Government adopts draft bill on reform of Works Constitution Act

In February 2001, the German cabinet adopted a draft bill on reform of the Works Constitution Act, which governs the system of works councils. After some disagreements between the Ministry of Labour and the Ministry of Economics, the new bill represents a compromise between the positions of the two Ministries.

On 14 February 2001, the cabinet of the German federal government adopted a draft bill on reform of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) - the law which determines the legal framework for co-determination at the level of the establishment in the private sector, through works council s. The government's bill will now pass through the legislative process, and it is planned that parliament will adopt the new BetrVG before summer 2001, so that the next works council elections in spring 2002 may be held under the provisions of the new Act.

Since the BetrVG has remained almost unchanged for nearly three decades, the reform aims to bring it into line with modern company and work organisation. The adopted bill on a new BetrVG is mainly based on an earlier draft presented by the Ministry of Labour in December 2000 (DE0102242F). The initial proposal, however, received some criticism from the Ministry of Economics, so the two Ministries had to find a compromise. In its criticism, the Ministry of Economics adopted some of the arguments of employers' associations, which strongly oppose the whole draft of a new BetrVG as merely creating new costs and extending co-determination rights in an unacceptable manner.

One major controversy between the two Ministries was on the number of works council members, and of works councillors released from work to perform their duties, in relation to the size of the establishment. While the Ministry of Labour's draft proposed reducing the ratio between the former and the latter (ie allowing for larger works councils and more councillors to be released in smaller establishments), the Ministry of Economics rejected this since it would create high costs for small and medium-sized establishments. However, the new bill adopted by the federal government in February still foresees an improvement in the ratio between number of works councillors released from work and the size of the establishment, but it will be less favourable than originally proposed by the Ministry of Labour - see the table below.

In addition, there will be no obligatory group works council (Konzernbetriebsrat) or group-level economic committee (Konzernwirtschaftsausschuss) in groups of companies, as had been proposed by the Ministry of Labour. Finally, some of the provisions on co-determination rights in the fields of new work organisation, group work and environmental protection have been posed in a more restrictive manner in order to ensure that works councils cannot block management's investment decisions.

Although trade unions were not happy with the changes resulting from the Ministry of Economics' criticism, they called the adopted bill a "good basis" and announced that they would come forward with further proposals during the legislative process. By contrast, employers' associations saw only "minor improvements" in comparison with the Ministry of Labour's draft and, therefore, continued to reject the whole new BetrVG.

Source: own composition.