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Germany: Employee representation

Updating author: Dr Anke Freckmann and Dr David Plitt, Osborne Clarke, Germany

Original author: Karen Ullmann

Consultant editor: Dr Jan Tibor Lelley, Buse Heberer Fromm

Summary

  • Generally, works councils elected by employees represent them on operational matters at business unit or company level, and trade unions represent employees' overall interests at industry level. (See Dual system)
  • A works council may be elected at business units with five or more employees, at the initiative of the employees or a trade union represented in the business unit. (See Works council elections and membership)
  • Senior executives are not represented by works councils, and instead have their own representative structures (See Executive committee)
  • Members of a works council may not be disturbed in or hindered from performing their activities. (See Works council members' protection and facilities)
  • The law obliges the employer to engage in "trustful cooperation" with the works council. (See Works council's duties)
  • A works council has a wide range of information, consultation and co-determination rights regarding the employer. (See Works council's rights)
  • A conciliation committee should be set up, at the employer's expense, to resolve differences of opinion between the employer and the works council. (See Conciliation committee)
  • Every three months, a works council must hold a works meeting for all employees and report on its work. (See Works council information for employees)
  • When a company consists of two or more business units with works councils, it must establish a company works council. (See Company and group works councils)
  • Companies with trainees or at least five employees under the age of 18 must set up a youth and trainee representative body. (See Youth and trainee representative body)
  • In establishments with at least five employees with severe disabilities, these employees may elect a representative and at least one deputy. (See Representation of people with disabilities)
  • Community-wide active companies must, in certain circumstances, establish a body to negotiate with management over the establishment of a European works Council or an information and consultation procedure. (See European Works Councils)
  • Employees in companies with more than 500 employees are entitled to board-level representation. (See Board-level representation)

Dual system

Germany has a dual system of workers' representation. Broadly speaking, works councils elected by employees represent them in respect of operational matters at business unit or company level, while trade unions represent workers' overall interests at industry level. Although many members of works councils are union members, the fields of activity of trade unions and of works councils are kept separate. For example, works councils are not allowed to organise strikes, which is the prerogative of trade unions. Also, remuneration and employment conditions that are regulated, or normally regulated, by collective bargaining agreements cannot be a subject of a works agreement signed by a works council and an individual company, unless a collective bargaining agreement expressively permits the conclusion of such supplementary works agreements.

Works council elections and membership

A works council (Betriebsrat) may be elected in business units with five or more employees and at least three employees who are eligible for election, at the initiative of the employees or a trade union represented in the business unit. They are made up of employee representatives generally elected every four years by the workforce in a ballot organised by an ad hoc election board and paid for by the employer. Candidates may be nominated for election by employees or a trade union represented in the establishment, and must be employees of the company. Temporary agency workers are excluded from standing for election. However, from 1 April 2017, a temporary agency worker must be counted as an employee for the purposes of determining the threshold for the right to a works council, provided that he or she has been employed by the relevant company for more than three months. All adult employees may vote in the elections, and temporary agency workers may do so if they have worked in the establishment for at least three months (see Germany: Employee rights > Temporary agency work). If an employee is employed in more than one operational unit within the same company, he or she is entitled to vote in each respective unit, provided that the other conditions for eligibility are satisfied. Candidates who fail to be elected become substitute members who stand in if a works council member cannot attend a meeting or resigns.

The number of works council members varies with the size of the business unit, from one member in those with between five and 20 employees to 35 members in those with between 7,001 and 9,000 employees. Business units gain two additional works council members for every additional 3,000 employees above 9,000. Membership should, as far as possible, represent the establishment's various categories of employees and organisational units, while the gender that is in a minority in the workforce must be represented proportionally in works councils with three or more members.

In the public sector, works councils are replaced by a broadly similar body, the staff council (Personalrat).

Executive committee

Senior executives are not represented by works councils, and instead have their own representative structures (Sprecherausschuss). Executive committees may be elected in business units with ten or more senior executives to represent the senior executives in respect of operational matters. Temporary agency workers are not counted as senior executives for the purposes of determining the right to an executive committee. However, temporary agency workers who are employed as senior executives may vote in the elections if they have worked in the establishment for at least three months. Generally, executive committee elections take place every four years, and must be organised contemporaneously with the works council elections.

An executive committee is obliged to engage in "trustful cooperation" with the employer. Compared with a works council, an executive committee has no right of co-determination, but information and consulting rights as well. It is permissible to establish a company or group executive committee.

