Works Constitution Act – an initial Overview
General
The Works Constitution Act along with other statutes provides for a complex system of employee representative bodies and a broad catalogue of rights enjoyed by these bodies. The works constitution cannot be overruled by information and consultation agreements between the employer and the staff. Even where an agreement on information and consultation procedures has been concluded, this could not hinder the establishment of works councils and other representational bodies which could exercise all rights following from statute. For this reason, agreements defining practical arrangements for informing and consulting employees hardly play any role in Germany.
Works councils
By far the most important representational body under the Works Constitution Act is the works council (Betriebsrat).
Works councils are formed at the level of an establishment (also called works, plant or operation), this being an organisational labour unit carrying out an economic activity on an ongoing basis. German law assumes that the majority of business decisions which can have an impact on employment relationships are typically made at the level of the relevant establishment rather than with effect for all establishments of a company. Employees shall therefore be represented where the employer customarily makes his decisions.
A works council can be created in any establishment with at least five permanent employees who are over 16 years of age, provided that three of these employees are also over 18 years of age and have for at least six months been employed in the establishment or have worked mainly for the establishment as homeworkers (Heimarbeiter). The formation of a works council is not mandatory. In particular, the employer does not have to take any initiative to establish a works council. The initiative must come either from the employees or from the union(s) represented in the establishment. Neither a quorum nor a majority of the work force are required to support the establishment of a works council. The elec¬tion process leading to the formation of a works council can be started where three employees or a union already represented in the establishment support its establishment.
In some industry sectors (such as the IT sector) however the level of works council representation is noticeably low. In the more "traditional" industry sectors (e.g. in the automotive or the chemical industry), works councils are much more common.
Joint works council
If a company consists of more than one establishment works councils are usually created for each of those establishments with five or more employees. In companies with more than one works council a joint works council (Gesamtbetriebsrat) must also be formed. The formation of a joint works council is mandatory. Each works council delegates members to the joint works council. This body is responsible for matters which concern the company as a whole or more than one establishment and which therefore by definition cannot be handled by individual works councils at their respective establishments. Moreover the works councils may pass on certain matters to the joint works council.
In practice it is not always easy to determine which works council is competent for dealing with a certain codeterminable matter.
Example
If a company intends to introduce a telephone system at all establishments either the local works councils or the joint works council can be competent. Should the company intend to use telephone equipment of the same type in all offices but with different features and different conditions of use at each of the individual establishments the local works council is the com-petent body to negotiate with. If the telephone equipment shall be used to collect data which is then to be compared with that of other establishments the joint works council is the responsible body for this matter.
Group works council
Where companies form a group of companies, the joint works councils may elect a group works council (Konzernbetriebsrat) on a voluntary basis. The group works council is responsible for matters which relate to the whole group or several companies of the group.
Economic committee
In companies with regularly more than 100 employees the works council is required to form an economic committee (Wirtschaftsausschuss). The economic committee has no codetermination rights but must be informed and consulted on a number of economic matters relating to the company.
Executives' committee
Whilst works councils do not represent executives (leitende Angestellte) these employees with managerial tasks may elect their own representative body, the so-called executives' committee (Sprecherausschuss). Inter alia, this committee must be informed and consulted with if an executive is to be dismissed.
Youth and trainee representation
In establishments with at least five employees who are below 18 years of age or employed as trainees, a special youth and trainee representative body (Jugend- und Auszubildendenvertretung) must be formed. This body represents the interests of young employees and trainees vis-à-vis the works council.
Representatives of severely disabled employees
Representatives of severely disabled employees (Schwerbehindertenvertretung) are elected in establishments with at least five permanent employees with severe disabilities. In addition to joint works councils or group works councils, joint representatives and group representatives of severely disabled employees may also be elected. As well as having the right to attend all meetings of the respective works councils, joint works councils and group works councils, these representatives also have their own information and consultation rights with regard to all matters relating to severely disabled employees.
