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COUNTRY OVERVIEW

Employee representatives have half the seats on the boards of larger Germany companies and one-third of the seats in medium-sized companies. Both unions and employers were consulted on the legislation implementing the directive and the employers used the discussion on implementation to start a wide-ranging attack on the national system of board-level representation.

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Employee representation at board level is a central part of the German system of industrial relations. Employee representatives have a right to seats on the supervisory board of larger companies – one-third in companies with 500 to 2,000 employees, half in companies with more than 2,000. This made the issue of employee representation in European companies a key concern. In the years of debate before the directive was passed, the German government was concerned to ensure that German companies could not use the opportunity to become European companies to escape from their obligations to give supervisory board seats to employee representatives.

Unions and employers were consulted on the implementation of the directive and the employers used the opportunity to launch an attack on the existing system, arguing in a document published in November 2004 that it required substantial “modernisation”. This led in turn to a government commission, made up of representatives of the unions and the employers and independent experts, being appointed to discuss employee board-level representation in Germany. It completed its work at the end of 2006 but was unable to present a common report because of fundamental disagreements between the unions and employers. However, the independent members of the commission produced their own report, which stated that they saw no reason to propose a fundamental revision of the German system of board-level representation but called for a number of changes. As the coalition government which by that time was in place, had agreed that it would only implement the recommendations of the commission if they were unanimous, no subsequent changes were introduced.

It remains the case, however, that Germany is one of the few, if the not the only country, where the implementation of the directive led to a wide public debate.

Form of transposition

Directive was implemented through legislation passed in December 2004, slightly more than two months after the October 2004 deadline.

The legislation implementing the directive on employee involvement in European companies was passed on 22 December 2004 and published in the Federal Law Gazette on 28 December. The legislation, Law on the introduction of the European company (Gesetz zur Einführung der Europäischen Gesellschaft (SEEG)) includes both legislation to adapt German company law to the requirements of the Regulation on European companies and the legislation necessary to implement the directive itself. (The paragraphs transposing the directive are in Article 2 of the law).

Special negotiating body (SNB)

Selection of national members

German SNB members are initially chosen by a meeting of works council representatives. Only if there are no works councils are the SNB members directly elected by the employees. The proportion of men and women elected should reflect the gender make-up of the workforce and unions are guaranteed a third of the SNB members from Germany if there are more than three.

German SNB members are chosen by an election body (Wahlgremium) with a maximum of 40 members in a secret ballot. Where only one group of companies is involved, the election body is composed of the members of the group works council (Konzernbetriebsrat), or, if this does not exist, the members of the company works councils (Gesamtbetriebsräte), or where these do not exist the members of the works councils (Betriebsräte). Where there are workplaces and companies without a works council these are represented by the bodies that do exist.

Where there is only one company or one workplace involved, similar rules apply with the company works council or the works council respectively taking the position of the group works council.

Where there are several groups of companies or a mixture of groups of companies and independent companies or workplaces, the election body consists of the members of the group, company and works councils. If some of these companies have no employee representatives, the members of the election body representing them are elected directly by the employees.

If there are no employee representative bodies at all the members of the SNB are chosen by the employees in a secret ballot (Article 2 §8).

The number of German male and female members elected to the SNB should be in proportion to the number of male and female employees in the companies involved in Germany and where at least three members SNB members come from Germany, every third member should be a union representative, nominated by a union with members in one or more of the companies involved. (If there are seven or more SNB members from Germany, every seventh should be a managerial employee.) (Article 2 §6) Where only one union nominates, there should be at least twice as many nominated candidates as seats (Article 2 §8).

External trade union representatives

External union representatives from Germany can be members of the SNB and must be if there are three or more German SNB members.

The German legislation states specifically that both employees and trade union representatives can be elected as SNB members from Germany. If at least three SNB members come from Germany, every third member must be a union representative, nominated by a union with members in one or more of the companies involved. (If there are seven or more SNB members from Germany, every seventh should be a managerial employee.) (Article 2 §6) Where only one union nominates, there should be at least twice as many nominated candidates as seats (Article 2 §8).

