In May 2001, employees at the Berlin office of the German multimedia agency, Pixelpark, elected a works council. As works councils are not widespread in the information and communication technology sector and it is generally difficult for trade unions to gain influence in this industry, this event attracted attention. In the run-up to the election, Pixelpark management announced that offices will be closed and employees made redundant in the course of company restructuring. The newly elected works council is now trying to counter this plan by developing alternative proposals.
On 11 May 2001, a first works council was elected at the Berlin office of Germany's flagship multimedia design agency Pixelpark AG, which is a subsidiary of the German-based media corporation Bertelsmann. The new works council, consisting of nine members, has been elected for a five-year period. As the management at Pixelpark is planning a reduction of the workforce (see below), the works council will be giving priority to protecting employees from dismissal. Furthermore, the works council is focusing its work on: the regulation of working time, overtime and income structures; the establishment of a staff canteen; and examining the company's time-monitoring system.
Background
In February 2001, connexx.av- a special trade union project for the multimedia sector founded in 1999 by the Media Union (IG Medien) and the German White-Collar Workers' Union (Deutsche Angestelltengewerkschaft, DAG) and now run by the newly founded Unified Service Sector Union (Vereinte Dinestleistungsgewerkschaft, ver.di) (DE0104220F) - sent about 1,500 e-mails to employees at Pixelpark, proposing the establishment of a works council. According to connexx.av, the e-mail initiative led to broad and controversial debates among the Pixelpark employees. Of about 500 employees reacting to the e-mail, a third supported the idea of a works council, another third asked for more information and a further third expressed their rejection of the trade union initiative. Although Pixelpark management initially refused the establishment of a "formal" works council, in March 2001 ver.di finally succeeded in setting-up a works council election committee (DE9702101F) to prepare for elections at the firm's Berlin site, which took place on 11 May 2001 with a high turn-out of 68%.
Job losses at Pixelpark
The day before the works council elections took place, the head of the board of Pixelpark, Paulus Neef, announced that 200 employees – equivalent to a fifth of the workforce - nationwide would be made redundant. While 60 employees were to be made redundant at the company's Berlin headquarters, branch offices in Stuttgart and Frankfurt would close by 30 June 2001 and the office in Dortmund outsourced through a management-buy-out. In addition, Pixelpark announced its intention to concentrate its business in western Europe and therefore not only to close its office in the USA by 30 September 2001 but also to outsource its office in eastern Europe through a management buy-out. The total number of employees in Pixelpark's international business would thus be reduced by 90 by the end of September 2001.
The head of the new Pixelpark works council in Berlin, Katja Karger, stated that the establishment of the works council had happened at the right moment, because four weeks later it would have been too late to intervene in the workforce reduction process at all. Although the works council, which must be consulted regarding each dismissal, might not have been able to prevent the job losses in total, it has been able to develop alternatives for the employees concerned - ie part-time work or retraining. As the new works council represents only the employees in Berlin, it is not able to interfere in the developments at other offices, where the setting up of works councils has just begun. The day before Pixelpark announced that it would close the branch office in Stuttgart, the employees there started to prepare elections for a works council. As prior notification of six weeks is necessary before elections can take place, it was too late to influence the decision of the management, which nevertheless promised to apply the same standard to the redundancies in Stuttgart as in Berlin.
Works councils in ICT companies
There are no accurate figures available which give a realistic picture of the spread of works councils in German information and communication technology (ICT) companies. The situation may be different in the various ICT subsectors. It can be assumed that in ICT manufacturing companies, as well as in ICT companies growing from traditional industrial companies, works councils are very likely to exist. Larger ICT companies with more than 1,000 employees will also usually have a works council. Given this situation, the debate on works councils in the "new economy" is very much focused on newly-established small and medium-sized companies in ICT services, where it is estimated that the number of companies with a works council is rather low. A study by Deutsche Börse AG found out that only eight of the 50 companies which belong to the so-called "Nemax 50 index" – the stock index for the 50 "new market" companies with the highest stock quotation – had a works council. Some of these companies, however, had established an alternative form of employee representation which was not based on the provisions of the Works Constitution Act. The study also gives an explanation for the low spread of works councils: it indicates that in 88% of these 50 companies, employees hold shares in the company, which leads to a situation whereby the division between employee and employer becomes indistinct.
According to a recent survey on works councils in software and information technology (IT) services companies carried out by the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans-Böckler Foundation, the picture is far from clear. On the basis of an examination of 186 works councils, the WSI survey comes to the conclusion that around one quarter of these works councils were founded in the past five years and more than half of them were established in the last decade - see the table below. These figures contradict the widespread opinion that the establishment of a works council is very unlikely in new ICT services companies. The WSI survey further indicates that there is often a time-lag of a few years between the foundation of the company and the establishment of a works council.
Date of establishment of companies and works councils in software and IT services*
| Before 1970 | 28.0% | 14.0% |
| 1971-90 | 41.9% | 33.9% |
| 1991-5 | 16.1% | 26.9% |
| 1996-2000 | 14.0% | 25.3% |
| Total | 100% | 100% |
* n = 186.
Source: WSI Works Council Survey in software and IT services 2001.
In recent times, the increasing financial problems of many ICT service companies have contributed to significant changes in the debate on industrial relations in the ICT sector. With falling share prices leading to a significant reduction of income for many employees, and several ICT companies announcing that even well-qualified ICT experts would be made redundant, the "old institutions" such as works councils or collective agreements seem to have regained much of their attractiveness. According to an internet-based survey carried out by the weekly newspaper Computerwoche in March 2000, nearly three-quarters of those surveyed said that IT companies need to have a works council. In the past few months, employees have set up works councils in many prominent ICT services companies - besides Pixelpark, these include AOL Deutschland, Amazon Deutschland and EM.TV.
Commentary
The dynamic growth of new ICT service companies in recent years had lead to a broad public debate on the emergence of a so-called "new economy". Regarding industrial relations, there has been a widespread view that the traditional industrial relations institutions of the "old economy" such as works councils or trade unions do not fit the needs of work in the new economy. Against the background of apparently unlimited rises in share prices and a significant labour shortage among ICT experts (DE0003252F), it seemed that many employees, in particular in new start-up companies, simply would not need a works council or other formal employee representation. The company culture of these new companies presented the image of a non-hierarchical organisation with strong employee involvement and self-determination. This image is showing some scratches since several ICT companies have started restructuring processes, and in this context reduction of income and redundancies have become very likely. In such cases, the hierarchical structure and differences between management and employees again become obvious and even autonomous and strongly-placed employees might also need the support of an institutionalised representation body, as the example of Pixelpark proves. (Alexandra Scheele and Thorsten Schulten, Institute for Economic and Social Research, WSI)