Works council members' protection and facilities

Members of the works council may not be disturbed in, or hindered from, performing their activities and may not be disadvantaged or advantaged due to their activities. The employer has to meet all the expenses of the works council necessary for its activities, including office equipment, communication expenses and even legal fees for legal action against the employer itself. Candidates for election to, and members of, the works council, the youth and trainee representative body (see Company and group works councils) and the election board (see Works council elections and membership) may be dismissed only in cases where the law allows dismissal without notice for a "serious reason" (see Germany: Termination of employment > Notice periods); other dismissals are illegal. For members of the works council and the youth and trainee representative body, this dismissal protection ends one year after the end of their term of office.

The works council holds its meetings during working hours. The employer must relieve all works council members of their work duties without loss of pay when this is necessary for the proper performance of their functions. If members carry out works council work outside their working hours, they must be compensated with time off. In establishments with at least 200 employees, at least one works council member (elected by the works council) must be fully released from work duties. The number of members released rises with business unit size.

In establishments with 100 or more employees, the works council is entitled to set up standing committees to perform its daily work. Works council members are entitled to organise for themselves the training necessary to perform their duties (see Germany: Training and development > General) and have the right to attend approved training courses.

Works council's duties

The law obliges the works council to engage in "trustful cooperation" with the employer. Members of the works council are obliged not to disclose or to use trade or business secrets that have become known to them due to their function. The works council is not allowed to engage in party politics.

The works council's duties include:

  • receiving complaints from employees and, if it considers a complaint to be justified, influencing the employer to rectify the situation concerned;
  • ensuring the compliance with legislation and collective bargaining agreements;
  • making recommendations to the employer for action benefiting the business unit and the staff;
  • promoting equality between women and men, and the reconciliation of work and family life;
  • promoting the rehabilitation of severely disabled people and others in particular need of assistance;
  • promoting the employment of older workers;
  • promoting the integration of foreign workers and requesting action to combat racism and xenophobia;
  • promoting and safeguarding employment; and
  • promoting health, safety and the protection of the environment.

Works council's rights

The works council has a wide range of information, consultation and co-determination rights vis-à-vis the employer. The works council and employer must meet at least once a month.

The employer must supply the works council with comprehensive information in good time to enable it to perform its duties, and the works council must be granted access at any time to any documentation it may require for the discharge of its duties. The works council's specific information rights cover matters including:

  • the structure, organisation and design of jobs, operations and the working environment;
  • matters relating to personnel planning, including present and future personnel needs, staff movements and vocational training measures;
  • recruitment, grading, regrading and transfers (in establishments with more than 20 employees); and
  • developments such as cutbacks, closures, business transfers, mergers, divestments, important organisational changes and the introduction of new work methods and production processes (in establishments with more than 20 employees).

In companies with more than 100 employees, an economic committee (Wirtschaftsauschuss) must be appointed by the works council, which the employer must inform and consult about economic matters concerning the company.

Consultation rights apply to broadly the same areas as information rights, along with vocational training and dismissals. The works council must be consulted before every dismissal and the employer must give the reasons for the termination. Any notice of dismissal that is issued without consulting the works council is null and void. The works council can object to a dismissal on various specific grounds (see Germany: Termination of employment > Unfair dismissal - general).

A number of matters are subject to co-determination rights - that is, joint decision-making by the works council and employer. These are:

  • matters relating to the business unit's rules of operation and the conduct of employees;
  • the start and end of daily working hours, breaks and the distribution of working hours over the week;
  • any temporary reduction or increase in normal working hours;
  • the time, place and form of payment of remuneration;
  • general principles for annual leave arrangements, the preparation of leave schedules, and the time at which leave is taken by individual employees, if no agreement is reached between the employer and the employees concerned;
  • the introduction and use of technical devices to monitor employees' behaviour or performance;
  • arrangements for the prevention of accidents at work and occupational diseases and the protection of health, on the basis of legislation or safety regulations;
  • the form, structure and administration of social services;
  • matters relating to accommodation rented to employees in view of their employment;
  • remuneration arrangements, including their principles of remuneration and the introduction and application of new or amended remuneration methods;
  • the fixing of job and bonus rates and performance-related remuneration;
  • principles for operational business suggestion schemes; and
  • principles governing the performance of group work.

These issues may be subject to a works agreement (Betriebsvereinbarung) between the employer and works council, as may topics such as: health and safety; environmental policy; financial participation; the integration of foreign employees; and combating racism and xenophobia. Works agreements are legally binding, and, unless otherwise agreed, can be terminated on three months' notice. However, in the case of agreements relating to the co-determination issues listed above, a works agreement remains in force after notice until a new agreement is concluded, even if one side gives notice to terminate.

