Corporate Co-determination in Germany

Co-determination at corporate level is a comparatively powerful instrument in the possession of the elected employee representatives because the employer and the employee representatives have the right to decide at equal level within the statutory limits (so-called principle of positive consensus).

A decision taken by the employer without the compulsory participation of employee representatives, for example, may be legally ineffective and, hence, incapable of effectively shaping the legal relationship with the employees (so-called theory of conditional effectiveness, according to which the effectiveness of any measures taken by the employer is conditional upon the implementation of co-determination rights).

In an extreme case, the employee representatives could in fact paralyze a business unit in Germany, e.g. by objecting to the work schedule prepared by the employer.

In Germany, Co-determination at establishment level (betriebliche Mitbestimmung) differs from co-determination at company level (unternehmerische Mitbestimmung). The latter concerns the employees' participation in the planning, organization, and management of the company, while co-determination at establishment level mainly concerns decision-making powers in social matters at the establishment level.

Co-determination at company level is, hence, a form of co-determination on strategic decisions. It is implemented by appointing employee representatives to the supervisory board. Whether at establishment or at company level, co-determination relates to the interests of employees. However, especially the latter has a major influence on the daily work at the company.

Co-determination is relevant both in private companies and in public sector establishments. In the public sector, co-determination at establishment level is governed by the Federal Staff Representation Act (Bundespersonalvertretungsgesetz; "BPersVG") or the state staff representation acts of the individual federal states. Staff representative bodies represent the interests of public sector employees and civil servants.

In the private sector, co-determination at establishment level is governed by the Works Constitution Act (Betriebsverfassungsgesetz; "BetrVG"). This act provides for the representation of employee interests by election of a works council in establishments having 5 or more employees.

If a German company comprises more than one establishment, a company works council may be formed; and within a group structure, the existing company works councils may establish a group works council to represent the employees' interests throughout the group. 

Elections of works councils or employee representatives are subject to detailed statutory regulations and may be challenging especially for companies and public sector establishments that are faced with an election of a staff representative body for the first time. As both, organizing and holding elections, are complex matters, companies that wish to avoid mistakes should definitely seek expert assistance by a German attorney.

Mistakes affecting the election may render the election voidable and/or void. An already constituted staff representative body may be dissolved after a lengthy and costly court procedure and must be newly elected thereafter. Both, the procedure itself and the new elections, involve substantial costs that can be avoided by obtaining legal advice from the beginning of the election procedure. We will be pleased to advise you on any aspects concerning the election of a staff representative body within your company or public sector establishment.

Besides, the next regular works council election in Germany will be in 2018 and should thus be prepared in good time.

The range of objects that are subject to co-determination at establishment level in the private and public sectors is broad:

• Rights to information to ensure compliance with health and safety regulations for the benefit of the staff;
• Discussion of complaints from employees against the employer;
• Issues relating to operating regulations, e. g. relating to workwear, external appearance, smoking at the workplace, etc.;
• Scheduling of working hours, e.g. when preparing the weekly work schedule;
• Introducing and/or using technical equipment suitable for monitoring employees, like installing video surveillance systems or introducing an electronic time-recording system or a document management system;
• Wage-setting at establishment level, e.g. when reducing extra payments so far made in excess of the general pay scale;
• Changes affecting workplaces or working processes;
• Consultation on human resources planning measures;
• Co-determination right in recruitments, classifications, reclassifications or relocations;
• Participation rights in dismissals both with and without notice;
• Notification of staff changes when executive staff is concerned;
• Providing information to the economic committee, e.g. about the company's economic situation, rationalization projects, mergers or demergers of companies, reductions or closure of establishments or operational units, etc.;
• Notification and consultation in case of planned operational changes, like closures of establishments or operational units; negotiation on compensation for economic disadvantages faced by employees, e.g. by conclusion of a compensation agreement and a social plan.

Given the large number of topics requiring an involvement of staff representative bodies, employers should always seek legal advice to ensure they keep an overview and safeguard their rights at all times. Our employment law attorneys offer competent support in realizing your projects.  

Employers in Germany should exploit the opportunities for co-determination at establishment level and cooperate in a trustful manner with their respective staff representative body. A trusting cooperation with the respective staff representative body usually has a positive effect on the workplace atmosphere, motivates employees, and may produce valuable synergies.

A difficult relationship with the staff representative body, on the contrary, may entail organizational and costly problems in operation processes and is a source of discontent.

To ensure that you, as an employer, succeed in walking the fine line between the preservation of your rights and interests and a trustful cooperation with the staff representative body, our employment law attorneys support you in a competent and reliable manner through advice and in negotiations with your staff representative body and assist you in preparing and concluding collective bargaining arrangements, such as company agreements or establishment agreements.

If a legal conflict cannot be avoided in an individual case, we will – of course – assist you in safeguarding your interests at the arbitration committee or before the labor courts.