European works council
A European works council may be formed in a company domiciled in Germany and having at least 1,000 em¬ployees in member states of the European Union with at least 150 employees thereof in each of at least two member states. Unlike other bodies mentioned above the European works council does not play a major role in practice. Its rights are limited to information and consultation rights concerning the economic situation and prospects of the company or group of companies.
Alternative concepts of works constitution
Subject to certain conditions, alternative works council structures can be implemented. In particular local works councils may be established at the company level rather than at the establishment level. In companies organised along product-oriented or project-oriented lines works councils for each business unit may be formed instead of local works councils if this concept facilitates proper employee representation. Similarly, other representational structures might be implemented if this were to support an effective and expedient representation of the employees' interests.
Such alternative structures may be created by means of a collective bargaining agreement which is to be agreed with the competent union. To some extent other representational bodies can be established by way of collective agreements with works councils, too, or, if a works council does not exist in the company, by a resolution of a majority of the employees. To date such alternative representational bodies are rare in practice.
Works Council
Election of a works council
Works councils are elected every four years. A formal election process is set out in the Works Constitution Act and in an additional Election Code (Wahlordnung).
Election committee
The election is organised by an election committee appointed by the works council or a joint or group works council. Where no such bodies exist or have failed to appoint an election committee the latter can also be formed by an employees' assembly initiated by three employees of the establishment or a union represented in the establishment. Elections are held during working hours and election costs are borne by the employer.
Elections
All employees of the establishment aged 16 or above have a right to vote. They are eligible to stand for election after they have reached the age of 18 and have for at least six months been with the establishment or have worked mainly for the establishment as homeworkers.
The details of the election process depend on the number of employees in the establishment.
In establishments with between five and 100 employees a simplified election procedure applies. The election committee has to draw up a list of candidates during a (first) employees' assembly. At the end of this assembly the election committee enacts the election writ setting out the essentials of the election procedure. Thereafter candidates or lists of candidates may be nominated to the election committee. During a second employees' assembly the works council members are then duly elected.
In establishments with between 101 and 200 employees, the election committee and the employer may agree on the applicability of this simplified election procedure.
In establishments with more than 200 employees the election committee publishes the list of the candidates following the employees' assembly. Thereafter it enacts the election writ. For a certain period of time lists of candidates may be nominated to the election committee. The committee then checks if the lists comply with statutory requirements. The election itself, depending on the number of campaigning lists of candidates (one list = majority vote, more lists = proportional representation), will then be undertaken without assembling all employees.
Members of the works council
The number of works council members depends on the number of employees in the establishment. By way of example, in establishments with five to 20 employees, only one works council member is to be elected. If there are 21 to 50 employees the works council will consist of three members. In an establishment consisting of 7,001 to 9,000 employees, 35 works council members have to be elected.
The members of the election committee, candidates on the lists of candidates, and members and substitute members of the works council all enjoy extensive protection against dismissal. The same applies for the first six employees who invite to an employees' assembly or the first three employees who apply for the appointment of an election committee.
For instance members of the election committee can only be dismissed for good cause and with the consent of the labour court (on the occasion of the first election) or of the works council (subsequent elections), starting with the time of their candidacy to the election committee at the employees' assembly. The same applies to (non-elected) candidates with effect from their nomination. For a period of six months after the election result has been announced they continue to enjoy dismissal protection and can only be dismissed for good cause. During this grace period, however, the consent of the labour court or works council is no longer needed.
Similarly, members of the works council may, during their four-year period of office, be dismissed for good cause only and if prior consent of the works council has been obtained. Should the works council refuse its consent, the labour court may, at the request of the employer, overrule this decision. For a grace period of one full year after the end of their period of office or resignation from the works council, former members can only be dismissed for good cause, too. Again, the works council's consent is no longer required during this period.
Employees who undertake preparatory actions for the establishment of a works council and have submitted a publicly certified declaration stating that they intend to establish a works council may also only be dismissed for good cause. However, the protection against dismissal applies for a maximum of three months only.
Dismissal protection is also enjoyed by substitute members of the works council for a period of one year after they stepped in for a regular works council member.
