Works Council Modernisation Act - over-regulation and cost increases included

Last Friday, 21 May 2021, the Bundestag passed the German Works Council Modernisation Act [Betriebsrätemodernisierungsgesetz]. Core issues of the Act are the strengthening of the work conducted by works councils and digitisation. There has been and is plenty of criticism of the changes. In particular, the legislator has failed to address the question of whether the co-determination criterion for introducing and using technical devices to monitor conduct and performance need to be modified in view of the ongoing digitisation of corporate processes.

A key aim of the Act is to encourage the establishment of works councils and to provide their members with greater protection. In view of the upcoming works council elections in spring 2022, companies need to gain an initial overview of the relevant new regulations.

The digital work of works councils is being expanded. Works council meetings via video and telephone conference will still be feasible and shop agreements can be signed digitally. The legislator also makes it clear that the works council is not to be seen as the responsible body in terms of data protection.

In addition, co-determination rights concerning the use of artificial intelligence (AI) and the organisation of mobile work have been laid down for the first time. Such an explicit provision had been superfluous.

In the last few metres of the legislative process there has also been a significant new regulation of accident insurance cover in the home office, which has also been adopted. The home office is now unquestionably covered by accident insurance. Accident insurance cover is also being extended to journeys made by employees for external childcare purposes.

The bottom line is that the new Works Council Modernisation Act will hardly be able to meet the challenges of the modern working world. There is therefore still a need for a genuine modernisation of shop constitution law. The topic of digitisation is only dealt with hesitantly. The regulations that had been hoped for in practice, such as the continuation of § 129 (2) German Shop Constitution Act [Betriebsverfassungsgesetz, BetrVG] (possibility of conciliation meetings via video and telephone conference), the concretisation of the definition of the business establishment (“Betrieb”) or clarifications concerning the technical monitoring of conduct and performance are missing in their entirety.

Specifically, the Act provides for the following changes:

1. Facilitated establishment and election of works councils

It will be easier to establish works councils, especially in smaller companies. To this end, the scope of the simplified election procedure is being extended and the number of support signatures required for election proposals is being reduced. In future, the simplified election procedure will be compulsory for companies with 5 to 100 employees. In companies with 101 to 200 employees, the company and the election committee can agree to conduct the simplified election procedure.

In very small companies with up to 20 employees entitled to vote, the requirement to obtain supporting signatures will be waived in future. In contrast, the thresholds for supporting signatures are being positively fixed and lowered in small and medium-sized enterprises. This is especially intended to avoid formal hurdles in works council elections.

The right to challenge works council elections due to errors in the electoral list is being restricted in order to increase the legal certainty of works council elections. A challenge is excluded if the reason for the challenge is the incorrectness of the electoral list and if the legally provided possibility of filing an objection to clarify such an electoral error was not made use of beforehand. The same applies to a challenge by the company, if it is responsible for the incorrectness of the electoral list.

Besides this, protection against dismissal is being improved in order to safeguard elections to the works council and ship’s committee. With the amendment to the German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG], the number of employees named in the invitation to a works council, electoral representation or ship’s committee or application for the appointment of an election committee, who are subject to protection against dismissal pursuant to § 5 (3a) sentence 1 KSchG, is being increased from three to six. In addition, the new provision of § 15 (3b) KSchG intends to better protect the "preliminary initiators", i.e. those employees who campaign for the establishment of a works council before the publication of the invitation to an election meeting. The prerequisite for this special temporary protection against dismissal for personal reasons and on grounds of conduct is a publicly certified declaration by the initiators pursuant to § 129 German Civil Code [Bürgerliches Gesetzbuch, BGB] that they wish to establish a works council and have also undertaken the corresponding preparatory actions for this. The protection against dismissal begins with the certification of the signature under the declaration of intent and ends with the date of the invitation to the shop meeting, but no later than three months after the period of certification.

