Objection! - Five myths about the Works Council Modernisation Act

The June 2021 enactment of “The law on promoting the election of works council members and the activities of the works council in a digital working world” (i.e. The Works Council Modernisation Act or Betriebsrätemodernisierungsgesetz) appeared to give hope for greater things. But does the law really deliver what the title promises?

Below we hope to dispel five major misconceptions about this law.

Background

As a brief introduction to the German system of works council and the German Works Constitution Act (BetrVG), it should be noted that the rules of co-determination apply to companies above a certain size. At least five employees must be employed in the company in order to establish a works council, which represents the interests of employees vis-à-vis the employer. To this end, the works council enjoys information, proposal, consultation, co-determination and consent refusal rights. In order to preserve entrepreneurial freedom, however, not all operational matters are subject to co-determination by the works council. Instead, these issues are defined in the German Works Constitution Act (BetrVG).

In an April CMS blog post about the Works Council Modernisation Act, we described the strengths and weaknesses of the draft at that time. Since the law's June 2021 passage, the relevance of the topic has already been proven through an increase in the creations of works councils for small and medium-sized (SME) companies and start-ups. Some of these current works council creations have been covered in the media, such as the struggles the delivery service Gorillas went through when its employees attempted to form a works council.

In light of this media spotlight, below we tackle the chief misconceptions about the legislation:

"Democracy not only means parliaments, democracy also means works councils. Therefore, many thanks to the works councils in Germany. We are backing them today."

Federal Employment Minister Hubertus Heil on the introduction of the Works Council Modernisation Act.

The Works Council Modernisation Act makes the procedure to establish works councils easier by simplifying the election process

False.

The law, which came into force on 18 June 2021, does not in itself simplify the election process. Only the provisions relating to a “simplified election procedure”, which is already provided for in the German Works Constitution Act (BetrVG), have been expanded. This is now compulsory, not only for companies with up to 50 employees who are entitled to vote, but also for companies with up to 100 employees who are entitled to vote (section 14a (1) sentence 1 German Works Constitution Act (BetrVG), new version). It is now possible for companies to implement this voluntarily by agreement with the employer in companies with 101 to 200 employees entitled to vote, whereas previously this was only possible in companies with up to 100 employees entitled to vote (section 14a (5), German Works Constitution Act (BetrVG), new version). The simplified election procedure is characterised rather by a shortening of deadlines than by a real simplification. Therefore, it still remains complex. The step towards introducing digital works council elections, which has been called for on many previous occasions, has also failed to materialise.

However, the establishment of works councils is facilitated by other provisions of the law, such as the reduction of the right to vote to 16 years of age (section 7 (1) German Works Constitution Act (BetrVG)) and the reduction of the number of supporting signatures required for election proposals in SME companies. This means that in companies with up to 20 employees who are entitled to vote, no supporting signatures are required. In companies with up to 100 employees, two supporting signatures are sufficient for an election proposal (section 14 (4) German Works Constitution Act (BetrVG), new version).

The law promotes the establishment of works councils by providing greater protection for workers initiating elections

False.

The protection provided for the workers initiating works council elections (i.e. initiators) remains unchanged. Between the issuance of the invitation to attend a works council election until the announcement of the election result, these initiators can only be terminated without notice if there is good cause. The law still does not provide for a period of subsequent effect for the initiators of elections. The Works Council Modernisation Act merely doubles the number of election initiators protected in this way from three to six (section 15 (3a), sentence 1 (2), German Act against Unfair Dismissal (KSchG), new version) in order to ensure the election committee is filled.

In addition, the special protection against dismissal in the context of works council elections has been brought forward in time in a questionably indeterminate manner by the additional extension to an indefinite number of "runner-up [or back-up] initiators" (section 15 (3b) German Act against Unfair Dismissal (KSchG), new version). According to the law, this refers to employees who undertake "preparatory measures" (not defined in any more detail) relating to the establishment of a works council and have made publicly certified declarations that they wish to establish a works council.

The runner-up initiators, who are now also protected, cannot be dismissed until the works council has been established

False.

The protection against dismissal of workers serving as runner-up initiators of works council elections has been prioritised in terms of time before the other circumstances of special protection against dismissal for works council elections and applies without subsequent effect: from the submission of the publicly certified declaration of the intention to establish a works council up until the time that invitations are issued to the works council election, but for a maximum of three months (section 15 (3b) sentence 2 German Act against Unfair Dismissal (KSchG), new version). In addition, runner-up initiators are only protected against dismissals for personal and behavioural reasons, but not against dismissals for operational reasons. This is to prevent employees from initiating a works council election shortly after the announcement of a planned staff reduction, which would be an abuse of rights with the sole intention of obtaining special protection against dismissal. Moreover, termination without notice of runner-up initiators – in contrast to what was provided for in the first draft of the law – is possible without court approval, as are terminations of election initiators. This means that in companies without a works council, a judicial decision in lieu of consent is only necessary in case of termination of members of the electoral board and election candidates (section 103 (1), (2a) German Works Constitution Act (BetrVG)).

The Act transfers the transitional solutions of section 129 German Works Constitution Act (BetrVG), which were introduced at the beginning of the COVID-19 pandemic into permanent rules relating to the participation in works council meetings and adopting resolutions by means of video and telephone conference

False.

Even though a digital works council is still possible, section 30 (1), sentence 5 and (2), sentence 1 German Works Constitution Act (BetrVG), new version, clearly stipulates a “priority for face-to-face meetings”. Participation in works council meetings by means of video and telephone conference is only permissible if:

• the requirements for this type of participation are set out in the rules of procedure that ensure the face-to-face meetings are prioritised;
• at least one quarter of the members of the works council do not object to this within a period to be determined by the chairperson; and
• protections are in place ensuring that third parties cannot view the meetings.

If these conditions are not met when a virtual meeting is held, the resolutions adopted at the virtual meeting are invalid.

Furthermore, meetings of conciliation boards and economic committees (in which the works council and the management discuss economic matters) may no longer be held digitally, despite the predominantly positive experiences that have been expressed by our clients with the now repealed provision of section 129 (2), (1) German Works Constitution Act (BetrVG).

One positive feature, however, is that in the future it will be possible to conclude works agreements using a qualified electronic signature (section 77 (2) sentence 3 German Works Constitution Act (BetrVG)).

The works council now has a right of co-determination regarding the introduction of remote work

False.

A works council has no right of initiative. It cannot, therefore, force the introduction of remote work. This is because the right of co-determination under section 87 (1) no. 14 German Works Constitution Act (BetrVG)), new version, only refers to the organisation (the “how”) but not to the introduction (the “whether”) of remote working. The decision to introduce remote work continues to be the free decision of the employer. However, it remains to be seen how case law will interpret “organisation”. This should be limited to regulations on technical equipment and the places from which remote work can be done (the "where") and regulations on the beginning and end (the “when”) of remote work.

This article is part of our monthly series "Five Myths" on ESG, sustainability and CSR in which we dispel untruths and clichés that you may encounter as a legal practitioner in fields, such as labour law and compliance.

For more information on the laws surrounding works councils in Germany, contact your CMS client partner or local CMS experts Prof. Dr. Marion Bernhardt, Dr. Henrike Seifert and Dr. Niclas Minderjahn.