New proposals for a reform of collective bargaining in metalworking

In November 1997, the collective bargaining parties in the German metalworking industry presented new documents on the future of branch-level collective agreements. While both parties agree in principle to the necessity of modernising the bargaining system, their proposed concepts are rather different. The Gesamtmetall employers' association emphasises a further decentralisation of collective bargaining, but IG Metall trade union wants to widen the scope of both branch-level and (additional) company bargaining.

Collective bargaining in metalworking

Since the beginning of the 1990s, the German system of branch-level collective agreements (branchenbezogene Flächentarifverträge) has been in an continuing process of change in the direction of a differentiation between companies of collectively agreed norms and standards, and a decentralisation of bargaining competence to the company level. Two basic paths to decentralisation can be distinguished:

  • following the path of "regulated decentralisation", the collective bargaining parties have jointly agreed the introduction of "opening clauses" in branch-level collective agreements, which give the companies the opportunity for a flexible adoption of collectively agreed provisions including the possibility, to a certain extent, to differ from collectively agreed standards (DE9709229F). On this path, branch-level collective bargaining remains the dominant form of bargaining;
  • by contrast, on the second path of "wild decentralisation", companies directly undermine branch-level collective agreements either through opting out of the employers' associations, or through creating provisions at company level which breach the valid collective agreements.

In recent years collective bargaining in the German metalworking industry has seen both forms of decentralisation. On the one hand, the collective bargaining parties at branch level - the IG Metall metalworkers' union and the Gesamtmetall employers' association - have concluded various provisions allowing differentiation at company-level including, for example, "hardship clauses" or provisions for flexible distribution of working time. On the other hand, many companies in the sector (and in particular in eastern Germany) have concluded so-called "company pacts for jobs", which often place employees under pressure to accept conditions of employment below the collectively agreed standards in order to safeguard their jobs. The latter tendency was reinforced against the background of a sharp decline in employment: between 1991 and 1996 the number of employees in the German metalworking industry was reduced by about 1.5 million to 3.5 million.

Despite the clear tendencies towards decentralisation, branch-level agreements still remain the most dominant form of agreement in metalworking. According to IG Metall, there currently exist 381 branch-level collective agreements in the metalworking industry (including iron and steel), which cover about 66% of all metalworkers in western Germany and 57% in eastern Germany. There are also 1,102 company agreements in 674 companies which cover another 10% to 15% of employees. All in all, the collective bargaining coverage in the metal industry is still about 80%. However, there is also a growing number of undetected cases in which companies are formally covered by a collective agreement but do not actually offer all the collectively agreed provisions.

Both collective bargaining parties in metalworking agree, in principle, on the necessity for a modernisation of bargaining. Therefore, in November 1997 both sides presented new documents in which they analysed the ongoing pressures on the existing bargaining system and presented their concepts for further reforms of collective agreements. At the same time, IG Metall and Gesamtmetall announced that joint talks on further reforms would start before Christmas 1997.

The viewpoint of the employers

In recent years, the Gesamtmetall employer's association has been confronted with growing criticism from its member companies, which accuse it of concluding collective agreements whose standards are too high and which are too inflexible in terms of allowing company-specific provisions. Hence, Gesamtmetall has taken the view that, given structural changes in the economy and increased international competition, existing collective agreements need some fundamental reforms in terms of scope, content and bargaining procedures. On the other hand, Gesamtmetall has also made clear that it wants to continue with the basic principles of branch-level collective bargaining - mainly because of its peace-keeping function. During the validity of a collective agreement, trade unions and employers are placed under a peace obligation (Friedenspflicht) which forbids any industrial action and thereby guarantees a relatively stable production process with no interference. This stability is also supported by the fact that only trade unions, and not works councils, have the right to call for a strike. Therefore, a change from branch-level to company bargaining might also bring industrial action back to the company level.