Exceptions apply only in the event of the establishment or a division of the establishment closing down.
Note
In establishments without works council representation employees becoming aware of imminent redundancies may be prompted to immediately start an election process. In a worst case scenario, all staff members could then run as candidates for the works council in the election process. In such a case all employees become entitled to special protection against dismissal for a period of six months following the election with the result that they may be dismissed for good cause only. Employees who then manage to be elected to the works council will then benefit from additional protection from dismissal for the duration of their period of office and one year thereafter. However, the employer has the option of filing an application with the labour court to have the extraordinary termination confirmed.
Court disputes
A works council election may be challenged before a labour court if fundamental provisions regarding the right to vote, the eligibility or the election procedure have been infringed unless such infringement could not have influenced the result. If not challenged within two weeks from the announcement of the election results by at least three employees eligible to vote, the employer or a union represented in the establishment, the election is deemed valid. Very severe infringements can also render the election null and void.
Obstruction of works council activities
It is a criminal offence to hinder or prevent the formation of a works council, its activities or to influence the election or to treat unfairly a member of a works council for reasons of their membership in the works council. Such a criminal offence could attract a custodial sentence of up to one year.
Participation rights of the works council
The works council has a number of rights of participation of varying strength. Information and consultation rights are the weakest forms of participation. The stronger forms, in particular codetermination rights, usually comprise the right of the works council to receive timely and adequate information.
Information and consultation
Scope
The employer must inform the works council about all relevant measures which he intends to carry out and which might relate to the responsibilities of the works council. The works council is entitled to review documents or other data which are relevant for the proper exercise of its duties. It may also obtain information by visiting the workplaces of individual employees.
As a rule the employer must only disclose such information as is in his possession. He is not required to collect data for the sole use of the works council. The question as to if and when the employer must obtain information from its parent company to pass it on to the works council remains to be clarified. The works council must be informed proactively and in good time before the employer carries out a codeterminable measure.
Areas
The works council may request any and all information relating to its general responsibilities, including:
ensuring that laws, collective bargaining agreements and other provisions in favour of the employees are fully observed by the employer;
recommending to the management measures that would serve the establishment and its employees;
considering and passing on to management any suggestions from employees and reporting back to them;
promoting the integration of disabled and other such protected groups;
promoting the integration of foreign workers into the workforce as well as promoting a good relationship between them and their fellow German workers.
Example
The works council may review the payroll showing the gross remuneration paid to all employees (excluding executives) at any time and without any specific reason. Such payroll data must include all payments (including fringe benefits) that the employer grants to the employees. This shall enable the works council to determine whether the applicable collective bargaining agreements or the principle of equal treatment have been infringed.
In addition the employer must inform and consult the works council on matters of health and safety, accident prevention as well as on environmental protection measures to be implemented in the establishment.
The works council also has information and consultation rights in general personnel matters covering all employees, for example:
manpower planning, in particular the present and future personnel requirements;
measures for securing and promoting employment, such as flexible scheduling of working hours, the promotion of part-time work, new forms of organising the work, changes in work procedures and alternatives to outsourcing work;
employee questionnaires/surveys;
guidelines for the selection of personnel to be hired, transferred and dismissed;
training.
Remedies
In order to enforce its information and consultation rights the works council may file a claim with the labour court. It may sue for the disclosure of information withheld by the employer. In specific circumstances the works council may obtain a preliminary injunction obliging the employer to cease and desist from implementing a measure without proper information and consultation of the works council. The employer must bear the entire costs of such proceedings including legal fees irrespective of the outcome of those proceedings.
Codetermination rights
Scope
The strongest right of participation is known as "enforceable codetermination". Certain rules or policies may only be introduced or changed by the employer with the consent of the works council. Moreover the works council for its part may take the initiative and try to bring in a rule or policy.
If no agreement can be reached between the employer and the works council, either party may bring the matter before a conciliation board. A conciliation board is a joint decision committee with equal representation of the employer and the works council and a neutral chairperson mutually appointed by both sides or by the labour court. The conciliation board will continue to negotiate the contentious issue. If the two sides are still unable to reach an agreement the conciliation board will ultimately pass a binding decision, with the neutral chairperson having the casting vote.
