Works Constitution Act reform adopted

In June 2001, the lower house of the German Bundestag approved a reform of the Works Constitution Act. Almost 30 years after the last major overhaul of the law on works councils, the government now aims to adjust numerous provisions to the changed business environment and in particular seeks to give works councils a say in areas such as training, employment security, protection of the environment and fighting xenophobia and racism at the workplace. Besides several provisions which seek to streamline the procedure for the election of works councils and increase their size, the new Act will also improve the representation of women. While trade unions mainly welcomed the new law, employers' associations highlighted major concerns.

On 22 June 2001, the lower house of the German parliament (Bundestag) passed legislation to reform the Works Constitution Act (Bertriebsverfassungsgesetz, BetrVG) by a majority of 336 votes to 208. The reform of the law, which determines the legal framework for co-determination at the level of the establishment in the private sector through works council s, was strongly disputed. In particular, trade unions and employers' associations expressed conflicting views on the original bill (DE0102242F). While the employers did not see any need for extending the co-determination rights of works councils, unions by and large supported the draft legislation issued by the Minister of Labour,Walter Riester, but also argued that there was still room for improvement.

While the coalition government of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen) largely supported Mr Riester's draft bill, the legislative process led to several adjustments and changes compared with the original proposal. In several cases, such changes were those proposed by the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB). Below, we summarise the most important changes introduced by the new law, focusing particularly on those provisions that were changed in the course of the legislative process.

Election procedure and works council organisation

The new BetrVG will provide social partners with the opportunity to bring the structure of employees' interest representation into line with modern forms of company organisation. Based on a collective agreement negotiated between trade unions and employers, or on a works agreement, company management and works councils are now empowered to adjust employee representative structures more flexibly and to introduce: works councils for special product or business units (Spartenbetriebsräte); works councils for subsidiaries of an establishment (Filialbetriebsräte); or joint works councils for several establishments (unternehmenseinheitliche Betriebsräte). In the event of company restructuring through mergers, acquisitions and buy-outs, the new section 21a of the BetrVG will now provide works councils with a "transformation mandate" (Übergangsmandat) during the transitional period, for up to six months.

The most heavily disputed elements of the draft bill concerned the revision of the works council election procedure. The unions argued that a revision of the law was necessary because the existing election procedure was too complex and thus provided employers with ample opportunities to slow down or even prevent the election of works councils. According to the unions, these rules often kept in particular employees in small and medium-sized companies from initiating the election of a works council. The employers, in turn, feared that easing the election provisions would merely benefit a minority within the workforce: a minority of employees would gain the right to initiate the election of a works council, even against the will of a "silent majority" who would prefer to do without collective interest representation.

Parliament largely followed the unions' reasoning and introduced a streamlined election procedure which applies to companies with between five and 50 employees. In companies with 51-100 employees, the social partners can voluntarily agree to apply the streamlined procedure as well. At the centre of the new election rule is a two-step procedure. First an electoral board (Wahlvorstand) will be set up and candidates for the works council nominated. Later, after a waiting period of one week, the actual election will take place. While the new rule accommodates employers' concerns that "spontaneous moods" might lead to the creation of a works council, it also protects members of the electoral board from dismissal and thus addresses one of the unions' major concerns. In addition, the new law will also abolish the so-called "group principle", according to which blue- and white collar workers hold separate elections. Starting with the next works council elections in spring 2002, there will be a single joint election for both groups. Upon special request of the Greens, the SPD's coalition partner, there will still be separate lists of candidates when it comes to determining the works council members who are to be released from their regular work duties to perform their works council duties, and the members of special works council committees.

While the number of works councillors will be adjusted as foreseen in Mr Riester's initial proposal (DE0102242F) the coalition government did not follow his lead with regard to defining the number of works councillors to be released from their regular work duties. As shown in the table below, however, there will still be substantial improvements in the operation of works councils.

Source: Ministry of Labour.

While the new law lowers the threshold for a works council to be entitled to a full-time representative from 300 to 200, it also lowers the ratio of employees to released works councillors and thus improves the prospects for more professional interest representation. In addition, the new BetrVG introduces the possibility to release works councillors part time and also improves works councils' operating conditions substantially. As far as the latter point is concerned, most of the provisions of the draft legislation have been adopted (DE0102242F). In addition, the law also gives all temporary agency workers who work more than three months in the same establishment the right to vote in works council elections.

