Codetermination in Germany defines a set of rights that give employees the possibility to actively participate in shaping their working environment. This includes legally stipulated co-determination rights, internal company agreements devised in conjunction with union contracts, and informal arrangements that have arisen from co-determination practice.
DGB/Simone M. Neumann
In companies with at least five members of staff, the employees elect a works council. The decision to have a works council is always voluntary. The applicable law (“Betriebsverfassungsgesetz”, the “Works Constitution Act”), however, does not state that a works council may be elected but rather sets out the number of employees above which a works council is elected. The works council represents the interests of all employees to the employer. It can conclude what are called “works agreements” with the employer – enforceable, legally valid agreements that regulate working conditions in the company, for example concerning wage supplements, working time, professional development, or company pension schemes.
The distinction between a “workplace” and a “company” in German labor law is easily explained: a “workplace” is an employer’s facility in which several employees normally work together. Examples include branches of a supermarket or a factory of an automotive corporation. A “company” can therefore comprise many “workplaces”: the automotive corporation or the supermarket chain are the “company”; their separate branches and factories are the “workplaces”.
The size of the works council depends on the number of employees in the company: it consists of a single person in small firms with up to 20 employees and grows in numbers commensurate with the size of the company. For example, companies with 100 employees will have five people on the works council; those with 250 employees have nine. At over 7,000 employees, a works council is elected with 35 members – and even larger committees are possible.
Where necessary, members of works councils are allowed to perform their duties during working hours and are still paid with no wage cuts. In companies with more than 200 employees, one member of the works council is fully “released” from their work duties. In practice, this means that the member of the works council carries out their works council business exclusively and full-time while continuing to receive their regular pay. The number of full-time works council members increases in companies with more than 500 employees.
In addition to its capacity to conclude company agreements, the works council is endowed with further legal codetermination rights. If a German company has a works council, the employer cannot lay down rules on the following issues without consulting it:
The works council must also be consulted prior to any termination of employment. A dismissal is null and void if there is a works council and it was not consulted prior to the termination of employment.
In German companies, employees have codetermination rights through their works councils. At company level, they have a say on the supervisory board. A supervisory boards is a company’s corporate governance body that monitors the work of the business management. It goes without saying that having a supervisory board in a corporation is not unique to Germany, but in many cases, elected employee representatives are members of supervisory boards in this country.
The most extensive employee codetermination on supervisory boards of corporations is found in the mining, coal, iron, and steel industries, in which the Coal, Iron, and Steel Codetermination Act applies above 1000 employees. Seats on supervisory boards are apportioned equally between shareholder and employee representatives. The chairman of the supervisory board, however, is a further shareholder representative – but is balanced by another neutral member who is elected to the board by mutual agreement of both sides. The extremely far-reaching scale of employee codetermination in the coal, iron, and steel industries is a consequence of the second world war: the victorious allied powers wanted to prevent these strategically important industries from becoming unilaterally controlled and abused by major shareholders.
Different rights of codetermination exist in corporations with more than 2000 employees not involved in the coal, iron, and steel industries. The relevant law is named after the year in which it was passed (1976). Here again, both sides are in principle represented equally on the supervisory board, but the chairman, whose vote is decisive in the event of a deadlock, is always a shareholder representative. In contrast to the Coal, Iron, and Steel Codetermination Act, the chairman is not “balanced” by a neutral member, meaning that the shareholders can always outvote the employees.
In corporations with 500 to 2000 employees outside the coal, iron, and steel industries, employee representatives occupy just one third of the positions on the supervisory board under what is known as the “One-Third Participation Act”.
Both the Coal, Iron, and Steel Codetermination Act and the Codetermination Act of 1976 grant trade unions an official right to propose works council members for seats. Despite this, the candidates put forward by the unions must still also be elected. Under the One-Third Participation Act, the trade unions have no right to propose members.