The conciliation board decides at its discretion, having due regard for the interests of the establishment and those of the employees affected. The decision of the conciliation board must (i) either be recorded in writing and signed by the chairperson or recorded in electronic form and provided with the chairperson's qualified electronic signature and (ii) forwarded to the employer and the works council. The decision must be duly implemented and enforced by the employer. If the employer or the works council are of the opinion that the conciliation board has exceeded its discretion in reaching its decision, they may file a claim to have the decision reviewed by the labour court.
For as long as an agreement has not been reached or replaced by a decision of the conciliation board the employer is prevented from implementing the planned measures.
All costs of conciliation proceedings, in particular the remuneration of the chairperson of the conciliation board as well as fees of the works council's external advisers, have to be borne by the employer.
Areas
The works council has far-reaching codetermination rights regarding so-called social matters where these matters are not governed by collective bargaining agreement or statute. Social matters concern the following topics:
the internal order and conduct of employees within the establishment (e. g. dress code, restrictions on alcohol consumption, penalties for misconduct);
the beginning and end of daily working hours including breaks and distribution of working hours over the various days of the week, in particular shift work;
the temporary reduction or increase of the usual working hours (in particular overtime arrangements);
the time, place and manner of payment of remuneration;
general rules regarding vacation and determination of vacation time for individual employees where they cannot agree with the employer;
the introduction and application of technical equipment designed to monitor the behaviour and performance of the employees (e. g. time clocks or computer programmes with lock-in storage);
health and safety (rules on accident prevention, prevention against occupational diseases and health promotion measures);
the administration of welfare matters, in particular pension or welfare and support funds at establishment level or company level;
the conclusion and termination of rental agreements regarding company housing entered into by the company and individual employees;
remuneration policies (salary system, performance bonuses, commission, bonus systems) and voluntary payments by the employer (e. g. the common “13th month” salary payment);
principles regarding suggestions for improvements;
principles regarding group work (Gruppenarbeit) and
the organization of mobile work performed by means of information and communication technology.
Examples
The codetermination right of a works council with regard to the introduction of over-time is one of its strongest rights. Unless a relevant collective agreement is already in place the works council may block any work which exceeds the usual working hours. Even if an individual employee volunteers to work overtime the works council’s consent is still required.
With regard to the introduction of new technical equipment, the codetermination right not only applies where the employer actually intends to monitor the conduct or performance of employees. It is sufficient that the equipment contains features which might be used for such monitoring purposes. Consequently the introduction of computer systems, computer software and telephone systems will always require the consent of the works council.
The employer is obliged to inform and consult a works council on any changes to the organisation of the work place, the work flow and the work environment, in particular regarding the planning of
new construction, remodelling and additional production, administration and other work areas;
technical installations;
work procedures and the flow of work including the use of artificial intelligence;
the workplace.
If the intended changes place significant burdens on the employees the works council may demand measures to eliminate, mitigate or compensate for the burden. In the event that the employer and the works council do not reach agreement the conciliation board will make a binding decision.
Far-reaching rights of the works council also apply with regard to economic matters, in particular business reorganisations. Such measures include:
the scaling down or closing down of an establishment or a significant part thereof;
the relocation of an establishment or significant part thereof;
the separation or consolidation of several establishments into one;
substantial changes to the organisation, its primary purpose or to the technical facilities of the establishment;
the introduction of fundamentally new working methods and production processes.
In companies with more than 20 employees the employer must inform the works council of any plans to implement such reorganisations. The information has to be furnished in good time so the works council may yet influence the actual outcome during the information and consultation process. Changes are designated as "planned" and as such trigger information and consultation rights where there exists a management decision on the broad measures, even if the necessary consent of the supervisory board may yet to be been granted. The information will not have been provided in good time if all necessary bodies of the company have already approved the specific measure. The works council must always be able to influence implementation and to propose alternatives.
