In Germany, there are various forms of collective employee representation, each bearing different responsibilities and influencing employer decisions in different ways. We hear from domestic and international legal experts on this matter.
1. Labor Unions
Labor unions (Gewerkschaften) are organizations of workers aimed at protecting and improving workers' labor and economic conditions. They represent workers in specific economic sectors, such as workers in the metal and electrical industries or those in the service sector.
Labor unions engage in collective bargaining with employer associations (or individual employers) and conclude collective agreements (CBAs; Tarifvertr?ge). These collective agreements include minimum working conditions such as working hours, compensation, and vacation. The collective agreement has immediate and binding effect on the employment relationship if (i) the worker is a member of the union and the employer is a member of the employer association (or a direct party to the collective agreement), or (ii) the employer and worker have agreed to apply the collective agreement in their employment contract, or (iii) by official declaration (translator's note: in Germany, the Federal Ministry of Labour and Social Affairs can declare that a collective agreement applies to an entire economic sector, which is called an official declaration), the collective agreement applies to the entire economic sector. Union members may strike under certain conditions to compel employer associations/employers to conclude collective agreements. During a strike, work is suspended and wages are not paid by the employer. Most labor unions provide strike pay to compensate for members' lost wages.
2. Works Council
A works council (Betriebsrat) is an employee representative body elected for a four-year term. It can be elected in workplaces with five or more employees.
The role of the works council? The works council has various types of participation rights. In some areas, the works council only has the right to information and consultation, while in other areas it has substantial co-determination rights. Co-determination rights are the strongest form of participation rights of the works council and include (i) personnel matters (e.g., hiring and transfers, dismissals), (ii) social matters (e.g., employee conduct within the workplace, start and end of daily working hours, implementation and use of information technology, or principles of compensation), and (iii) economic matters (e.g., changes in business operations).
(i) In personnel matters, the works council's consent is required for hiring and transfers. The works council may refuse consent only for specific reasons. In the case of dismissals, the works council must be notified and consulted before the dismissal. Although the works council cannot prevent dismissals, if the employer fails to conduct proper consultation, the dismissal may be invalid.
(ii) In social matters, the works council exercises co-determination rights by concluding works agreements (Betriebsvereinbarungen) with the employer. If an agreement cannot be reached, a conciliation committee composed of an equal number of members appointed by the employer and the works council, and a neutral chairperson appointed by labor-management agreement or the court, makes a binding decision.
(iii) In economic matters, if there are changes in business operations that cause substantial disadvantages to employees (such as downsizing, closure, relocation, merger/split), the works council must be notified and consulted. If such changes cause economic disadvantages to employees, the employer and the works council must conclude a social plan (Sozialplan) to compensate employees for these economic disadvantages (e.g., severance pay, reimbursement of relocation costs).
3. Co-Determination in Corporations
Co-determination in corporations refers to employee representatives jointly making decisions on the company's supervisory board (Aufsichtsrat). The number of employee representatives on the supervisory board depends on the company's size and legal form. Companies with 500 or fewer employees are not required to have employee representatives on the supervisory board. For German stock corporations (Aktiengesellschaft; AG) or limited liability companies (Gesellschaft mit beschr?nkter Haftung; GmbH) with more than 500 employees, one-third of the supervisory board must be composed of employee representatives. Companies with more than 2,000 employees must have employee representatives constituting more than half of the supervisory board.
What employee representatives do on the supervisory board? The main task of the supervisory board is to oversee management (and thus the main task of employee representatives is the same). According to the law, the company's management must report to the supervisory board on matters related to the company or its subsidiaries upon request. The supervisory board can also review and audit the company's accounting books, records, and assets.
Michael Burian, GLAS Lutz, German Attorney
Josephine Chakrabarti, GLAS Lutz, German Attorney
Seo Hyun-young, Yulchon LLC, Attorney
※This article is based on content supplied by Law Times.
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