It remains doubtful whether the new regulations adopted will really help to facilitate works council elections and prevent companies from hindering them. The hindrance of a works council election currently already represents a criminal offence according to § 119 (1) No. 1 BetrVG. The individual changes will also not be sufficient to increase the relatively small number of works councils, especially since this is not solely the company’s fault. In smaller companies, in particular, a direct exchange usually takes place between the company and the employees, making an intermediate works council superfluous.

The extended protection against dismissal also increases the risk that individual employees will initiate works council elections solely with a view to obtaining this special protection.

1. Simplification of the digital work of works councils

Participation in works council meetings by means of video and telephone conferences is possible until 30 June 2021 in accordance with § 129 BetrVG. Independently of the COVID-19 pandemic, the amendment still allows meetings and resolutions to be conducted digitally in future. In principle, face-to-face meetings continue to have priority. However, works councils are given the opportunity to stipulate in their rules of procedure that they can conduct video and telephone conferences according to their own framework conditions. The use of such media is permitted only if a quarter of the members of the works council have not previously objected to the procedure and if it is ensured that third parties are unable to gain knowledge of the meeting’s content.

Another point that can be welcomed is that, in future, it will also be possible to conclude shop agreements using a qualified electronic signature.

With the newly inserted § 79a BetrVG, the legislator intends to provide legal clarity with regard to who bears the responsibility under data protection law according to the General Data Protection Regulation when the works council processes personal data. According to this provision, it is the company that bears the responsibility under data protection law for the works council’s processing of personal data, whilst the works council must comply with the data protection provisions.

The legislator has thus followed the prevailing view of the legal literature. In contrast, it remains unclear what precisely the legislator means by mutual support between the company and the works council regarding the compliance with data protection provisions (cf. § 79a sentence 3) and how possible infringements are to be sanctioned. The role of the data protection officer in relation to the works council also remains unclear. Despite the new regulation, the hoped-for clarification of the data protection legislation is therefore lacking.

1. Right of co-determination in the organisation of mobile work

The works council's participation rights already have to be regularly taken into account when introducing mobile work or home office workplaces.  Thus, there was no regulatory gap here. Nevertheless, § 87 (1) No. 14 BetrVG (new version) introduces a new right of co-determination of the works council with regard to the organisation of mobile work. The new co-determination right relates in particular to all provisions concerning the "how", i.e. from the beginning and end of the working time as well as the place of the mobile work, to the equipment provided to the individual employees. The decision as to "whether" mobile work will still be possible, in contrast, will also remain with the company in the future.

1. Artificial intelligence

With advancing digitisation, the use of artificial intelligence (AI) in an operational context is also becoming increasingly important. The new regulation therefore provides that the works council may in future call in an expert to assess AI, insofar as this is necessary for the fulfilment of its tasks. Companies therefore have to be prepared for an enormous additional financial outlay in this area.

Furthermore, the works council’s rights to be informed pursuant to § 90 (1) No. 3 BetrVG also apply to the planning of work processes and procedures if these guidelines are drawn up exclusively or with the support of KI. This likewise applies to the use of AI in the development of selection guidelines for personnel selection pursuant to § 95 (2a) BetrVG new version. The amendments thus have only a clarifying function, whilst a fundamental modernisation is still lacking.

1. Other matters relating to the Shop Constitution

If, in future, agreement on vocational training measures cannot be reached in consultations, the company or the works council can appeal to the conciliation board for mediation. In addition, the right for trainees to vote and stand for election to the youth and trainee representation [Jugend- und Auszubildendenvertretung, JAV] will now only be based on status and not on age. The extension of the simplified election procedure for works council elections also applies to the JAV.

1. Accident insurance cover in the home office

Accident insurance cover in the home office has been assessed very strictly to date. This was recently confirmed by the German Federal Social Court [Bundessozialgericht]. With an amendment to § 8 SGB VII, insurance cover in the home office is now being treated in the same way as insurance cover at the workplace. Furthermore, journeys between the home office and the place of childcare will also be insured.

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