After providing information the employer must attempt to reach an agreement with the works council on the organisational implementation of the operational change (balance of interests – Interessenausgleich). In this agreement the parties agree on whether, when and how the change is to take place. The works council cannot force the employer to conclude a specific balance of interests. However, if the employer does not negotiate (or, in case of a dispute, does not bring the matter to the conciliation board) the works council may try to prevent the intended reorganisation by obtaining a preliminary injunction from the labour court. As some labour courts in Germany (depending on the region) do grant such a preliminary injunction, failing to attempt to reach agreement may therefore result in considerable delay.
Moreover the works council, irrespective of whether a balance of interests has been negotiated or agreed, can require the employer to conclude a social plan (Sozialplan). This is an agreement under which the employees affected by the reorganisation receive compensation for the financial disadvantages suffered by them (typically in the form of severance payments for personnel laid off). If the works council and the employer are unable to agree on the content of such a social plan, the conciliation board will decide on both the budget of the social plan and the distribution of said budget.
In cases of operational changes and other economic matters another representative body, the economic committee, plays an important role, too. The employer must inform the economic committee on a number of economic matters relating to the company, in particular with respect to the economic and financial condition of the company, the production and sales figures, the production and investment programmes, consolidation projects, manufacturing and working methods, questions of environmental protection of the establishment and intended business changes as listed earlier.
Remedies
Should the employer infringe the works council's codetermination rights by implementing measures without having the works council’s consent (or without having said consent replaced by a decision of the conciliation board) the works council may block all such measures by obtaining a preliminary injunction. Some German labour courts will order the employer to cease and desist from implementing measures that lack the consent of the works council even where the employer's conduct cannot be regarded as a serious breach of the works council's rights. If the employer then fails to comply with the court order the labour court may impose a fine on the employer.
If the employer does not negotiate with the works council to reach a balance of interests or if he deviates from its provisions, individual employees may, in addition, be entitled to statutory severance payments.
Example
A company plans to split up its production facility and transfer it to another company. Without having informed the works council at all, the company offers termination agreements to individual employees. The works council can bring the introduction of these measures to a halt by applying for a preliminary injunction. Moreover, those employees who have already signed a termination agreement could be entitled to a (possibly higher) statutory severance payment.
Other codetermination rights
Special types of codetermination rights of the works council apply with regard to individual personnel matters.
Hiring and relocation
In companies with more than 20 employees the works council enjoys a strong position with regard to the hiring and relocation of staff. If the employer intends to hire a new employee or to relocate an employee to a different position or place of work, he must notify the works council in good time, producing the relevant documents (e.g. application documents) and any other relevant information requested. The works council may then consent or refuse its consent based on certain grounds (e.g. if the appointment or relocation deviates from a general directive on personnel planning or if it leads to an unjustified dismissal of another employee).
If the works council refuses to grant its consent the employer may file a claim in the labour court. An affirmative decision of the court replaces the works council's consent. However it typically takes months for a court to come to such a binding decision. In urgent cases the employer may provisionally hire or relocate the employee subject to confirmation of this action by the court at a later date.
Dismissals
If the employer intends to dismiss an individual employee he must formally inform and consult the works council on the matter of the dismissal one full week before notice of termination is given. The information to be provided must include the employee's personal data, details of the contract of employment and detailed in-formation on the reasons for dismissal.
The employer does not require the consent of the works council in order to dismiss an employee. Indeed, the employer may give notice of termination even if the works council has objected or raised concerns. But if the employer fails to properly involve the works council or fails to present relevant facts to the works council, the dismissal will be invalid from the outset. In fact, many dismissals fail in labour court proceedings precisely for this very reason.
Time off for works council members
In establishments employing 200 or more employees one or more works council members must be released entirely from their work duties. If 200 to 500 people are employed one member will exclusively carry out works council tasks while continuing to receive their remuneration. In larger establishments the number of members so released from their employment duties increases proportionately. The individual members to be released are selected by the works council after consulting with the employer.
