CODETERMINATION IN GERMANY - MITBESTIMMUNGSPRAXIS A Beginner's Guide - Hans-Böckler-Stiftung
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MITBESTIMMUNGSPRAXIS No. 32 · July 2020 CODETERMINATION IN GERMANY A Beginner’s Guide Lionel Fulton
AUTHOR FURTHER TITLES
Lionel Fulton https://www.boeckler.de/de/mit-
is secretary of the Labour Research Department in London, an bestimmungspraxis-2770.htm
independent research institute with close ties to the trade unions.
He has published extensively on workers’ representation in Europe
and prepared much of the material on UK labour relations for the
European Trade Union Institute website.
www.worker-participation.eu
lfulton@lrd.org.uk
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vice offers codetermination ac-
tors specific action and orientati-
on know-how, including sectoral
monitors, issue and topical ra-
dar, ‘knowledge in a nutshell’ and
Codetermination Scenarios 2035.
Register free of charge at:
www.mitbestimmung.de
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Publisher Editorial
Institute for Codetermination and Corporate Governance Dr. Manuela Maschke, Head of Unit Work and Codetermination
(I.M.U.) of the Hans-Böckler-Stiftung Hans-Böckler-Stiftung, Telephone: +49 (211) 77 78-224
manuela-maschke@boeckler.de
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Mitbestimmungspraxis No. 32
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Mitbestimmungspraxis No. 32 · July 2020 Page 2
MITBESTIMMUNGSPRAXIS
No. 32 · July 2020
CODETERMINATION
IN GERMANY
A Beginner’s Guide
Lionel Fulton
ABSTRACT
This guide is intended to help people unfamiliar with the German system of labour relations to understand
one of its key aspects, the system of employee involvement known as ‘codetermination’ (‘Mitbestimmung’ in
German).
Codetermination is governed by a series of rules set out in legislation and provides employee represent-
atives with clear rights to act in ways that benefit the employees who elected them. Codetermination also
requires employee representatives to consider the interests of the business where they work and there is evi-
dence that codetermination brings benefits to the companies in which it is exercised.
Codetermination affects decisions at all levels and plays a role in German companies and those who work in
them, making it an important element not just of German industrial relations, but also of the German economy
and German society.
Anyone who wishes to understand the German economy and society better would be well advised also to
take time to learn a little about codetermination.
The guide is intended for non-Germans encountering the codetermination for the first time. Whether they
are managers or investors, trade union officials or elected employee representatives, they are likely to find
initially that parts of the system seem unfamiliar and perhaps uniquely German. But on closer examination, it
is clear that codetermination has many features in common with other systems of employee involvement else-
where in Europe. The rules and the structures may differ but the concerns and needs are the same.
Mitbestimmungspraxis No. 32 · July 2020 Page 3CONTENT
1 A quick overview ��������������������������������������������������������������������������������������������������������������������������� 5
2 Board-level codetermination ��������������������������������������������������������������������������������������������������������� 5
2.1 Establishment, composition and structure ������������������������������������������������������������������������������������������������ 5
2.2 What are the rights and duties of employee representatives on the supervisory board? ������������������������ 8
2.3 The impact of board-level codetermination ����������������������������������������������������������������������������������������������� 9
2.4 Codetermination: part of a bigger whole ��������������������������������������������������������������������������������������������������� 9
3 Workplace codetermination �������������������������������������������������������������������������������������������������������� 10
3.1 Establishment, composition and structure ���������������������������������������������������������������������������������������������� 10
3.2 The rights of the works council ���������������������������������������������������������������������������������������������������������������� 13
3.3 Other aspects of works council activities ������������������������������������������������������������������������������������������������ 19
3.4 The impact of workplace level codetermination �������������������������������������������������������������������������������������� 21
4 Conclusion ������������������������������������������������������������������������������������������������������������������������������������ 21
Appendix �������������������������������������������������������������������������������������������������������������������������������������������� 22
Endnotes �������������������������������������������������������������������������������������������������������������������������������������������� 22
Bibliography ��������������������������������������������������������������������������������������������������������������������������������������� 23
Mitbestimmungspraxis No. 32 · July 2020 Page 41 A QUICK OVERVIEW ee representatives depends on the number
of employees and whether they are coal or
Codetermination operates at two levels: iron and steel companies.
– In the approximately 1,500 companies with
– workplace level and between 500 and 2,000 employees (other
– board level. than coal or iron and steel companies) one-
third of the supervisory board are employ-
Workplace level codetermination (betriebliche Mit- ee representatives, directly elected by the
bestimmung) is provided through the works council workforce.
(Betriebsrat), a body directly elected by and made up – In the around 640 companies with more than
of those working in the organisation. Works councils 2,000 employees (other than coal or iron
can be set up in all companies with five or more em- and steel companies) half of the supervisory
ployees. The works council has extensive and clearly board members are employee representa-
defined legal rights, which in some cases mean that tives. They are elected by the workforce, but
the employer cannot act without the work council’s some are full-time union officials nominated
agreement.1 by the union, and at least one must be an ex-
Board-level codetermination (Unternehmensmit- ecutive employee.
bestimmung) is provided through the presence of – In the approximately 30 coal or iron and steel
elected employee representatives in a company’s su- companies with more than 1,000 employees
pervisory board, the body which sets the company’s there are equal numbers of employee and
strategy and monitors its progress. It is more limited shareholder representatives on the supervi-
in scope, only affecting companies with 500 or more sory board plus a neutral chair. The employee
employees. But these employee representatives have representatives, some of whom are nominat-
the same rights and duties as the board members rep- ed by the union, are formally elected at the
resenting the shareholders, although they can always annual general meeting, but the shareholders
be outvoted by the shareholders’ representatives (ex- must accept the works council’s proposals.
cept in a small number of companies in the coal, iron
and steel industries).2
The two levels are linked as the employee rep-
resentatives in the supervisory board are normally
works council members. Which companies have to have employee rep-
Neither works councils nor employee represent- resentation at board level and how many employ-
atives on supervisory boards are direct trade union ee representatives must they have?
bodies. There are clear links to the unions, however. Employees in larger share-based companies (500 em-
The majority of works council members are union ployees or more) have a right to representation on the
members; unions have nomination rights; and the supervisory board (Aufsichtsrat) to which the day-to-
work council chairs in Germany’s biggest companies day management of the company reports. This right
are often influential figures in their own unions. They applies both in a public limited company (AG) and a
are also the individuals who are likely to be on su- limited company (GmbH), as well as in some other
pervisory boards, and, in companies with more than company forms, although not in all. It does not apply
2,000 employees, full-time trade union officials also in ’ideological companies’, companies whose purpos-
sit on the boards as employee representatives. es are primarily political, religious, educational or artis-
tic, or that produce news or comment.
