BEERG Newsletter - Germany: Works Council Modernization Act - Reform in the Wrong Place

Gerlind Wisskirchen of CMS-HS writes: The "Betriebsrätemodernisi-erungsgesetz" (Works Council Modernization Act) is intended to make it easier to establish works councils and strengthen their rights. Though the Betriebsrätestärkungsgesetz (Works Council Strengthening Act) was not even discussed in the Cabinet a few weeks ago due to CDU reservations, it is now being helped to a breakthrough by political horse-trading.

Secretary of Labor Hubertus Heil (SPD) announced his success with comments that leave no room for doubt on where he stands. Speaking in Berlin last week, he said:

"We want there to be more works councils in Germany again. Employees should be encouraged to set up such bodies. The law is a clear message to employers who want to prevent works councils from being set up. I say this especially in view of some U.S. corporations that trample co-determination rights underfoot. Anyone who tries to prevent works council elections, harass works councils or obstruct their work has me as a staunch opponent."

The declared goal of the tenacious Labor Minister Heil, in close cooperation with the unions, is to make it easier to establish and elect works councils.

In presenting the draft, the ministry relies on figures from the trade union-affiliated Institute for Employment Research. According to these figures, 9% of establishments with works council capacity in western Germany and 10% of establishments with works council capacity in eastern Germany still have a works council, a decline of 3% and 1% respectively in 23 years. Around 41% of employees in western Germany and 36% in eastern Germany are represented by works councils. A number of new regulations are intended to counter this trend.

Extension of the simplified election procedure: The so-called simplified election procedure is already mandatory in companies with up to 50 employees. It is now to be extended to companies with up to 100 employees. Previously, it could be carried out voluntarily in companies with up to 100 employees by agreement with the employer. In the future, this will be possible in companies with up to 200 employees.

It is doubtful whether the goal of increasing the number of works councils will be achieved. The so-called simplified election procedure is characterized primarily by shortened deadlines and not by any real simplification. It remains a complex procedure. The reason for the relatively low number of works councils is more likely to be found in the fact that in the smaller companies, communication takes place directly between employer and employee without an intermediary works council.

Extension of protection against dismissal in the event of the establishment of works councils: There are also plans to extend the protection against dismissal that already exists for employees who call for a works council election and to introduce special protection against dismissal for so-called precursor initiators of such an election for the first time. The explanatory memorandum to the bill states that, according to a recent survey of full-time trade unionists (2019), obstruction occurred in 1.6% of the companies surveyed and attempts at obstruction occurred in 15.6% of first-time elections. Doubts about the statistical relevance of at least the first figure are stirring.

To date, the first three employees on the invitation to vote are not subject to ordinary dismissal. In the future, this protection against dismissal is to be extended to the first six employees on the list. Further, an unlimited number of pre-initiators of the election are not to be subject to ordinary dismissal for a maximum of three months after submitting a publicly certified declaration that they wish to establish a works council. 

However, the protection against dismissal does not apply to terminations for operational reasons, presumably to counter the practical problem of an unlimited number of employees becoming involved in preparing for the election in the event of an already announced staff reduction. In the case of extraordinary terminations of both groups, the prior consent of the works council or the labor court must be obtained.

Right to home office through the back door? After Labor Minister Heil failed last year with a general right to home office working (working from home) especially with the Chancellor, now comes the watered-down version: the works council has a right of co-determination in the "design of mobile work performed by means of information and communication technology." The criticism of this provision in brief:

• Definitional weaknesses and demarcation problems (example: lawyer with paper file only vs. lawyer with e-file and laptop).
• There are already numerous co-determination rights of the works council in mobile work: which gap is to be filled? The explanatory memorandum to the law itself speaks only of a catch-all provision. This is just political marketing in view of the upcoming federal elections.
• Last but not least: even though the draft law does not tire of emphasizing that the employer decides on the "whether" of mobile working, i.e. the works council has no right of initiative, the new regulation creates pressure and expectations among every workforce. Six months ago, the German government still rejected the right to home office on the grounds that it would be too much of a burden on the economy.

Unfortunately, only insufficient attempts at digitization: According to the draft, it will be possible in future to hold partial meetings by video and telephone conference in exceptional cases. However, face-to-face meetings are to remain the rule. Due to the pandemic however, much more is currently possible because of the temporarily inserted § 129 Works Constitution Act. 

Currently, almost all meetings can be held virtually. A regular possibility of virtual participation, secured in the law, would promote gender equality and help to reduce disadvantages due to disability. In particular, it is difficult for many part-time employee representatives, who are very often women in many industries, to participate in supra-local meetings. A positive aspect is that in future it will be possible to conclude works agreements using a qualified electronic signature.

Financial burden for experts of AI: There are also plans to require works councils to consult an expert on artificial intelligence if the works council has to assess AI as part of its duties. This is to take place permanently and without a necessity test, meaning a heavy financial burden for companies. Such an expert would be required, for example, even for the introduction of the simplest word processing software, especially if a permanent expert is used. In the draft, a daily rate of around €800 is set for the expert under the heading "Compliance costs for business". At the same time, it is assumed they will only be necessary for one day per year. Both assumptions are completely unrealistic and, moreover, are not limited to rights of the works council under Section 87 I Works Constitution Act.

Nor is it apparent why there should be any deviation from the established principle that the works council must give priority to internal expertise.

Lack of hoped-for clarifications in data protection law: The employer is now to become the responsible party under GDPR and the Federal Data Protection Act. The high liability risks associated with high fines must thus be borne by the company. Unfortunately, the bill also fails to clarify the role of the data protection officer in relation to the works council, which has long been a matter of dispute, e.g., what control options he has vis-à-vis the works council. For this purpose, it is also not sufficient to state that the works council must comply with data protection regulations.

Conclusion: The Works Constitution Act is to be amended in many places, but unfortunately not in those areas where there is the most urgent need for reform: e.g. the concept of the establishment, new forms of employee representation (e.g. across companies or in a matrix structure) as well as the completely overpowering importance of the right of co-determination according to § 87 I 1 No. 6 Works Constitution Act for every update/new release of any software. The financial burdens that this will place on companies will ultimately come at the worst possible time. 

You can find the original German version here: Neues Betriebsrätemodernisierungsgesetz – Reform an der falschen Stelle (cmshs-bloggt.de)

From BEERG Newsletter Issue #14 – April 22, 2021