Germany: New law promotes collective bargaining

A new law has been introduced in Germany to encourage collective bargaining.

The Act on the Promotion of Collective Bargaining Autonomy came into force in August 2014, introduced by Social Democratic Labour Minister Andrea Nahles. The act actively promotes collective bargaining and the role of the state in wage setting. It includes:

  • introduction of a statutory minimum wage and establishment of a minimum wage commission;
  • regulations on the implementation and the inspection of the minimum wage – the Customs Service continues to be in charge of the inspection of the minimum wage, and the number of customs service staff has been increased;
  • mechanisms for simplifying the extension of sectoral minimum wage agreements.

Over the past decade, the number of extensions of collective agreements dropped from more than 100 to fewer than 20 agreements per year. In 2012, the number was very low compared with other EU Member States. The aim of the new act is to help bring those figures back up again.

Previously, a collective agreement could only be declared generally binding if it covered more than 50% of the employees in a sector. Now, the prerequisite for an extension is that it is ‘of public interest’. This will be the case if the agreement is vital for the protection of working conditions in a sector or for battling economic ‘maldevelopment’ – for instance to prevent wage dumping.

Additionally, sectoral collective minimum wage agreements can be extended via the Posted Workers Act. Under new rules, this mechanism can now be applied to any industry (rather than just sectors defined by the Posted Workers Act) if the extension is seen as serving the public interest.

The Temporary Employment Act has also been amended so that a minimum wage can be set if it serves ‘the public interest’. 

The new rules mean a simplification of dispute resolution mechanisms and a stronger role of regional labour courts.

Now, legal action against a government’s decision to declare an agreement generally binding must be taken to the labour courts and not to the administrative courts.

Furthermore, any dispute regarding the representativeness of a collective bargaining partner can no longer be decided by local labour courts. To speed up decision taking, disputes have to be taken initially to a regional labour court and in a second step to the Federal Labour Court.

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