The proportion of worker representatives varies
from one-third, in companies with between 500 and
2,000 employees, to 50 per cent, in companies with
2 BOARD-LEVEL CODETERMINATION more than 2,000 workers. The remaining members of
the supervisory board represent the shareholders and
are chosen at the annual general meeting. In all cases
the employee numbers relate to the number of com-
2.1 Establishment, composition and structure pany employees in Germany.
Even in these larger companies, however, the
shareholders can win any contested votes on the
Key points supervisory board, as the chair represents the share-
holders and can cast a second vote in the event that
– C
ompanies with more than 500 employees a vote is tied. The one exception is the larger coal or
in Germany must, in most cases, have some iron and steel companies, in which there is a neu-
employee representatives on their superviso- tral member of the supervisory board, in addition to
ry board. (The other members are chosen by equal numbers of employee and shareholder repre-
the shareholders.) The proportion of employ- sentatives.3 The precise number of supervisory board
members and employee representatives varies ac-
Mitbestimmungspraxis No. 32 · July 2020 Page 5Figure 1 cording to the number of employees and the legisla-
tion being applied.
One-third Participation Act 2004 Companies that regularly employ between 501 and
It applies to all corporations with between 500 and 2,000 employees. 2,000 employees and are neither ’ideological com-
One-third Participation Act 2004
The supervisory board is one-third composed of employee representatives and panies’ nor coal or iron and steel companies, where
It applies to all corporations with between 500 and 2,000 employees.
two-thirds of shareholder representatives. special rules apply, are covered by the One-Third
The supervisory board is one-third composed of employee representatives Participation Act (Drittelbeteiligungsgesetz), as well
and two-thirds of shareholder representatives. as by more general company law, particularly the
Stock Corporation Act (Aktiengesetz). Company law
Chair sets three members as the minimum size of the su-
SHAREHOLDERS‘ BOARD/ pervisory board and precisely prescribes a maximum,
MEETING MANAGEMENT linked to the company’s share capital. A company
appoints and with share capital of up to €1.5 million has a maxi-
monitors mum nine-strong supervisory board, going up to 15
for a company with share capital of between €1.5 and
€10 million, and 21 for a company with share capital
above €10 million. As employee representatives take
one-third of the seats, the total number must be divis-
ible by three (see Figure 1).
A recent study found that there were 1,477 compa-
nies with between 500 and 2,000 employees in 2009
(Bayer, 2009).
EMPLOYEES Companies that employ more than 2,000 employ-
ees and do not fall into other categories (ideological or
Source: own illustration, © I.M.U. 2020
coal or iron and steel) are covered by the Codetermi-
nation Act (Mitbestimmungsgesetz). This links the size
Source: own illustration @ I.M.U. 2020, https://www.imu-boeckler.de/en/the- of the supervisory board not to the share capital, as in
supervisory-boards-in-germany-19329.htm
smaller companies, but to the number of employees.
In companies with 2,001 to 10,000 employees, there
is a 12-strong supervisory board, in those with 10,001
to 20,000, the size of the supervisory board goes up
to 16, and in those with more than 20,000, it increases
Figure 2 to 20. In all cases half the supervisory board mem-
bers are employee representatives (see Figure 2).
Codetermination Act 1976 In 2016 there were 641 companies in Germany with
It applies to corporations with over 2,000 employees. more than 2,000 employees, in which employee rep-
Codetermination
The Actis1976
supervisory board composed of shareholder and employee representatives ... resentatives made up half the supervisory board. This
It applies to corporations with over 2,000 employees. The supervisory board number comprises 234 public limited companies (AGs),
is composed of shareholder and employee representatives ... 354 private limited companies (GmbHs), 14 European
Companies (SEs) and 39 companies and cooperatives
with other legal forms (see Figure 3).
Chair Companies primarily producing coal and iron and
with casting vote in the steel and with more than 1,000 employees are cov-
SHAREHOLDERS‘ BOARD/
event of a tie ered by a special form of codetermination, set out
MEETING MANAGEMENT
in the Coal and Iron and Steel Codetermination Act
appoints and
monitors (Montanmitbestimmungsgesetz). In its standard form,
this fixes the size of the supervisory board at 11, with
four employee representatives and four representa-
Vice- tives of the shareholders, plus one additional member
DIRECT VOTE chair Labour from each side, making a total of 10. On the employ-
OR ASSEMBLY Executive
employees director ees’ side this additional member may not be from a
OF DELEGATES
union or work in the company, while the sharehold-
Proposal of candidates / appointment of delegates
ers’ additional member may not be a member of the
employers’ association or a large shareholder. The
Executive
final (eleventh) member of the supervisory is neutral,
TRADE UNION EMPLOYEES,
EMPLOYEES and must be nominated by a majority of both sides. It
Source: own illustration, © I.M.U. 2020 is also possible to have 15-strong or 21-strong super-
visory boards with parallel composition (see Figure 4).