Financing of experts

Funding not limited to a single expert.

The German legislation does not limit funding to a single expert. It states that the SNB may “draw on the assistance of experts of its choice” (Article 2 §14) and goes on to state that the companies are liable “for the expenses incurred with the establishment and activities of the special negotiating body” (Article 2 §19). There is no restriction on the number of experts who can be funded.

Standard rules under the fallback procedure

Allocation of national seats on SE representative body

Same arrangements apply as for SNB members – German SNB members are initially chosen by a meeting of works council representatives, with direct elections only if there are no works councils. Unions are guaranteed a third of the German seats on the representative body if there are more than three.

The same arrangements which apply for the choice of German members of the SNB also apply for the choice of German members of the SE representative body – known as the SE works council (SE-Betriebsrat) in the German legislation. In other words, they are chosen by a meeting of works council representatives, with direct elections by the employees only if no works councils are present. The same rules on gender balance and external union representation also apply. The number of male and female SE works council members from Germany, should be in proportion to the number of male and female SE employees in Germany, and at least one third of the German seats must go to the unions if there are more than three SE works council members from Germany (see section on SNB) (Article 2 §23).

Budget of representative body

The company should bear the expenses of the representative body, including the costs of experts.

The company is obliged to cover the costs of the representative body. These include “the assistance of experts of their choice where this is necessary to enable them to properly carry out their tasks” (Article 2 §32 and §33).

National procedure for the allocation of board seats

Same arrangements apply as for SNB members – German board-level employee representative members are initially chosen by a meeting of works council representatives, with direct elections only if there are no works councils. Unions are guaranteed a third of the German seats on the board if there are more than three.

The same arrangements which apply for the choice of German members of the SNB also apply for the choice of German employee representatives at board level. In other words, they are chosen by a meeting of works council representatives, with direct elections by the employees only if no works councils are present. The same rules on gender balance and external union representation also apply. The number of male and female employee board members from Germany, should be in proportion to the number of male and female SE employees in Germany, and at least one third of the German seats must go to the unions if there are more than three SE works council members from Germany (see section on SNB) (Article 2 §23).

Misuse of procedures and structural change

Misuse of procedures

Changes in the structure of a European company in the first year, which result in employees being deprived of or failing to gain board-level involvement, are regarded as a misuse of procedure, unless such changes lead to a renegotiation of the agreement.

The legislation states that a European company may not be misused to deprive employees of participation rights or to withhold these rights from them. It states that changes in the company structure which are likely to result in employees losing or not gaining these rights in the first year of a European company’s existence are to be taken as a misuse of procedures unless they lead to a renegotiation of the agreement (Article 2 §43).

Structural change

The agreement must be renegotiated if, after the SE has been established, structural changes are planned which are likely to lead to a reduction in employees’ board-level involvement.

The German legislation includes a clear requirement for the agreement to be renegotiated, if structural changes “are planned, which are likely to lead to a reduction of the employees’ participation rights”. Either the management or the SE works council can initiate these negotiations, and if both sides agree these negotiations can include representatives of employees who are planned to be brought into the SE.

Position of trade unions and employers

Both unions and employers were consulted on the legislation implementing the directive. While the unions were positive about the proposals, the employers were critical, accusing the government of going beyond the requirement of the directive.

Initial drafts of the legislation were sent to both the unions and the employers. However, while the unions were very positive, issuing a statement in May 2004 which stated that the draft deserved “both praise and recognition”, the employers were much more critical.

In a joint statement, also in May 2004, all the main employers’ associations expressed their concern that German companies would face “renewed disadvantages” because the German government had reproduced the existing national system of board-level representation in the legislation implementing the directive. They were particularly critical of the requirement for union representatives to be members of the SNB, the SE representative body and the board, which they said gave unions “over-proportional influence” and was not required by the directive.

These points were not, however, taken up in the final text of the legislation and the employers moved on to a broader attack on the German system of board-level representation (see introduction).

L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)

Alle Germany