As early as June 1996, Gesamtmetall presented a first comprehensive document called the Project to reform branch-level collective agreements (Reformprojekt Flächentarif), in which it proposed to reduce the scope and content of branch-level collective agreements to determining seven core elements:

  1. percentage increases in wages, salaries and vocational training pay;
  2. the level of the basic pay rate (Ecklohn);
  3. the number of working hours which correspond with the basic pay rate (by contrast, actual working time should be determined at company level)
  4. the number of holidays per year;
  5. the provisions, forms and level of special bonuses;
  6. the norms for adopting legal provisions such as periods of notice or leaves of absence; and
  7. new forms of binding conflict regulation and arbitration

All other issues negotiated at branch-level should take the form of framework agreements in which a general opening clause allows the management and the works council to conclude company-specific provisions, which might differ from what has been agreed at branch-level. Gesamtmetall's reform project foresees a future split of branch-level bargaining into one part which has still a binding character for the companies and a second part which includes only non-binding advice. To sum up, the employers' association's proposals would lead to a major transformation of branch-level collective bargaining, following the path of "regulated decentralisation".

More recently, on 17 November 1997, Gesamtmetall came forward with a new document called the Frankfurt Declaration to reform branch-level collective agreements (Frankfurter Erklärung zur Reform des Flächentarifs) which includes new proposals on four main topics.

  1. The introduction of a general company clause (Betriebsklausel) which would allow companies with particular economic problems to diverge from collectively agreed standards for a limited period of time in exchange for safeguarding jobs. According to Gesamtmetall this could mean, for example, a limited extension of working time without wage compensation. The use of the "company clause" should be determined by the management and the employees, if necessary with binding support of the collective bargaining parties. In the event of disagreement among the bargaining parties a new instrument for rapid arbitration should be created.
  2. Further flexibilisation of working time through the introduction of a working time corridor of between 30 and 40 hours per week. Actual working time should be determined at company level between management, works council and the individual employees.
  3. The introduction of performance-related pay by linking the payments of special bonuses - such as holiday bonuses (Urlaubsgeld), Christmas bonuses (Weihnachtsgeld) or capital-forming payments (vermögenswirksame Leistungen) - to the economic performance of the individual company.
  4. The introduction of new forms of conflict resolution. In the view of Gesamtmetall, strikes are out of date and out of place in an internationally linked economy. Therefore, strikes should be avoided through the use of new forms of "peaceful" conflict resolution, as have already been agreed in other European countries

Finally, Gesamtmetall emphasises the need to continue with the very moderate wage policy of the recent years, and sharply reject the unions demand for an "end of modesty" in this area (DE9711236F). According to Gesamtmetall, only moderate wage increases below the increase of productivity could help to improve the employment situation and furthermore stabilise the collective bargaining system.

The trade union viewpoint

On 20-22 November 1997, IG Metall held a conference with more than 500 participants (mainly workplace union representatives and local trade union officers) to discuss the union's positions on the future of branch-level collective bargaining. In the run-up to the conference, the board of IG Metall presented 12 theses on collective bargaining autonomy and branch-level collective agreements (12 Thesen zur Tarifautonomie und Flächentarifvertrag), giving the union's interpretation of the current pressures on the bargaining system and elaborating its proposals for further reforms and modernisation.

As a starting point for its analysis, IG Metall sees branch-level bargaining as being under political attack by an increasing number of "neoliberal" politicians and employers. According to IG Metall, these forces are trying to destroy the branch-level bargaining system with the clear perspective of weakening the political position of trade unions. IG Metall's analysis points to clear tendencies towards an erosion of the binding character of branch-level collective agreements at company level, where employees are, it is claimed, often forced or even blackmailed with the threat of redundancies to accept conditions of employment which are below the collectively agreed standards. During the IG Metall conference, this point was confirmed by many local union representatives, who reported on their local experiences of defending existing collective agreements. Taking into account these experiences, many local trade unionists expressed their strong scepticism over further decentralisation of collective bargaining, because this might mean a change for the worse in terms of working conditions as well as bargaining power at company level. Consequently, as a first step, IG Metall called for the political defence of branch-level collective agreements - in particular by a strengthening of trade union counter-power at company level.

However, IG Metall did not limit itself to the "defence" position but also presented its own concepts for a reform of branch-level collective agreements. The union distinguishes between reforms of the content of collective agreements and reforms of the structure of bargaining procedures and levels.