In smaller establishments, all works council members are required to continue performing their working duties. They must however be released without any reduction in pay whenever necessary for their works council activities. In other words, they are to be released for attending works council meetings, attending employees' assemblies, attending meetings of other representative bodies, training sessions, consultations and other duties. The same applies for members in larger establishments who are not entirely released from work.
The works council itself allocates the duties and tasks among its individual members. A works council member is required to take leave of absence from their workplace and sign on again after the task has been completed. The works council member is not however required to reveal the nature of the task they are to perform.
The employer's obligation to release works council members from work is more extensive than the simple requirement to allow them to leave their work place: The employer is also required to reduce a works council member's workload accordingly.
As it is a requirement that the works council members must not suffer any financial disadvantages as a result of being released from work, their continuing entitlement to payment of wages also includes other general payments such as gratuities, bonuses, increases, etc. The works council member must not suffer any disadvantages in career advancement as a result of their full or partial release from work.
If necessary, works council activities must also be performed outside working hours. The employer must then compensate the works council member with equivalent free time.
Reimbursement of costs
The works council cannot insist on a certain budget being made available by the employer. Rather the employer must bear all "reasonable" costs of the works council's activities. Reimbursement is due for all costs and material expenditures which are objectively necessary to enable the works council to perform its tasks properly. The costs must be proportionate to the significance of the task. It goes without saying that disputes in this respect are quite common.
The material costs of the works council's activities include the following:
premises, office staff, materials for meetings, consultations and day-to-day management (e.g. desks, stationery, information and communication technology, printed legislation, legal books);
training courses (provided by unions or independent organisers); costs including travel and accommodation must be paid;
legal fees incurred in the clarification of difficult or complex matters of works constitution law and/or in the event that the works council is required to assert its rights in the labour courts.
Rules and Practical Solutions on how to set up an Information and Consultation Process
General
The broad scope of the rights of works councils in Germany raises the question as to whether companies are still in a position to decide at their own discretion on operational and business issues which potentially affect their employees. Who is really running the business? Is it still the employer? Or is it in fact the works council?
Broadly speaking the current system works well where both the employer and the works council see themselves as partners working together in a spirit of mutual trust. Experience shows that any attempt to circumvent the works council's rights does not yield the desired results. On the contrary, in such cases the works council will not only enforce its rights but also exploit its strong position in other areas to put pressure on the employer.
Cooperation with the works council does not mean that the company must always make concessions if in fact it is vital that strict rules be followed. Nor does it always follow that disagreements or a failure to reach an agreement have to be decided by conciliation boards or the courts. In any event, after any court proceeding and irrespective of its outcome, both sides will need to resume a policy of cooperation.
Establishing a cooperative environment
The creation of a cooperative working environment is a prerequisite for the pursuit of a constructive information and consultation culture.
Election procedure
Cooperation begins with the employer's support of the election process. As already explained, the employer must not hinder or influence the establishment of a works council. As a majority or quorum of employees is not required for the formation of a works council it is almost certain that an initiative started by a minimum of three employees or by a union will ultimately lead to the establishment of a works council.
Some employers however, especially those lacking experience with a works council environment, try to delay the election by withholding information, such as the list of employees who are eligible to vote. Other employers use rumour or Chinese whispers to promote the view that works council representation is not wanted by the company. Such tactics almost invariably lead to a clash with the union, the election committee and the incoming works council and can often influence the election result to the detriment of the company.
Example
A subsidiary of a US corporation has announced that it does not want works council representation in its German establishments. It has threatened that, should a works council be established, the parent company may well decide to close down its German establishments. The union involved in the election process is unimpressed by this announcement and ignores it. All the same the employer's message has had an impact on the candidates who had originally agreed to be nominated. Those employees who were interested in a "smooth" cooperation with the employer have now withdrawn their candidacy. In the end, therefore, the works council ends up consisting only of so-called "hardliners" or “troublemakers” with an extremely negative approach.
