Voluntary Employee Representative Bodies – A Benefit for Employers and Employees?

Many companies regard the German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) as outdated and overly restrictive. This applies in particular to international groups that are unfamiliar with German co-determination structures or whose domestic rules differ fundamentally from the German legal framework. While works councils in Germany are vested with extensive co-determination rights, many other jurisdictions provide for less stringent employee participation models. “Employee Forums,” “Employee Committees”, “Staff Councils” and other voluntary employee representative bodies are therefore becoming increasingly important.

Through a voluntary or alternative employee representation body, company specific circumstances can usually be addressed more precisely than the BetrVG allows. Company-specific employee representation structures can also foster dialogue between management and employees, particularly at international level. At the same time, group-wide changes can be communicated more transparently, and feedback from different countries can be consolidated more easily. In particular, so-called “Employee Forums,” “Employee Committees” or “Staff Councils” are increasingly being used as platforms for cross-border communication and exchange, but also as genuine negotiating partners for company-wide agreements. If properly designed, they can help increase employee acceptance of transformation projects. A benefit for both sides.

It must always be borne in mind that existing works council structures retain their rights and responsibilities (“exclusive representation mandate”). A voluntary employee representative body cannot supersede or replace a statutory employee representative body. It can therefore only be meaningful where a statutory employee representative body does not yet exist. Only in such circumstances can the voluntary employee representative body be considered a genuine communication and negotiating partner – and fully realize its benefit for both employers and employees.

The establishment of a voluntary employee representative body entails a number of pitfalls that should be carefully assessed in advance:

• Legitimacy and acceptance among the employees must be ensured.

• When designing the body, it must be clearly defined which functions it is intended to perform, which matters it will address, how employee participation is to take place (information, consultation, co-determination), and, in particular, what role the body is to play in restructurings or transformation projects. At the same time, the body should be designed to be future-proof, meaning that even scenarios which currently appear unlikely but cannot be entirely ruled out should, where practicable, be taken into account in order to avoid potentially protracted renegotiations with a body that has already been established. A detailed and well-prepared arrangement governing the composition and rights of the employee representative body is essential to ensuring mutual benefit.

• Agreements concluded with an alternative employee representative body should be carefully considered and should include sufficient flexibility and solution mechanisms that also allow for unilateral changes by the company (“fallback solution”).

• It should never be overlooked that, provided the statutory requirements are met, the formation of a works council remains possible at any time. Once a statutory employee representative body is established, the voluntary employee representative body loses its purpose – there is no protection of continued existence. In this context, it must also always be ensured that the formation of a works council is not obstructed in any way, including indirectly.

Voluntary or alternative employee representative bodies are gaining importance in today’s world of work. For corporate groups operating across borders in particular, employee participation tailored to the specific corporate structures can offer considerable added value, especially in cross-border projects. Although such bodies are no panacea and conflicts in the context of employee participation cannot be avoided entirely, for many companies they constitute an important additional component of modern employee relations based on a culture of dialogue on an eye-to-eye level. The contractual framework for introducing an alternative employee representative body is therefore a key factor for success.