Companies covered by this legislation must also
Source: own illustration @ I.M.U. 2020, https://www.imu-boeckler.de/en/the- appoint a Labour director to the management board,
supervisory-boards-in-germany-19329.htm responsible for personnel and employment issues. He
Mitbestimmungspraxis No. 32 · July 2020 Page 6or she cannot be appointed or dismissed against the (non-executive employee) employee representatives
wishes of the employee representatives in the super- are nominated by the normal employees and the can-
visory board. didates for the executive employee position (there
Probably only around 30 companies are covered must be two) are chosen by the executive employees,
by the legislation on coal and iron and steel compa- meeting separately. All three groups, union officials,
nies. The Labour directors are often former trade union employees and executive employees, are elected by
officials. the whole workforce, either directly or, in larger com-
panies with more than 8,000 employees, indirectly
Who are the employee representatives on the su- through workforce delegates elected for this purpose.
pervisory board and how are they chosen? The legislation sets out precisely the split between
In all cases, employee representatives on German the three groups of employee representatives, with
supervisory boards are elected by the workforce of the executive employees being counted as employ-
the companies concerned, but the precise methods ees. In companies with between 2,000 and 10,000
vary, depending on the size and type of the company, employees, there are six employee representatives –
as does the type of individual who is entitled to be two external union members, one executive employ-
elected. ee and three normal employees; in companies with
In companies covered by one-third codetermina- 10,000 to 20,000, there are eight –two external union
tion (those with between 501 and 2,000 employees), members, one executive employee and five normal
the employee representatives are elected directly by employees; and in companies with more than 20,000
the workforce in a secret ballot. (The election proce- there are 10 – three external union members, one ex-
dure itself is complex.) If there are only one or two ecutive employee and six normal employees.
seats, all the employee representatives must be em- Under legislation for the coal and iron and steel
ployed in the company. If there are three or more, at companies, in an 11-strong supervisory board there
least two of them must be employed in the company. are employees (two) and union officials (two) plus an
In larger companies, above 2,000 employees, additional member as part of the five-member em-
where the employee representatives take half the ployee group. The employees are nominated by the
seats, some of the employee representatives are works council and the union officials by the union.
nominated directly by the union or unions with mem- The whole employee group is formally elected by
bers in the company, and are usually union officials. the annual general meeting of the shareholders. This
The others must work for the company, although one meeting must accept the works council’s proposals,
of them must be an executive employee. The normal however.
Figure 3 Figure 4
Companies in which employee representatives make up half the Coal and Iron and Steel Codetermination Act 1951
supervisory It applies in the mining and iron and steel industries to companies with over 1,000 employ-
Coal and Iron and Steel Codetermination Act 1951
ees. The supervisory board is composed on a parity basis of an equal number of share-
It applies in the mining and iron and steel industries to companies with
holder and employee representatives.
over 1,000 employees. The supervisory board is composed on a parity basis
of an equal number of shareholder and employee representatives.
31.12.2016
Chair
Total
641 SHAREHOLDERS‘ BOARD/
MEETING MANAGEMENT
Independent, appoints and
proposed by shareholders monitors
Neutral with casting vote
in the event of a tie
Independent,
proposed by employees
appoints with a majority Labour
(blocking minority) director
P ublic limited companies (AG)
E uropean Companies (SE)
P rivate limited companies (GmbH)
L imited partnerships based on shares (KGaA) propose candidates
on a binding basis
L imited partnerships linked to a limited company (Kap. Ges. & Co. KG.)
TRADE UNION WORK COUNCILS
Cooperatives
Source: own illustration, © I.M.U. 2020
Source: Department for the Promotion of Codetermination Source: own illustration @ I.M.U. 2020, https://www.imu-boeckler.de/en/the-supervisory-
(2017), own translation, https://www.imu-boeckler.de/ boards-in-germany-19329.htm
de/19328.htm
Mitbestimmungspraxis No. 32 · July 2020 Page 7In practice, the employee representatives on super-
visory boards, who are also employees of the compa- – In no case can the employee representatives
ny, are normally the key figures on the works council outvote the shareholder representatives,
(the chairs or vice-chairs). The representatives who are even where they have an equal number of
nominated by the union (in companies with 50 per cent seats. In companies with more than 2,000
employee representation and coal and iron and steel employees, the chair, who always represents
companies) are typically full-time officials of the union the shareholders, has a second, casting vote
concerned or its senior employees. in the case of a tie. And in coal and iron and
Pressure for increased gender equality resulted in steel companies there is a neutral chair.
2015 in legislation to increase the proportion of wom-
en in leading positions in companies and public sector
organisations, particularly in the supervisory boards
in major companies. This required companies quoted Rights and duties
on Germany’s main stock exchanges and companies German company law sets out the role of the super-
whose supervisory boards included employee repre- visory board and its tasks and duties, which include:
sentatives, both those with one-third and those with
50 per cent representation, to set binding targets for – monitoring the management board (Vorstand),
increasing the number of women (formally the under- which is responsible for the day-to-day operations
represented sex, whichever it may be, but in practice of the company;
women) in leading positions. Since 2016, companies – dealing with issues which have been reserved to
that are both quoted on the stock exchanges and 50 the supervisory board – these are likely to relate to
per cent of whose supervisory board members are particularly far-reaching decisions, such as major
employee representatives, have in addition to ensure investments, moving into new areas of business
that 30 per cent of the supervisory board members or out of old ones, closing factories and taking on
are women. large loans;
In calculating this 30 per cent ratio it is possible – receiving regular reports from the management
to take the employee representatives and the share- board; and
holder representatives together. For example, in a – appointing the management board and being in-
20-member board, where there must be six women, volved in setting its pay.
they could in theory all come from the employee side.
