is to be interpreted in a broad sense, also covering rules on organisation, the challenged rule does not regulate organisational matters relating to the performance of social security services, but the question of municipal decision-making.

The legislative competence vested in the Federation by Art. 91e sec. 3 GG cannot be used as legal basis for the rule at hand. This article constitutes an adequate basis to regulate the conditions for granting the status of Optionskommunen, especially concerning their number and admission criteria. However, the challenged norm does not concern the legal relationship between the applying municipality and the Federation or the Land, but the internal organisation of the municipality.

dd) The first half of the third sentence of § 6a sec. 2  SGB II is to be declared incompatible with the Basic Law. The rule remains in force for existing admissions. However, the rule must no longer be applied for new admission procedures.

If the rule was declared to be void, the already existing Optionskommunen would no longer be able to perform their services adequately. This would affect both a high number of beneficiaries of social services and the municipal employees. Without maintaining the effects of the rule for the past, it would therefore be impossible to ensure the regular functioning of social services.

c) § 6a sec. 2 sentence 4 SGB II, which stipulates that the number of Opt-in Municipalities  may not exceed 25 % of the authorities existing as of 31 December 2010, does not raise constitutional concerns.

aa) Pursuant to Art. 91e sec. 3 GG, the federal legislature is competent to enact such a provision. With regard to their content, Art. 91e sec. 1 and sec. 2 GG establish a regime of rule and exception: Services being performed together in joint establishments are considered to be the rule, whereas services being performed solely by the Optionskommunen are to be the exception. This is supported by the wording of Art. 91e sec. 2 GG, by the position of this article in the Basic Law, and by its genesis. Apart from this regime, the legislature possesses a broad discretion.

bb) In particular, the wording of Art. 91e sec. 2 GG does not indicate a specific number of potential Optionskommunen. Setting the limit at 25 %, the legislature only has taken up the target figure envisaged when the Constitution was amended taking into account the political expectations of the parties concerned. It was under no constitutional obligation to do so.

cc) There is no need to interpret § 6a sec. 2 sentence 4 SGB II in a way compatible with the Constitution, in particular in the light of Art. 28 sec. 2 sentence 1 and 2 GG. Providing basic benefits for job-seekers does not constitute a task of the local community protected by the guarantee of self-government of municipalities (Art. 28 sec. 2 sentence 1 GG). This rather constitutes a task that is usually performed by the Federal Employment Agency throughout Germany. Furthermore, the guarantee of local self-government of counties (Art. 28 sec. 2 sentence 2 GG), which only exists to the extent it is provided for by statute, is not violated. Assignment of a new task could only be required if otherwise the guarantee of local self-government would be endangered in its core. This is obviously not the case here.

dd) If the legislature offers the municipalities the opportunity to be responsible for specific tasks, it must ensure both a transparent allocation procedure as well as a decision based on adequate reasoning when granting the specific legal status. While the legislature had to determine the essential features of this procedure (cf. Art. 80 sec. 1 sentence 2 GG), it was allowed to leave the details to the Federal Ministry of Labour and Social Affairs. § 6a sec. 3 SGB II does constitute an adequate legal basis.

There is no need to decide whether or not the procedure of allocation itself, which is governed by the Regulation on Ascertaining the Eligibility of Municipalities (Kommunalträger-Eignungsfeststellungsverordnung - KtEfV), meets the requirements of a non-arbitrary, transparent and comprehensible admissions procedure. Nor is there a need to decide whether specific federal regulations are required for the allocation of quotas of prospective Optionskommunen to different Laender. The regulation, which might be insufficient in this respect, has not been challenged in the proceedings at hand.

d) Finally, § 6b sec. 4 SGB II, which provides for financial control by the Federal Ministry of Labour and Social Affairs, does not raise any constitutionally relevant concerns. The legislative power to enact this provision can be derived from Art. 91e sec. 3 in conjunction with sec. 2 sentence 2 GG. The entailing powers of the Federation are different from the ones inherent to the Federal Auditors’ Office and are limited to the fiscal interests of the Federation. In particular, the Federation is entitled to claim reimbursement under public law and to enforce its claims also by way of set-offs in the context of the same legal relationship. This does not entail a control of legality or supervisory control. The financial control exercised by the Federation is not, in general, directed towards ensuring uniform execution of federal law and, therefore, does not entitle the Federation to object to legal views of Opt-in Municipalities, as long as they are legally tenable.