Last but not least, it should be kept in mind that obstructing the election of a works council or influencing such election by causing or threatening disadvantages or by granting or promising advantages is a criminal offence for which the sentence is one year's imprisonment or a fine. The same can be imposed on the employer for obstructing or disturbing the works council's activities or for discriminating against or unlawfully favouring a member of the works council.
Meetings with the works council and employees' assemblies
Regular meetings of the works council are not open to the public or to the employer. It is reasonable and advisable for the employer to have joint round table meetings with the works council on a regular basis (e. g. once a month).
A joint approach of the employer and the works council is also advisable with regard to employees' assemblies. German law requires that the works council host an employees' assembly once a quarter and report on its activities. Although the employer is invited to those meetings and is entitled to speak during the meetings, some employers do not make use of this opportunity. They prefer to inform the employees in separate meetings or use other communication media. However such a strategy could generate unrest among the workforce.
The meetings of the Works Council are usually held in the form of an in-person meeting. Under certain conditions, however, participation may also take place by means of video and telephone conferences. Due to the ongoing COVID-19 pandemic, works council meetings can be held virtually at the moment. This provision is limited until 19 March 2022 but can be extended once by up to three months. Works council members who participate in the adoption of resolutions by means of video and telephone conferences are deemed to be present in person, so that their votes must be counted. If works council members participate in the meeting by video and telephone conference, they must confirm their participation to the chairperson in text form.
Treating the works council seriously
Constructive cooperation with the employees' representatives requires that the works council be treated in the same manner as a business partner.
The Head of HR (in important matters) or at least a senior executive of the HR department should act as the main point of contact for the works council.
Involving the works council can be very time-consuming. It may require discussing a variety of alternatives proposed by the works council with its members or delegates. During these discussions the works council should at least feel that some suggestions will be reviewed and considered seriously, even if there is no doubt that the company will ultimately follow its own proposal without any amendments.
Requests for (further) information should be treated with due respect. Not always is it advisable to limit the furnishing of information to what is statutorily required as a minimum.
Disputes over the reimbursements of costs for the works council's activities should be avoided to the extent possible. As a business partner the works council should be in a position to work under the same conditions as the HR department itself. In particular, the employer should not refuse the reimbursement of any reasonable training costs. Oftentimes, it is more efficient to work with representatives who are fully informed about the scope (and the limits) of their rights than with inexperienced negotiators. Furthermore, a lack of training is likely to be time-consuming when the employer is seeking to implement measures speedily and at short notice.
Example
A company has decided to close down its offices in Hamburg and move them to the location of its parent company in Frankfurt. It has informed the works council in detail about the economic reasons for the move, the probable development of the company’s prospects following the move and the effect on the employees. Thereafter it intends to consult the works council and negotiate a balance of interests. The works council has so far refused all consultation and negotiation offers. It argues that the works council members, having been in office for three months only, need to be trained before any negotiation can take place. In addition the works council requires the services of a financial advisor to be paid for by the employer. Both suggestions have been refused by the employer. Instead the employer has declared the negotiations to have failed and has asked the court to set up a conciliation board.
Months later however, the labour court rejects the employer's application and supports the works council’s position. The employer has in the end wasted almost a year before he can implement the relocation of the office.
Influencing the level of representation
As described earlier the Works Constitution Act distinguishes between the responsibilities of the (local) works council and the joint works council. Only matters which concern the entire company or more than one establishment and which cannot be handled on a local level fall under the competence of the joint works council.
The employer may nonetheless influence the level at which he negotiates by shaping the intended measure and its purpose in one way or another.
Examples
A company with more than one establishment intends to introduce a new IT system. Ultimately, the employer wants all establishments to work with the same system. If the employer prefers to start negotiations with one local works council, he must limit its business decision to the introduction of the system in that respective establishment. If the employer wants to negotiate with the joint works council he must decide to simultaneously introduce the system in at least two establishments whilst emphasising that the sharing of data requires the use of identical equipment.