However, if either side objects the ratios must be cal- Supervisory board members can be held personally
culated separately, meaning that in this case each responsible for damages that occur, if they are found
side must have at least three women. to be at fault or to have acted carelessly. (They are
The requirement to have more women in supervi- therefore normally insured against this.)
sory boards has had an impact on the companies in Employee representatives have the same rights,
which the 30 per cent quota has been imposed. At the tasks, duties and responsibilities as other superviso-
end of 2018, among the 107 companies in this position ry board members. Like the others they must act in
(including one covered by the legislation for coal and the best interests of the company. They must not be
iron and steel companies) there were 38 that had more discriminated against as a result of their membership
than 30 per cent women, but 28 that had below that. of the board, and they must not be restricted in their
This is an improvement on the position before the leg- work as supervisory board members. They are paid
islation, but only in companies directly affected. The re- the same as other supervisory board members and
quirement to set targets for women in other companies are also entitled to reimbursement of their expenses
and at other levels has had much less impact (Weckes, and adequate training. (The unions encourage super-
2019). visory board members representing the employees to
donate the bulk of their pay to union-linked bodies, in-
cluding the Hans-Böckler-Stiftung; this is sometimes
2.2 What are the rights and duties of employee a direct obligation.)
representatives on the supervisory board? The period of office of employee representatives
on supervisory boards is the same as that of other
supervisory board members, typically four years.
Key points Employee representatives are able to influence
the supervisory board through their arguments but
– S
upervisory boards set the general direction alone they can never have a majority of votes on the
of the company and monitor its progress. board. This is obvious in boards where they only have
The day-to-day operation of the company is one-third of the seats, but it is also the case in boards
in the hands of the management board. where half the seats are held by employee represent-
–
Employee representatives have the same atives. This is because, in these companies, in the
rights and duties as the supervisory board event of a tied vote, the chair, who almost always rep-
members representing the shareholders. resents the shareholders, has a second vote to deter-
mine the outcome. (The situation is slightly different
Mitbestimmungspraxis No. 32 · July 2020 Page 8in companies in the coal and iron and steel industries, Figure 5
where there is an eleventh member, who is neutral.)
Although the chair of the supervisory board comes Doing better with employee participation
from among the shareholders, the vice-chair comes Progress of EU states with ...
from the employee representatives and is an influen-
Europe 2020 goal
tial figure.
In practice, it is difficult to assess how employee
representatives in supervisory boards use the powers Stronger employee participation
Employment rate 75 %
that they have, as the work of the boards is essentially Weaker employee participation
confidential.
One noteworthy element is that the employees’ and
shareholders’ groups often meet separately, before Completed tertiary education 40 %
the supervisory board meeting. The employee repre-
sentatives use this opportunity to develop a common
approach towards the company’s strategy and the in- Share of renewable energy 20 %
formation that is needed from the management board.
They also need to have a mechanism for transferring
the knowledge they have gained from their position in Expenditure on research 3%
and development OF
the supervisory board, without breaching their confi-
GDP
dentiality obligations.
2.3 The impact of board-level codetermination
Source: Böckler Impuls 05 / 2016, own translation, https://www.boeckler.de/de/
boeckler-impuls-mitbestimmung-bringt-europa-voran-7355.htm. Download graphic: bit.
The most recent official study of the impact of do/impuls0300. Download data: bit.do/impuls0301
board-level codetermination was set out in the so-
called ‘Biedenkopf report’. This was the final doc-
ument of a government commission into modern-
ising board-level codetermination, chaired by the
centre-right politician Kurt Biedenkopf, which was
presented to the German government in December
2006.4 of poverty and the share of renewable energy (see
At its core was a report by the academic members Figure 5) (Vitols, 2016);
of the commission, which, among other things, exam- – a study that found that having employee represen-
ined the economic impact of board-level representa- tatives on boards or supervisory boards helped to
tion. It concluded that there were general methodo- limit top pay, with the highest management pay
logical difficulties in making comparisons, but went in the 100 largest companies in Europe averaging
on to say that: ’After lengthy discussion of the observ- $7.89 million in companies without employee
able economic effects of employee representation board-level representatives and €4.07 million in
at board level, the academic members see overall companies where employee representatives sat
no reason to place in doubt the positive forecast of on the board (Hassel / Helmerich, 2017);
the legislators of 1976 [the date the legislation on 50 – another finding from the same study that com-
per cent board-level representation was introduced], panies with board-level employee representation
and to propose a fundamental revision of the legisla- and collective agreements have performed better
tion, let alone its repeal’. They considered that there than those without; and
was no evidence of negative effects of board-level – a study of 560 European companies that found
representation, and that, while no clear conclusions that those with employee representatives on their
could be reached, the results of the then current re- supervisory boards performed better during and
search tended more towards a positive evaluation of after the 2008 financial crisis than those without
the economic impact of board-level representation. any employee participation at this level, with
Since then, there has been further analysis, some positive effects on both employment and profits
of which confirms the positive impact of board-level (Rapp / Wolff, 2019) (see Figure 5).
employee representation. This includes:
– a study that divided EU states into two groups and 2.4 Codetermination: part of a bigger whole
found that the group with higher levels of codeter-
mination scored better in all the areas seen as key Codetermination at workplace level (through the
for the EU’s future development: the employment works council) and at board level (through employee
rate, the proportion of those leaving education representation in supervisory boards) are two crucial
early, the numbers who have completed higher parts of the German system of industrial relations, but
education, the percentage of the population at risk there is also a third, collective bargaining, particular-
Mitbestimmungspraxis No. 32 · July 2020 Page 9ly at industry level, which forms a crucial part of the particular rights in terms of their nomination. It is nor-
overall framework. mally trade unionists who sit on supervisory boards,
The position has changed over time, with a fall in and in larger companies union officials are present as
the coverage of collective agreements, but collective of right. In collective bargaining, only unions can rep-
bargaining at industry level between individual trade resent the interest of employees and sign agreements.
unions and employers‘ organisations is still the cen- As a research body close to the employers itself
tral arena for negotiating pay and conditions in Ger- noted in 2018, ‘the bargaining parties [unions and em-
many. In western Germany, almost half (49 per cent) ployers’ associations] still exercise a pretty major influ-
and in eastern Germany over a third (35 per cent ) of ence on working conditions in the country’ (Schneider /
all employees in workplaces with at least five employ- Vogel, 2018)
ees are covered by industry-level agreements, like
that for the metalworking industry (the largest), the
chemical industry, or construction (Ellguth / Kohaut,
2019). These agreements set broadly the same pay in-
creases and pay rates across the whole country. 3 WORKPLACE CODETERMINATION
In these circumstances, pay negotiations are not
conducted at workplace level, and the works council,
which generally is prohibited from negotiating on pay,
can deal with other issues. This system has, in the 3.1 Establishment, composition and structure
view of its supporters, the benefit of providing a lev-
el playing field to competing businesses, which can-
not try to gain an advantage by driving down wages. Key points
It may also mean that, with pay negotiations taking
place elsewhere, the works council is able to develop – Workplaces with five employees or more
a more constructive relationship with the employer in have a right to set up a works council, but
dealing with other problems. they are more common in larger workplaces.