It the employers and works council cannot agree on any of the co-determination issues listed above, the matter is referred to a conciliation committee (see Conciliation committee) for a decision (which takes the place of a works agreement). If the parties fail to agree on a range of other matters, these are also referred to the committee. These include: certain changes in jobs, operations or the working environment; staff questionnaires; guidelines for the selection of employees for recruitment, transfer, regrading and dismissal; and aspects of vocational training.

In companies with more than 20 employees, the employer must ask the works council for its consent to any recruitment, grading, regrading or transfer. It may refuse to give its consent if:

  • the measure in question would breach the provisions of legislation, a collective bargaining agreement or a works agreement;
  • the measure would breach agreed selection criteria;
  • the measure would cause an employee concerned disadvantage that is not warranted by operational or personal reasons;
  • there is well-founded concern that the measure is likely to result in the dismissal or other disadvantage to other employees, not warranted by operational or personal reasons - failure to consider an equally suitable fixed-term employee in recruitment for a permanent post would constitute in such a disadvantage;
  • a vacancy has not been advertised internally; or
  • there is well-founded concern that a job applicant or employee concerned would cause trouble in the establishment through unlawful conduct, in particular through racist or xenophobic behaviour.

If the works council refuses its consent, the employer must apply to the labour court for a decision on the issue.

In companies with more than 20 employees, if the employer plans changes - such as cutbacks, closures, business transfers, mergers, divestments, important organisational changes and the introduction of new work methods and production processes - that may entail substantial prejudice to a large part of the workforce, it must negotiate with the works council a "reconciliation of interests" (Interessenausgleich) on the issue. If a certain percentage of the workforce is to be made redundant, the employer must negotiate with the works council over a social plan to mitigate the disadvantages for the employees (see Germany: Termination of employment > Redundancy rights). If the parties cannot agree, the conciliation committee decides on the content of the social plan.

Conciliation committee

A conciliation committee (Einigungsstelle) has to be set up, at the employer's expense, to resolve differences of opinion between the employer and works council. It is made up of equal numbers of members appointed by the employer and works council, plus an independent chair accepted by the two sides (if no agreement can be reached, the chair is appointed by the labour court). Where the parties fail to agree on various specified issues (see Works council's rights), the matter must be referred to the conciliation committee, whose decision takes the place of a works agreement.

Works council information for employees

Every three months, the works council must hold a works meeting (Betriebsversammlung) for all employees and report on its work. If necessary, or at the demand of the employer or a quarter of the workforce, the works council can hold a departmental meeting (Abteilungsversammlung) for employees of a particular organisational unit.

The employer has the right to attend and speak at works meetings. Once a year, the employer must report to the meeting on developments relating to personnel and welfare, including equal treatment between men and women, the integration of foreign workers, the economic situation and development of the establishment, and environmental protection measures. This report need not compromise any business secrets.

Company and group works councils

When a company consists of two or more business units (Betriebe) with works councils, it must establish a company works council (Gesamtbetriebsrat). Each works council that consists of up to three members must assign one of its members to the company works council. Works councils that consist of more than three members must assign two of their members to the company works council. The genders should be adequately represented. The company works council is responsible for matters that affect the whole company or several business units and cannot be dealt with by the works council of a single business unit. The company works council also represents employees in business units without a works council. A company works council has no authority over the works council.

In groups of companies, the company works councils may on a voluntary basis elect a group works council (Konzernbetriebsrat). The group works council is responsible for matters concerning the group or more than one company. It also represents employees in companies or business units without works councils.

Youth and trainee representative body

If a company employs at least five employees under the age of 18 or trainees, a youth and trainee representative body (Jugend- und Auszubildenenvertretung) must be set up to represent their interests to the works council. The representatives elected to this body are entitled to be employed as employees after completion of their training.

Representation of people with disabilities

In establishments with at least five permanent employees with severe disabilities (see Germany: Recruitment and selection > Employment of people with severe disabilities), these employees may elect a representative (Schwerbehindertenvertretung) and at least one deputy. Their role is to promote the integration of employees with severe disabilities in the workplace, represent their interests and provide them with advice and assistance. The representatives must be informed when disabled people apply for a job. If personal, conduct-related or operational difficulties arise that could jeopardise the employment relationship of a disabled employee, the employer has to inform the representative and the public Integration Authority to discuss with them all available assistance (such as financial aid and counselling) that could eliminate the problems. The dismissal of severely disabled employees is valid only following participation of the representative and consent of the public Integration Authority (Integrationsamt).