Which representative body is the better negotiating partner will differ on a case-by-case basis. Local works councils are typically more familiar with the circumstances and unique peculiarities of their establishment. Joint works councils often concentrate on the benefit for all employees of the company without dealing with individual problems of employees in a single establishment. If the same or similar issues have to be negotiated with different local works councils it is likely that any agreement concluded with one works council will be taken as a benchmark by the other works councils. Other works councils are then likely to try to negotiate additional improvements for their respective establishments. If the employer negotiates with a joint works council only, such "competition" between several local works councils can be avoided.
Timetable and influencing the time of consultation
In general, the works council must be informed by the employer in good time, i.e. at a stage where the works council still has a chance to influence the business decision. A delay in providing information and consulting with the works council is regarded as a breach of its rights and may have grave consequences.
Communication is key in this respect. The company should therefore avoid any messages at an early stage, be it to customers, employees or to the works council, designating the intended measure as a final "decision". Instead, until the works council has been informed any discussions about the intended measure should be categorised as being at a “pre-planning stage”. Immediately before informing the works council, the management should make and record a formal business decision, noting that the company has now entered the detailed planning stage. In order to emphasise that no binding decision has been taken yet it is advisable to include any alternative options in the minutes.
Example
A company plans to close down its production site in Germany and dismiss the entire workforce. It has decided that the whole production shall in future be carried out in Romania. Before informing the works council, the project team produces a number of memos and minutes, detailing a precise timetable for the closure. From these documents it becomes clear that a business decision has already been taken. By accident the documents become available on the intranet and are spotted by a works council member.
The works council can then block the implementation of the planned closure by obtaining a preliminary injunction. All employees can claim for statutory severance payments based on the violation of the works council's information and consultation rights.
At the beginning of each consultation process the employer should try to agree a timetable with the works council and schedule sufficient dates for further meetings. As a number of measures cannot be implemented before the consultation process has been finalised, it is extremely important to ensure a continuous consultation process.
Choosing the appropriate means of communication
The employer should ensure that he is in a position to prove that he has provided the works council with proper and adequate information. Wherever appropriate, he should therefore provide the information to the works council in writing and ask for an acknowledgement of receipt.
When disputes about the completeness of information arise, the employer should provide information on the intended measure in writing, submitting the most important documents as attachments. In this letter the employer should ask the works council to submit a detailed request for further information (e.g. by completing a questionnaire or providing a list of documents) within a certain deadline. The employer should emphasise that after the deadline has elapsed the works council will be deemed to have been informed completely. This strategy typically leads to a speedier process of information exchange. It goes without saying that a works council which has to go through a large amount of documents may reasonably request more time.
Individuals involved in the information and consultation procedure
To avoid that the consultation process results in a series of endless discussions, it is vital to limit the number of participants from both the employer's and the works council's side. Depending on the issues in question, an equal number of between two and five participants should be nominated from each side. In addition, substitutes should be nominated to ensure the smooth continuing of the consultation, should one nominee be prevented from attending a meeting for personal or other reasons.
Whenever appropriate and reasonable the works council may ask for the assistance of external experts (e.g. economic advisors, lawyers), subject to agreement with the employer. With regard to negotiations on a balance of interests, the works council may call in an external consultant at its own discretion if the company has more than 300 employees.
Works council agreements
In Germany the consultation process usually leads to the conclusion of a works council agreement, the latter being a special type of contract concluded between the employer and the works council and containing general rules regarding working conditions. Works council agreements have an immediate and binding effect on the individual employment relationships. Since 2021 works council agreements no longer have to be concluded in strictly written form; instead, qualified electronic signatures are also sufficient. The terms of the works council agreement may to a certain extent even amend the individual contractual relationships without the employees' consent.
Confidentiality obligations for works council members
Members of works councils and other employee representatives must keep all trade and business secrets which have become known to them due to their membership of the representative body as strictly confidential. However this obligation not to disclose information applies only to such trade and business secrets which the employer has expressly designated as confidential. It is therefore extremely important to point out explicitly in every document that its content – in whole or in part – must be treated as confidential.
A member of a works council who reveals such trade or business secret commits a criminal offence.
Authored by: Dr. Kerstin Neighbour and Dr. Tim Joppich