In recent years, greater room for company-lev- – Works councils, which are purely employee
el flexibility on pay has emerged within the system. bodies, are set up at workplace rather than
Some agreements now permit changes to the terms company level and their size depends on the
to be negotiated locally, perhaps delaying an agreed number of employees.
increase or forgoing it completely through so-called – Both unions and groups of employees can
‘opening clauses’. Figures from the IAB show that, in nominate works council members, who, in
2011, 23 per cent of workplaces covered by collective practice, are likely to be union members.
agreements said that there were opening clauses in – Elections take place every four years
the agreements that applied to them (Ellguth, 2013). through a secret workplace ballot.
Trade unions operate in this changing landscape, – Works councils must have a chair and, in
and, like the system as a whole, they face clear chal- larger workplaces, a committee to deal with
lenges. The number of trade unionists has fallen, al- the day-to-day business. There are no rules
though only slightly in recent years. on how often it should meet, but weekly
Despite this, trade unions can be seen as the glue meetings are common.
that holds the system together. Most works council
member are trade unionists, and trade unions have
Figure 6
Codetermination in Germany: ‘Communicating vessels’
WORKPLACE: COMPANY: COLLECTIVE
WORKS COUNCILS SUPERVISORY BOARD (SVB) PARTICIPATION: TRADE UNIONS
Workplace information, Codetermination at board level Negotiate collective agreements
consultation and (board-level employee representation)
codetermination rights Cooperate with works councils
if > 2000 employees: 50 % of SVB
workplaces with at least 5 employees seats Have seats on the supervisory board
if > 500 employees:1 / 3 of seats
Source: own illustration © I.M.U. 2020, https://www.boeckler.de/pdf/mbf_praes_arguments_co_determination.pdf
Mitbestimmungspraxis No. 32 · July 2020 Page 10Which companies have to have a works council the basis of a collective agreement or other form of
and how big must it be? agreement to allow a works council to be set up.
Workplace level codetermination is provided through The size of the works council is linked to the num-
local works councils and they can be set up in work- ber of employees (see ). For example, a workplace
places with five or more permanent employees, pro- with 150 employees has a works council with seven
vided there are also three individuals with the right members, while there are 11 members in a workplace
to stand for election (see below). The law states that with 500 employees, and 19 in a workplace with
works councils ‘shall be elected’ in these circum- 2,500.
stances, which means that there is no obligation on The law uses a fairly wide definition of the work-
the employer to set up a works council. On the other ers to be included in calculating the thresholds set
hand, the employer is acting unlawfully if they hinder out above. With a few exceptions (see below), all
a works council being set up. employees, including trainees, aged over 18 count to-
In practice, these rights are not used in many small- wards the total, which is based on head-count, not
er workplaces and in total only 9 per cent of all private full-time-equivalent. (There is no distinction between
sector workplaces with five or more employees have a part-time and full-time workers.) Agency staff are also
works council. Works councils are found much more included, provided they have been in the workplace
frequently in larger workplaces, however: 87 per cent for at least three months, as are homeworkers, if they
of them with more than 500 employees have a works work principally for a single business.
council (Ellguth / Kohaut, 2019). Not included are the owners of the business and
Works councils are set up at workplace (establish- executive employees (Leitender Angestellte), defined
ment) level rather than at company (enterprise) level. as staff who have significant personal authority, such
In companies with a single workplace there will be no as being able to hire or dismiss staff.
difference between the two and there will be a single
works council. In companies where there are several Who are the works council members?
workplaces, however, for example a retail chain with Works councils are entirely employee bodies. Unlike
shops in several towns, there may be several works in some other countries (such as France or Belgium),
councils. Separate departments of the same work- they are not joint bodies with the employer.
place will normally be considered to be part of a sin- All employees who have a right to vote (those over
gle workplace, unless they are geographically remote 18, apart from the executive employees and other ex-
from the main workplace or operate independently. cluded groups have the right to stand as candidates
Small departments without a works council can be provided they have been employed in the workplace
included in the works council of the main workplace, for at least six months (less if the workplace has not
however. Sites can also be grouped together on been in existence for that long). Agency workers with
Table 1 Figure 7
Number of works council members and size of workplace Over all age groups codetermination is highly appreciated
Percentage of people relating something positive to codetermination or works councils
Number employed Number of works
council members
5 – 20 1
21 – 50 3
51 – 100 5
101 – 200 7
201 – 400 9
401 – 700 11
701 – 1,000 13
1,001 – 1,500 15
Note: From 1,501 to 5,000 employees the number of works council repre-
sentatives increases by two for every 500 employees or part thereof; from
5,001 to 7,000 by two for every additional 1,000. Workplaces with between
7,001 and 9,000 have 35 members on the works council, and above 9,000
workplaces they have two additional works council members for each
additional 3,000 employees.