Regarding reform of the content of collective agreements, in IG Metall's analysis, many provisions in existing collective agreements are still based on the principle of "Tayloristic" work organisation. The most prominent example of this is the existence of different pay agreements for white- and blue-collar workers. In 1991, IG Metall presented a comprehensive concept called Reforming collective agreements 2000 (Tarifreform 2000), in which the union developed several proposals for new provisions in collective agreements to make them correspond with modern forms of work organisation - for example, new provisions on group or teamworking or new grading systems. Since then there have been various talks between IG Metall and Gesamtmetall on these issues but, so far, without substantial results. Nevertheless, IG Metall insists that there is a growing need to reform these more qualitative aspects of existing agreements.

Regarding the reform of the structure of bargaining procedures and levels, IG Metall is still in the throes of an internal discussion process. Although, in principle, it is the position of IG Metall to keep branch-level collective bargaining as the binding norm for all major bargaining topics, the union also recognises, to a certain extent, a need for more company-level regulation. The latter is widely accepted with regard to qualitative aspects of collective agreements, but more disputed when it comes to quantitative aspects such as the level of wages or the duration of working time. In its recent document on branch-level collective agreements, IG Metall presented two possible paths for greater involvement of the company level in collective bargaining:

  1. the introduction ofequal"modules"in branch-level collective agreements (Tarifbausteine). The bargaining parties at branch-level could agree a certain number of different "modules", with each of them providing a mixture of certain provisions (for example payments and working time). Afterwards it could be decided at company level which module fits in best with the specific needs of the company and its employees; and
  2. the conclusion of additional company agreements (betriebliche Zusatztarifverträge): In addition to existing branch-level agreements, the management and a newly established "company-related collective bargaining commission" could either conclude additional company agreements on issues which have not been regulated at branch-level or put certain provisions of the branch-level agreement into a concrete form.

IG Metall has not yet decided which of the two alternative paths of structural reform it prefers. In any case, in the union's view the level of regulation through collective agreements should increase rather than decrease. Following this line, IG Metall has sharply rejected the recent proposals made by Gesamtmetall in its "Frankfurt declaration". In particular, IG Metall refuses the introduction of a general opening or company clause which might open the door to an even more accelerated erosion of branch-level collective bargaining. "Hardship clauses", as have been agreed in the east German metalworking industry (DE9703205F), are seen not as a progressive element to reform collective agreements but as an instrument for companies which are in danger of bankruptcy.

IG Metall also rejected the introduction of a working time corridor of between 30 and 40 hours per week, because the employers might use it for an extension of working time and thereby undermine the current 35-hour week. IG Metall is also quite sceptical about the employers' proposal to relate the yearly special bonuses to the economic performance of the company. According to the union, performance-related pay also requires new systems of controlling the company's results. Finally, IG Metall sharply rejects all forms of limiting the union's ability to take industrial action. The right to strike is seen as a basic democratic right which the union considers to be inviolable.

Commentary

The German system of branch-level collective bargaining has entered a period of change. In recent years it has already become more differentiated and decentralised, but the debates on further reforms are still intensifying among the bargaining parties. Therefore, the developments in metalworking are of particular interest, because collective bargaining in that industry still represents the notion of a "German model".

The recent discussions involving Gesamtmetall and IG Metall paint a rather ambiguous picture. On the one hand, both parties declare their wish to continue with the basic principles of branch-level collective bargaining, as well as their readiness to reform the system. This reflects the fact that branch-level collective bargaining is in their own organisational interest. On the other hand, at the moment the proposals of IG Metall and Gesamtmetall seem to be incompatible. While IG Metall basically wants to increase the level of regulation by collective agreements, Gesamtmetall wants to decrease it by shifting bargaining competence to the company level. This reflects the change of power relations between capital and labour at the company level where, under the conditions of mass unemployment and growing international mobility, employers increasingly have the opportunity to push their workforce towards company-specific employment systems. To sum up, it seems that in the battle on future branch-level collective bargaining, IG Metall and Gesamtmetall are partners and opponents at the same time. (Thorsten Schulten, Institute for Economics and Social Science (WSI))

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