European Works Councils

Community-wide active companies or groups of companies are those with at least 1,000 employees within the European Union (EU) or European Economic Area (EEA) member states and at least 150 employees in each of at least two member states (temporary agency workers are included). Such companies and groups headquartered in Germany must, at the written request of at least 100 employees or their representatives from at least two member states, establish a special negotiating body (SNB) to negotiate with central management over the establishment of a European Works Council (EWC) or an information and consultation procedure (management can also initiate such negotiations itself). The role of the EWC or procedure is to inform and consult employees on transnational issues.

The composition, functioning and rights of the SNB in multinationals with their headquarters in Germany are laid down by national legislation. The SNB negotiations may lead to an agreement on the establishment of an EWC or an information and consultation procedure. The contents of such agreements must meet certain requirements. Alternatively, the SNB may decide (by a two-thirds majority) not to open negotiations with management or to end negotiations already under way. A statutory EWC must be established if: management refuses to open negotiations within six months of being requested to do so; or an agreement is not reached within three years of a request to open negotiations. The composition, functioning and rights of the statutory EWC are laid down by legislation.

Members of SNBs and statutory EWCs representing German employees - in community-wide active companies or groups of companies headquartered in Germany or elsewhere - are appointed by the highest-level works council structure in the entity concerned (group works councils, company works councils or business unit works councils). Women and men should be represented in proportion to the numbers in the workforce.

The above obligations do not apply to community-wide active companies or groups of companies that, on 22 September 1996, had in place an agreement covering the entire workforce and providing for the transnational information and consultation of employees. This exemption lasts as long as such agreements are in force.

The German statutory provisions concerning matters such as the composition, functioning and rights of SNBs and statutory EWCs, the contents of EWC agreements, the definition and scope of EWCs' information and consultation role, and the rights of SNB/EWC members were amended from 6 June 2011 (in line with the "recast" EU Directive 2009/38/EC on EWCs). For example, EWC and SNB members must now be provided by the employer with necessary training without loss of pay. However, the previous provisions continue to apply to EWCs based on agreements signed before 6 June 2011, and there is no general obligation to renegotiate such agreements in line with the new rules. Where these existing agreements expire, the parties to them may decide jointly to renew or revise them under the rules that applied when they were signed. Where this is not the case, the new provisions apply.

Where the structure of a multinational company changes significantly, and the existing EWC agreement does not contain provisions on dealing with the effects of such change on the EWC, or there is a conflict between the relevant provisions of two or more EWC agreements (for example, in the case of a company merger), negotiations must be held over a new agreement, either on management's initiative or at the written request of at least 100 employees or their representatives in at least two companies or business units in at least two member states. These negotiations require the creation of a new SNB, made up of employee representatives selected in line with the relevant national rules, plus at least three members of the existing EWC or of each of the existing EWCs.

Board-level representation

In most types of companies (such as joint-stock and limited-liability companies) with more than 500 employees, the employees are represented alongside shareholders' representatives on the supervisory board (which, under Germany's two-tier board system, oversees the management board that is responsible for running the company day to day). In companies with 501 to 2,000 employees, one-third of the supervisory board is elected by the workforce from candidates nominated by the works council or employees. In companies with more than 2,000 employees, half of the supervisory board is elected by the workforce, with trade union nominees guaranteed a certain number of seats alongside company employees. In companies with this latter "parity" board representation, the supervisory board's chair is always a shareholders' representative and has a casting vote in the event of a tie.

For companies in the coal, iron or steel industries with more than 1,000 employees, a special, stronger form of board-level representation applies. Notably, half of the supervisory board is made up of employee/trade union representatives, and the board's chair is not a shareholders' representative but an independent person acceptable to the two sides. The employee representatives may also appoint a "labour director" who is part of the management board.

From 1 April 2017, a temporary agency worker must be counted as an employee for the purposes of calculating employees' rights to board-level representation if he or she has been employed by the relevant company for at least six months.

Sources/references

Works councils and youth and trainee representative bodies are governed by the Works Constitution Act (Betriebsverfassungsgesetz); executive committees by the Act of the executive committee (Sprecherausschussgesetz); agency workers' rights by the Temporary Agency Employment Act (Arbeitnehmerüberlassungsgesetz); EWCs by the Act on European Works Councils (Gesetz über Europäische Betriebsräte) and the Second Act on European Works Councils (Zweites Gesetz zur Änderung des Europäische Betriebsräte-Gesetzes); board-level representation principally by the Co-determination Act (Mitbestimmungsgesetz), the One-Third Representation Act (Drittelbeteiligungsgesetz) and (for the mining, iron and steel industries) the Montan-Co-determination Act (Montan-Mitbestimmungsgesetz); and the representation of disabled employees by ss.93-100 of book IX of the Social Security Code (Sozialgesetzbuch).