Source: own table © I.M.U. 2020 Source: Böckler Impuls 10 / 2016, https://www.boeckler.de/de/boeckler-impuls-junge-
leute-wollen-mitreden-8442.htm. Downlad graphic: bit.do/impuls0399
Mitbestimmungspraxis No. 32 · July 2020 Page 11at least three months’ service are able to vote in the most work council elections take place between the
workplaces they have been sent to, but they are not start of March and the end of May in the same year,
able to stand as candidates. on a four-yearly basis. In 2018, more than four out of
Generally, participation is high. In the election in 10 works council members (41.3 per cent) were elected
2018, turnout was around 75 per cent (Funder et al., for the first time, but a quarter (25.7 per cent) were en-
2018 5 ; and Kestermann et al., 2018 6). tering their second period of office and a third (32.2 per
Candidates are nominated either by a union, provid- cent) were entering their third.9
ed it is represented in the workplace, or by a group of
employees with voting rights. Where the nomination How is the works council organised?
comes from a group of employees they must number In organising its activities, the works council chair,
at least three (two in workplaces with up to 20 em- elected by the whole works council from among its
ployees) and make up at least 5 per cent of the total members, plays a key role. His or her legal functions
number of employees entitled to vote, although, in any include calling the meetings and setting the agenda.
case 50 employees are sufficient to nominate a list of (As well as a chair, the works council must also elect
candidates, irrespective of the number of employees. a vice-chair to take over the chair’s functions if he or
Works council members are much more likely to be she is unable to carry them out.)
union members: surveys vary, but they indicate that be- The law also requires that in works councils with
tween 59 and 75 per cent of works council members nine or more members (above 200 employees) a sep-
belong to a union. (Greifenstein et al., 2014)7 arate works committee should be elected from the
The legislation states that the works council should works council to deal with day-to-day business. (The
‘as far as possible’ be made up of employees from works council chair and vice-chair are automatical-
the various organisational units within the workplace, ly members of this committee.) If the works council
as well as the different employment categories, for wishes, it can also set up other sub committees.
example, manual and non-manual.8 The law is more In companies with more than 100 permanent em-
prescriptive on gender balance, stating that where a ployees, the law requires the setting up of another
works council has three or more members, the minor- body, the economic committee. This committee is
ity gender ‘shall at least’ be represented in line with consulted on economic and financial issues. It is cho-
the proportion of that gender in the workforce. sen by the works council, but in certain circumstanc-
Women made up around 30 per cent of works es, the council can decide to do without an economic
council members elected in 2018, but this is still leaves committee and take over its functions.
women underrepresented in relation to the workforce There is also separate representation for young
as a whole (Funder et al., 2018). people and for the disabled, who are able to take part
The procedures for elections are set out in the leg- in works council discussions of concern to them.
islation. Elections are run by an electoral board, made Health and safety committees should be set up in
up of employees. Depending on the number of em- all workplaces with more than 20 employees. These
ployees, the works council is elected using either the are joint bodies with the employer, together with
so-called standard procedure or a simplified proce- safety delegates (Sicherheitsbeauftragte), who are ap-
dure. The standard procedure, used in larger work- pointed by the employer. The works council has two
places, is based on competing lists of candidates and representatives on the health and safety committee
takes six weeks to complete. The simplified proce- (see Box on page 18).
dure, used in smaller workplaces, allocates seats on The legislation does not set out how often the
the basis of votes for individual candidates, and can works council should meet. It does state, however,
be completed within a week. Where there are com- that the works council should meet the employer ‘at
peting lists, seats are allocated in proportion to the least once a month’.
number of votes cast for each list (using the d’Hondt In practice, weekly works council meetings are
system), subject to the gender requirements. Where common. This is what Germany’s largest union, IG
there are individual candidates, those with the high- Metall, recommends.10
est number of votes are elected, again subject to the Works council meetings, which take place dur-
gender requirements. ing working hours, are not public, and decisions are
Voting is in writing and in secret and takes place at taken by a simple majority of those present, with all
the workplace, although those not at work when the members having an equal vote. Works council mem-
voting takes place must be sent a postal vote. bers have a duty to attend, unless they have a good
The electoral board announces the results of the reason for their absence, such as sickness, holiday or
works council elections to all employees and must travelling on company business, and decisions can be
also send a copy to the employer and to unions repre- taken only if at least half the members are present. On
sented in the workplace. other matters, the law requires that the works coun-
Works council members are elected for four years, cil adopt its own standing orders, which set out its
and there is no limit on the number of times they can procedures.
be re-elected. As well as meetings, the works council can set
In practice, although a new works council can be consultation times when employees can bring their
established at any point when the conditions are met, concerns and proposals to the works council. These
Mitbestimmungspraxis No. 32 · July 2020 Page 12times should, in the first instance, be agreed with the
employer and their existence does not eliminate em- Key points
ployees’ rights to speak to works council members at
other times. – The works council cannot just consider
The works council is also responsible for holding the employees alone. It must work with
works meetings, which all employees should attend. the employer ‘in a spirit of mutual trust
It also calls departmental meetings for those unable ... for the good of the employees and the
to attend the normal meeting, perhaps because they establishment’.
are in a separate location, or to deal with issues af- – The works council’s four main types of
fecting one group of workers in particular. The meet- rights include:
ings should be held once a quarter, during working · information;
hours, and all employees may attend without any loss · consultation;
of pay. · objection / refusal of consent; and
The agenda of the meeting is determined by the · enforceable codetermination (where the
works council and should deal with issues of direct employer cannot act without the works
concern to the workplace, including collective bar- council’s agreement).
gaining policies, social and environmental matters, – Objections / refusals of consent can be re-
gender equality and the integration of non-German placed by a judgment of the labour court,
employees. Once a year the employer should report but under enforceable codetermination is-
to the works meeting on a range of issues, including sues in dispute go to a conciliation commit-
the financial situation, the position on gender equal- tee, a joint body with an independent chair,
ity, the integration of non-German workers and envi- for resolution.
ronmental policy. – The works council’s powers in relation to the
The employer is entitled to attend all works meet- employer’s economic plans and decisions
ings, as are representatives of the trade unions with are generally limited to information and con-
members in the workplace. sultation, although they are greater when
the employer plans changes that may have a
negative effect on employees.
3.2 The rights of the works council – Its powers are more extensive in individual
personnel / human resource issues, where,
in certain circumstances, it can raise ob-
Figure 8 jections that can be overturned only by the
labour court.
