Federal Labor Court: Resolution regarding a uniform works council also applies to future elections.

 Chain store companies, in particular, might consider options for alternative works council structures.

Federal Labor Court: Resolution regarding a uniform works council also applies to future elections

A company-wide works council encompassing the combination of companies or establishments may be formed via an employee resolution. The Federal Labor Court has now ruled that a resolution of this nature is not limited to one election period, but shall remain in force until an alternative resolution is passed.

Differing works council structures

The Works Constitution Act (BetrVG) permits the formation of different works council structures in Section 3. According to Section 3 (1) no. 1 a) Works Constitution Act (BetrVG), uniform works councils may be established at companies with multiple branches if this facilitates forming works councils, or serves to properly represent the employees’ interests.

Such regulations governing differing works council arrangements are primarily implemented via collective agreements. If provisions have not been stipulated in a collective bargaining agreement, and no other collective agreement applies (regardless of the subject), the issue can be regulated by means of a company agreement with the works council.

If the company does not have a works council, the employees have the option of resolving on the election of a company-wide works council as per Section 3 (3) Works Constitution Act (BetrVG). The resolution may be initiated by at least three company employees with voting rights, or by a trade union represented at the company.

Employee resolution

The effective resolution by the employees is not dependent on whether the formation of works councils facilitates or serves the proper representation of the employees’ interests. Although this prerequisite applies when establishing a uniform works council via collective agreement, it does not apply to employee resolutions. Instead, the legislator assumes that majority resolutions of this form will only be passed if they facilitate the work performed by the works council.

If the employees pass a corresponding resolution, it will not be limited to a single election period. The Federal Labor Court recently clarified the situation (BAG, decision dated March 24, 2021 – 7 ABR 16/20). In future, if a uniform works council will not be elected, a new and corresponding resolution will be required. An increase in the number of employees also has no impact on the continuing validity.
The resolution to establish a uniform works council does not result in a single, unified company. Instead, the individual branches or enterprises within the company continue to exist. If new branches or enterprises become part of the company as a result of restructuring, the uniform works council also becomes responsible for these and their respective employees. If these enterprises already have works councils, these will be dissolved.

However, the resolution to establish a uniform works council within the company may become ineffective if actions are taken which are no longer covered by Section 3 (3) Works Constitution Act (BetrVG). The constellation reviewed by the Federal Labor Court consisted of a joint venture to be established by the enterprises belonging to the existing company, as well as the company formed by the spin-off. Although this situation implies a joint operation as per Section 1 (2) No. 2 Works Constitution Act (BetrVG), a uniform and, therefore, essentially company-wide works council cannot be established by an employee resolution.

Effect on works council elections

Prior to a works council election, it is important to consider whether to establish different enterprise or works council structures which deviate from the law. As a rule, this it is only possible in cooperation with the union by concluding a collective agreement. However, if the branches or enterprises of the company have neither collective agreements nor works councils, the employees can at least establish a uniform works council. This represents an interesting option for both the employees and the employer at chain store companies.

The election committee has the fundamental task of determining which organizational unit (i.e. the enterprise or the independent branch of the company) a works council is elected for. The committee cannot stipulate this itself yet must subject matter to a legal review. If a company has a uniform works council which was established by means of an effective employee resolution, and which deviates from the fundamental legal structure, the election committee must comply with this.