On June 18, 2021, the German Works Council Modernization Act (Betriebsrätemodernisierungsgesetz) entered into force. This legislation aims at supporting and facilitating the establishment of new works councils in Germany. In order to achieve this purpose, the new law improves, inter alia, protection against dismissal of employees who are initiating the establishment of a works council, and simplifies works council elections by expanding the possibilities for a simplified election procedure.
Background of the Changes
In business operations in Germany with at least five employees eligible to vote, the employees are entitled to establish a works council to represent their interests towards their employer. Despite this relatively low hurdle, in 2019 less than ten percent of the companies in Germany with a workforce entitled to establish a works council actually had established a works council. As a result, only approx. 38 percent of the employees in Germany are represented by works councils.
The German Works Council Modernization Act seeks to counteract these developments by way of the following measures:
- Strengthening of Protection against Dismissal
German labor law already provides for a special protection against dismissal of employees involved in the works council election procedure as well as of the members of the works council. For example, the ordinary termination of up to three employees who invite to a staff meeting or election meeting in connection with the establishment of a works council or who apply for the appointment of a works council election committee, is generally excluded until the result of the election has been announced. In such cases, only an extraordinary termination (i.e., a termination for good cause without notice period) remains possible.
Under the German Works Council Modernization Act, the protection against dismissal is extended to an even earlier preparatory phase. Accordingly, an employee who (i) undertakes preparatory activities for the establishment of a works council and (ii) has made a publicly certified declaration (e.g., before a notary public) stating that he or she intends to establish a works council, may not be dismissed based on reasons which lie in the person or conduct of the employee. The protection against dismissal applies from the time the declaration is made until the time of the invitation to a staff meeting or election meeting, but for no longer than three months. An ordinary termination based on operational reasons or an extraordinary termination for good cause remain possible. Preparatory activities already include discussions with other employees about their willingness to be nominated as candidates for the works council election or contacting a trade union.
- Extension of Simplified Election Procedure
In general, German labor law differentiates between two election procedures depending on the number of eligible employees: the “normal” election procedure and a simplified election procedure. These two election procedures differ primarily in two aspects. First, the simplified election procedure can be conducted more quickly, because the legally prescribed time limits are shorter in comparison to the normal election procedure. Second, in case of a normal election procedure, works council members are elected via election lists (proportional representation). This means that the eligible employees vote for a list of a particular interest group, e.g., a trade union. In contrast, in case of a simplified election procedure, the eligible employees vote for individual candidates (majority voting).
Under the German Works Council Modernization Act, the possibilities for a simplified election procedure are extended.
- The simplified election procedure is now mandatory for companies with 5 to 100 employees which are eligible to vote (previously this only applied to companies with 5 to 50 of such employees).
- In companies with 101 to 200 employees which are eligible to vote, the implementation of the simplified procedure can be agreed between the employer and the election committee (previously this only applied to companies with 51 to 100 of such employees).
- Furthermore, in companies with up to 20 employees which are eligible to vote, election proposals do not need to be signed any longer.
- Other measures
In addition, in particular the following measures have been implemented to modernize the legal framework applicable to works councils and increase their attractiveness, such as:
- Decreasing the age for voter eligibility from 18 to 16 years;
- Co-determination right of the works council in the organization of mobile work performed by means of information and communication technology;
- Ensuring involvement of the works council with respect to the use of artificial intelligence technology; and
- Allowing the conduct of virtual works council meetings via video and telephone conferencing.
With the new Works Council Modernization Act, the German legislator has expressed its intention to counteract the trend of decreasing numbers of works councils in Germany. The legislator recognizes a need for action, also with respect to the effects of digitalization.
For employers, the strengthened protection against dismissal of initiators of works council elections might result in additional risks, since employees can now use a publicly certified declaration to (at least temporarily) avoid their dismissal for personal or conduct-related reasons.
However, while the new law expands the scope of the simplified election procedure, it does not change the fact that the “simplified procedure” itself is still rather formalized and complicated.
Overall, it therefore remains to be seen whether the Works Council Modernization Act will achieve the purposes envisaged by the German legislator.