The limits imposed by the legislators on the regulatory powers of the parties to collective bargaining essentially restrict the scope of a collective agreement to the legal relationship between the parties to the agreement (called the obligational part (schuldrechtlicher Teil)) and the rights and obligations of employers and employees arising from the individual employment relationship and also any joint institutions set up by the parties to the agreement (called the normative part (normativer Teil)). Case-law further restricts these regulatory powers, as regards the rights and obligations arising from the individual employment relationship, to “the typical, essential or regularly occurring content of an employment relationship”, but this has met with strong criticism from some legal scholars. It is notable that collectively agreed changes to works constitution law, particularly any extension of the workforce's co-determination rights, are also not covered (at least according to prevailing legal opinion) by the statutory provisions on these regulatory powers.

According to more recent case-law, the parties to collective agreements are also obliged to observe a number of external restrictions. In particular, they are bound by mandatory statute law and fundamental rights. Regulation by collective agreement is not, however, subject to judicial control as to its content (Inhaltskontrolle); the courts are not required to test either the fitness or the expediency of collectively agreed provisions. The obligation to observe fundamental rights has for some time played a not inconsiderable role in regard to occupational pension schemes that are regulated by a collective agreement, as a bar to their being made less favourable under a later agreement. The constitutional principle of equality before the law and the fundamental right of ownership are of central importance here. According to case-law, however, this binding effect is only an indirect one. Fundamental rights consequently take effect mainly via the morality proviso of private law. This means that provisions in a collective agreement which violate fundamental rights are also contra bonos mores and hence null and void. See also third-party effect of constitutional rights.))

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.