Managing the crisis in Germany – not possible without – It has the most far-reaching powers in re-
codetermination lation to social issues affecting the whole
workforce, and there are a number of topics,
such as working time arrangements or hol-
iday rules, which are subject to enforceable
Index 1st Quarter 2008=100
codetermination.
– The fact that many issues are subject to en-
Employment
forceable codetermination means that many
Working time per binding works agreements are signed by the
employee employer and the works council.
– The works council plays a particular role on
workplace health and safety.
GDP
Introduction
Works councils exist to ensure that some of the key
decisions at the workplace are not taken by the em-
Quarter 1. 2. 3. 4. 1. 2. 3. 4. ployer alone, but also involve representatives of the
workforce. The works council cannot consider just the
The expansion of short-time working (STW), the reduction of overtime, the interest of the employees, however. Its legal basis is to
use of working time accounts and shorter working time saved a total of work together with the employer ‘in a spirit of mutual
1 million jobs during the crisis.
trust ... for the good of the employees and the estab-
Except for STW, all instruments are based on collective agreements and / lishment’. At the same time, the law recognises that
or company agreements between management and works councils or there will inevitably be conflicts between the interests
employment contracts.
of the employer and the workforce, and also makes it
Source: IMK 2013 © Hans-Böckler-Stiftung 2013, https://www. clear that trade unions have a separate duty to protect
boeckler.de/pdf/mbf_praes_arguments_co_determination.pdf their members’ interests.
Mitbestimmungspraxis No. 32 · July 2020 Page 13Figure 9
Works Constitution Act codetermination curve
SOCIAL PERSONNEL ECONOMIC
MAT TERS MAT TERS MAT TERS
te m-
ion
g
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s
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g
g
al s
ac me
s
tw h
ge
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t in
din
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y a lt
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is s
et ea
d v ti
an
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et
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at
e n nni
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ch
es
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Enforceable codetermination (arbitration board) Consultation rights
Requirement of agreement Information
Source: www.BR-Fachanwalt.de, https://www.imu-boeckler.de/data/Beteiligungsrechte_des_Betriebsrats_en.pdf
The works council has a number of general duties, Different types of rights
which include ensuring that the employer complies The legislation offers works councils a number of dif-
with existing legislation and collective agreements, ferent types of rights in their dealings with employ-
making proposals to the employer for the benefit of ers. The precise wording for these rights used in the
the workplace and the employees and promoting ac- legislation varies, depending on the area concerned,
tion on a number of issues (gender equality, work–life but essentially the rights fall into four main categories.
balance, the integration of disabled workers, the em- These are set out below, starting with the least exten-
ployment of older workers, the integration of foreign sive and ending with the most far-reaching.
workers and protection of the environment). It also
has specific rights and duties in relation to health and – Information – the most basic right of the works
safety at the workplace (see Box on page 18). council is to be informed of the employer’s posi-
Its most important rights, however, relate to its tion and, in some cases, plans. The works council
ability to influence the employer’s actions and deci- also has a right to inspect documents in certain
sions. These rights vary in their impact, according to circumstances.
the issues concerned. In broad terms, the works coun- – Consultation – in some cases, the law requi-
cil’s rights are strongest in social areas affecting the res that the works council be ‘heard’; in others,
whole workforce, such as the organisation of working it specifies that consultation must take place
time, and weakest in economic matters, such as the in such a way as to allow the works council’s
company’s financial planning. The extent of the works views to be ‘taken into account’, and in others it
council’s rights in individual personnel or human re- refers to the right of the works council to make
sources cases, such as appointments or dismissals, recommendations.
lies somewhere between these two ends of the spec- – Objection and refusal of consent – in certain
trum (see Figure 9). circumstances, the works council can block the
Mitbestimmungspraxis No. 32 · July 2020 Page 14actions of the employer by refusing its consent to and operations or employment, the works coun-
what is planned. However, the employer can ap- cil must not just be informed in good time of what
ply to the labour court for a decision in lieu of the is planned, but also consulted. And this consultation
work council’s consent and, if successful, imple- should take place in a way that ensures that the works
ment the plans. council’s suggestions and objections can be taken into
– Enforceable codetermination (sometimes known account in the planning.
as genuine or equal codetermination) – in the The aim of this consultation is that the job should
areas where this applies, the employer cannot act be adapted to the needs of the employees rather than
without the agreement of the works council: a the other way around. Where it appears clear that this
decision by the labour court cannot substitute it. is not the case, or special burdens are being imposed
The only way that the works council’s objections on employees, the works council can ask the employer
can be overcome is through a decision of the so- to take further action to eliminate, reduce or compen-
called ‘conciliation committee’ (Einigungsstelle), a sate for the stress imposed. If these further actions are
body made up of equal numbers of representatives not agreed, the issue is subject to enforceable codeter-
of the works council and the employer, with an mination and is referred to the conciliation committee.
independent chair. This is the most powerful of the In addition, in companies that normally have more
works council’s rights (see Appendix for more de- than 20 permanent employees, employers must in-
tails on how the conciliation committee works). form and consult the works council when they plan
changes that may have a negative impact on the
There are substantial differences between areas in workforce. The measures covered by this require-
the way that these rights apply, and these are set out ment to consult include plant closures and operational
below, looking at the three main areas in which the reductions, transfers, amalgamating workplaces and
works council has some influence: splitting them up, major changes in work organisation
or equipment and the introduction of new work meth-
– economic issues; ods or processes. (In companies with more than 300
– individual personnel / human resources issues; and employees, the works council can be helped by an ex-
– social issues affecting the whole workforce. ternal consultant – see page 20).
Where potentially negative changes are planned,
Economic issues the works council has two further rights. First, it can
On economic issues, the works council’s rights are seek to reach agreement on a so-called ‘reconciliation
generally limited to information and, to some extent, of interests’, which aims to ensure that the changes
consultation. This is reflects the principle that compa- are introduced with the least possible disadvantage to
nies must, as far as possible, be free to take their own the employees. Second, it can agree a so-called ‘so-
decisions in this area. But even here, some issues are cial plan’, which seeks to compensate the employees
subject to enforceable codetermination. for the disadvantages that remain.
