Employee representation in Germany: A guide for employers

The complex landscape of employee representation is a central pillar of German labor law. This article provides employers with a structured overview of the various levels of co-determination—from the company level through the works council and special representatives to corporate co-determination on the supervisory board. It highlights the key legal framework conditions from the Works Constitution Act (BetrVG), Social Security Code IX (SGB IX), and Co-Determination Act (MitbestG) and explains the fundamental rights and obligations that arise for companies when dealing with works councils, trade unions, and other committees. The aim is to create a sound understanding of the far-reaching participation rights, the correct handling of which is essential for legally compliant and constructive business management.

Employee co-determination is a defining feature of German collective labor law. For employers, a profound understanding of the various representative bodies and their far-reaching powers is not only a matter of compliance, but also a strategic factor for successful corporate management. Failure to observe participation rights can lead to significant legal and economic consequences, ranging from the invalidity of measures to costly conciliation proceedings.

Works constitution: The operational center of co-determination

The Works Constitution Act (BetrVG) regulates cooperation between employers and the employee representatives elected by the workforce, the works council.

The works council: Partner and supervisory body

A works council can be established in companies with at least five permanent employees who are eligible to vote. While the initiative for the election must come from the employees, you as the employer are obliged to support the election and may not obstruct it (Section 20 BetrVG).

Organization and costs: Once constituted, the works council is chaired by the works council chairperson. The costs of the works council's activities, including the necessary material resources and training for works council members, are borne by the employer (Section 40 BetrVG).

Legal status of members: Works council members enjoy special protection against dismissal (Section 15 KSchG, Section 103 BetrVG), which protects them from ordinary dismissal and only allows extraordinary dismissal under strict conditions. They are to be released from work to the extent necessary for their activities and are subject to the prohibition of discrimination and preferential treatment.

The central participation rights of the works council

The participation rights of the works council are graded and range from pure information rights to genuine, enforceable co-determination.

• Social affairs (Section 87 BetrVG): The core of co-determination
  In the areas listed here, the works council has a genuine right of co-determination that can be enforced through the conciliation committee. Without its consent, any measure taken by the employer is invalid. The most important issues include:
  • Questions of workplace order and employee conduct.
  • Situation and distribution of working hours, including the introduction of short-time working.
  • Establishment of general vacation principles and the vacation plan.
  • Introduction and use of technical equipment designed to monitor performance or behavior (e.g., software, time recording systems).
  • Regulations on the prevention of accidents at work and occupational diseases.
  • Fundamental issues of company wage structure and the setting of performance-related pay.
• Personnel matters: From hiring to termination
  • Hiring, classification, transfer (Section 99 BetrVG): The prior consent of the works council is required for these individual personnel measures. If the works council refuses to give its consent for one of the reasons specified in the law, the employer must seek a court order to replace the consent.
  • Termination (§ 102 BetrVG): The works council must be consulted in detail before any termination. A termination issued without proper consultation is invalid. The works council can object to a regular termination, which gives the employee a right to continued employment for the duration of the termination protection proceedings.
• Economic matters: Strategic decisions In companies with more than 100 employees, an economic committee must be formed. This committee is informed by the employer about economic matters. In the event of operational changes (Section 111 BetrVG) – such as the closure of the business, mass redundancies, or fundamental changes to the organization – the employer must negotiate with the works council to reach a reconciliation of interests (the “if” and “how” of the measure) and draw up a social plan (compensation for economic disadvantages for the employees). The social plan is generally enforceable.

Other works council bodies

• Youth and Trainee Representative Committee (JAV): Represents the interests of trainees and young employees.
• General and Group Works Council (GBR/KBR): Responsible for matters affecting the entire company or group.
• European Works Council (EBR): In companies operating across the EU, for information and consultation on cross-border issues.

II. Representation of special employee groups

In addition to the works council, there are specialized representative bodies whose rights you as an employer must be aware of and observe.

• Representative body for severely disabled employees (SBV): Based on SGB IX, the SBV monitors compliance with regulations in favor of severely disabled people. Its most important power is the right to be consulted before the dismissal of a severely disabled employee. Termination without prior consultation with the SBV is invalid according to Section 178 (2) sentence 3 SGB IX.
• Spokesperson committee for senior executives: According to the Spokesperson Committee Act (SprAuG), this committee represents the interests of senior executives within the meaning of Section 5 (3) BetrVG. The correct definition of this group of persons is often controversial and of considerable practical importance, as senior executives are not represented by the works council.

III. Corporate co-determination: Influence at the strategic level

Corporate co-determination grants employee representatives seats and voting rights on the supervisory board of corporations. The intensity depends on the size of the company:

• One-Third Participation Act (DrittelbG): Applies to corporations with more than 500 employees. One-third of the supervisory board consists of employee representatives.
• Co-determination Act (MitbestG): Applies to corporations with generally more than 2,000 employees. The supervisory board is composed of equal numbers of shareholder and employee representatives. In the event of a tie, the double voting right of the supervisory board chairman (a shareholder representative) is decisive.

IV. Right of association and collective bargaining autonomy

Anchored in Article 9(3) of the Basic Law, freedom of association allows employees to join trade unions and employers to join employers' associations.

These associations use collective agreements to shape working conditions for entire industries or companies. Important principles for employers are:

• Priority of collective agreements (Section 77 (3) BetrVG): Remuneration and other working conditions that are regulated by collective agreements cannot be the subject of a works agreement.
• Right of action: Trade unions have the right to access the workplace in order to inform and recruit their members.
• Industrial action: As a last resort, trade unions can call a strike to enforce collective bargaining objectives. Employers can respond to this with a lockout.

Conclusion

The regulations governing employee participation in Germany are multifaceted and have a profound impact on business decisions. Formal errors in the participation of the works council or SBV can render measures ineffective and incur considerable costs. A proactive, legally sound strategy for dealing with employee representatives is therefore essential. Consult a specialist labor lawyer at an early stage to minimize risks and achieve your operational goals in a legally compliant manner.