Extending participation rights

As proposed in the initial draft legislation, the new BetrVG will improve works councils' participation rights in a variety of fields and will also introduce new issues for participation. Most prominently, works councils will have the right to:

• be informed about and involved in all relevant aspects of environmental protection in the establishment and have the right to negotiate works agreements on this subject;
• suggest measures to fight racism and xenophobia at the workplace, veto the employment of people with racist attitudes and demand the dismissal of employees involved in racist activities at the workplace;
• insist that employers increase the working hours of part-time employees before hiring new workers;
• participate in setting the rules for group-work projects; and
• suggest measures on skill upgrading and further training which are likely to safeguard employment

Compared with the draft bill, the final point in particular provides a substantial extension of the rights of works councils. The new BetrVG will give works councils the right actively to initiate training measures (section 97) and thus requires employers at least to enter a consultation process with the works councils on this issue (section 92a).

Strengthening the representation of women

The new law seeks to improve the representation of women in works councils by introducing a variety of new measures. In particular, the law seeks to increase the number of female works council members and to improve the overall conditions for the representation of women's interests. In part at the unions' request, the new law exceeds the provisions of the original draft legislation. At the centre of the new rules is a so-called "equality quota" (Gleichstellungsquote), which provides that the gender which is in the minority within the workforce must be represented by at least a corresponding share of works council members. For the majority of establishments, this will establish a minimum quota for female representatives - which may be exceeded. A similar clause also applies for the election of the separate representative body for young workers and trainees (Jugend- und Ausbildungsvertretung).

The Act now also acknowledges the special problems of female works councillors who work part time. In the past, these works councillors often had to fulfil large parts of their representative duties during their leisure time. The law will now improve the situation and give works council members with part-time contracts the right to time off in compensation for representation work done outside regular work hours. Finally, the law briefs works councils to deal with issues of reconciling family and work life and also empowers them to propose plans for the promotion of women in the establishment.

Responses by unions and employers' associations

Immediately after the vote in parliament, several leading trade unions welcomed the new law. Dieter Schulte, the president of DGB, stated that the new law will improve the work of the works council and thus make it more appealing to employees to run for election to the council. In particular, the revamped election procedure for small and medium-sized companies will benefit both employers and workers, because it makes elections less bureaucratic. Emphasising the new provisions in the field of training and work organisation, Mr Schulte stated that it is also to the benefit of employers when employees' skills are up-to-date. There are, however, also some critical voices within the union movement. Although he acknowledges that the new law has brought some important improvements, Michael Sommer, the vice-president of the Unified Service Sector Union (Vereinte Dienstleistungsgewerkschaft, ver.di), regrets that the unions were not able to gain more far-reaching co-determination rights in the field of fixed-term contracts and in addition failed to lift restrictions on works council participation in subsidiaries of churches, political parties and the media (the so-called Tendenzschutz).

For leading employers' representatives, however, the reforms included in the new BetrVG go too far. According to a statement by Dieter Hundt, president of the Confederation of German Employers' Associations (Bundesvereinigung der deutschen Arbeitgeberverbände, BDA), the new Works Constitution Act disadvantages in particular small and medium-sized companies because it introduces more rules and bureaucracy, reduces companies' flexibility and increases the costs resulting from co-determination. Most prominently, employers oppose the new election procedure as well as the extension of the number of works council seats and of those works councillors released from their regular work duties. As Mr Hundt further argued, there is a pressing need to speed up the decision-making process in establishment-level arbitration committees, as well as in the fields of co-determination rights.

Commentary

Although phrases like "milestone in the history of industrial relations" or "landmark compromise" may be over-used, the reform of the Works Constitution Act has the potential to live up to these descriptions. Although the reform fails to give employees a far-reaching set of new participation rights, when compared with the previous reform in 1972, it includes various options which might help to improve the operation of works councils as well as to extend the issues for co-determination. However, it now depends on works councils, trade unions and the employees they represent whether they will actually take advantage of these options. Although the law makes it easier for the organised representation of labour to gain a foothold in the large number of companies which have no works councils, there is no automatic mechanism which would lead to coverage of these "blank spots". It is in particular up to unions to do this work and it will require them to devote substantial effort, time and resources. In this sense, the situation now is fundamentally different from 1972. In 1972, the left-wing government and the unions jointly sought to bring democracy and participation to the shopfloor and thus planned to improve the quality of representation. Today, however, it is a major goal of the new works council reform to keep co-determination from deteriorating. (Martin Behrens, Institute for Economic and Social Research, WSI)