In companies with more than 20 permanent em- The agreement on the reconciliation of interests,
ployees the employer has to report to staff on a quar- which is likely to cover issues such as when and how
terly basis concerning the financial situation and the changes will take place, is a voluntary agreement;
progress of the company. There is also a general duty in other words, the employer cannot be compelled to
on the employer to provide the works council with the accept it, although both sides can ask for mediation.
‘full and timely information’ necessary for it to ‘dis- However, the social plan – which typically deals with
charge its duties’, as a well as a right to have access issues such as compensation for redundancy, rights
to the documentation it needs. This includes a specific to retraining, earnings protection in the case of job
right of the works council to have access to the com- changes, and payments for additional travelling costs
pany’s payroll lists. – falls under the heading of enforceable codetermina-
Companies with more than 100 permanent employ- tion. In other words the conciliation committee can
ees must set up an economic committee (Wirtschaft- impose an agreement if the employer and the works
sausschuss), which receives information from the em- council cannot agree. The social plan is also unusual
ployer on a range of issues, including the company’s in that it deals with pay, which is not normally cov-
economic and financial situation, investment plans ered by works council agreements.
and work methods. The information must be com- Staff planning and training are both an economic
prehensive and provided in good time. If the economic and a personnel / human resources issue. As a result,
committee considers this is not the case, the issue can the works council’s rights in this area are more ex-
ultimately be referred to the conciliation committee for tensive than in purely economic matters. It must be
a binding decision. (The works council can also take informed and consulted on staff planning and has the
over the functions of the economic committee itself, right to make proposals in relation to job security and
however.) increased employment. The employer must also con-
When future plans are being considered, the works sult on training facilities and training programmes,
council’s rights go beyond information, to consul- while retraining and some other training issues, such
tation. Where employers want to make changes to as the number of trainees, are subject to enforceable
buildings, technical plants, working procedures codetermination.
Mitbestimmungspraxis No. 32 · July 2020 Page 15The works council can also oppose the appoint- – if the employer has failed to take account of social
ment of a training officer or ask for their removal, if issues in making the decision: this would be the
they are not seen to be competent. Where this is dis- case, for example, in a redundancy situation if an
puted, the issue goes to the labour court. individual with long service and family responsibi-
lities were to be dismissed while a recently recrui-
Individual personnel / human resources issues ted single employee was to be kept on;
The works council’s rights are generally more – if the decision is not in line with the agreed guide-
far-reaching in the area of individual personnel or lines for dismissals, where these have been agreed
human resources issues, although generally, where in advance by the works council and the employer;
there are disputes between the works council and the – if the employee to be dismissed could be emplo-
employer, the final decision is in the hands of the la- yed in another existing position;
bour court rather than the conciliation committee. – if the employee could be kept on after a reasonable
In companies with more than 20 employees, the amount of training or retraining; and
works council has substantial rights in relation to de- – if the employee could be kept on after a change in
cisions on recruitment, placement on a specific the employment contract, which the employee is
grade, regrading and transfer. The works council willing to accept, including if this involves worse
must be informed in advance and its consent is need- conditions.
ed, although this cannot be withheld arbitrarily. The
legislation states that the works council is justified in The works council has enforceable codetermination
withholding its consent if the appointment, grading, rights in drawing up guidelines for future action
regrading or transfer would: in this area, for example in setting permanent rules
for redundancy selection. If the contents of these
– breach legislation or a collective agreement; guidelines cannot be agreed between the two sides
– run counter to existing staffing guidelines; the issue goes to the conciliation committee to be re-
– be likely to lead to the dismissal of an existing solved. In smaller workplaces the works council can-
member of staff or the failure to transfer an exis- not require that these guidelines be drawn up, but,
ting staff member from a temporary contract to a in workplaces with more than 500 employees, it can
permanent contract; require that the employer produce them.
– result in unfair treatment for the staff member Finally, the works council has a role in dealing with
concerned; employees’ grievances. If it considers them to be
– occur despite the fact the vacancy had not been justified it can take up the case and ask the employer
advertised internally, if this is has been agreed; or to remedy them, with disagreements being resolved
– be likely to result in the appointment or transfer in the conciliation committee. This procedure cannot
of an individual who would cause trouble through be used where the grievance relates to employees’
unlawful behaviour, in particular through racist or legal rights.
xenophobic activity.
Social issues affecting the whole workforce
The works council must inform the employer in writ- The works council has its most extensive rights with
ing of its refusal to consent, although the labour court regard to social issues that affect or potentially affect
can overturn this refusal if the employer brings and the workforce. On these issues, the works council has
wins the case. enforceable codetermination rights. It must positively
The works council also has rights with regard to agree to the employer’s proposals, and if they can-
dismissals. It must be consulted before every dis- not agree, the question is decided by the conciliation
missal, with the employer providing the reasons for committee.
the decision. If it is not consulted, the dismissal is null The topics covered by this are almost all set out in
and void. Within strict time limits, the works council a single section of the legislation (Section 87 of the
can raise objections to the dismissal or it can oppose Works Constitution Act). They are:
it. Raising objections in itself will not prevent the dis-
missal going ahead, but the employer must attach the – works rules – including works clothing, passes
works council’s objections to the dismissal notice and and the methods for recording attendance;
this may help the employee if he or she contests the – daily starting and finishing times, including
dismissal in court. breaks and how hours are distributed;
If the works council opposes the dismissal, the – any temporary reduction or extension of normal
employee set to be dismissed will continue to be em- working hours, particularly overtime;
ployed until the case has been decided in the labour – the time, place and form in which workers are
court, provided the employee concerned has made an paid;
application for the case to be heard. As with decisions – the general rules for taking holidays;
on recruitment, grading and transfers, however, the – the introduction and use of devices to monitor
works council can oppose a dismissal only in certain employees’ behaviour or performance;
circumstances. These are: – arrangements to prevent accidents and occupa-
tional ill-health (see Box on page 18);
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