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14.07.2017 | KPMG Law Insights

Collective Bargaining Unity Act – constitutional with restrictions

Collective Bargaining Unity Act – constitutional with restrictions

Pending status prolonged – improvements required – goal of legal certainty achieved only with limitations

The Federal Constitutional Court has declared the Collective Bargaining Unity Act to be fundamentally constitutional (ruling of July 11, 2017, Ref.: 1 BvR 1571/15). However, the issue of collective bargaining agreements remains in limbo for the time being, as the law needs to be amended in parts by the legislator. From the point of view of the smaller unions, which reject the law as a restriction of their constitutionally guaranteed freedom of association, this appears to be a setback; for the large unions and employers, it is a step forward. But much remains uncertain: the judges have passed the ball back to the labor courts.

The law was triggered by a 2010 ruling of the German Federal Labor Court (ruling of July 7, 2010, Ref.: 4 AZR 549/08), which abandoned the principle of collective bargaining unity (“one company – one collective agreement”). Politicians, employers and parts of the public feared power struggles, high wage demands and long strikes, especially on the part of smaller sectoral unions. Examples, particularly from the healthcare and transport sectors (Lufthansa, Deutsche Bahn), show that the fears were not entirely unrealistic.

In 2015, the legislature reacted with the Collective Bargaining Unity Act, which was intended to restore the old situation. In the event of conflicting collective agreements, only one collective agreement should apply in each company, namely the agreement of the trade union with the most members (Section 4a (2) Sentence 2 of the Collective Agreement Act). For smaller sectoral unions, such as those representing train drivers, doctors or pilots, this means an encroachment on their freedom to represent their members and negotiate collective agreements on their behalf. This creates a two-tier society among unions, where some can negotiate valid collective agreements but others cannot. It is obvious which union is more attractive to its members. Accordingly, the smaller unions felt that their freedom of association under Article 9 (3) of the Basic Law had been violated.

For the labor courts, the work is only just beginning

The ruling is a stage victory for the Federal Ministry of Labor and Social Affairs and the DGB trade unions. Overall, the principle of “one company – one collective agreement” has not been touched by the Federal Constitutional Court. This result had already been foreshadowed in the proceedings of the First Senate of the Federal Constitutional Court in January of this year. In the run-up to the proceedings, however, renowned legal experts had considered the legal fixation of the principle of collective bargaining unity to be unconstitutional. Many employers were therefore skeptical and did not apply the law. Lufthansa, for example, only ended its conflict with the Vereinigung Cockpit pilots’ union in March by reaching a collective agreement.

Are strikes by divisional unions now a thing of the past? In principle, according to the ruling of the Federal Constitutional Court, the collective agreement of the larger union supersedes the agreement of the smaller one – so strikes by unions with few members are unlikely for the time being.

Doh the judges have left a loophole open: The interests of the smaller union and its members must be sufficiently taken into account in the applicable collective bargaining agreement, namely “seriously” and “effectively.” However, the judges refrained from further specification. This is what the labor courts will have to deal with in the coming years. Until a robust body of case law is established, the judgment therefore creates legal certainty to a very limited extent at best.

Link to the ruling of the Federal Constitutional Court

 

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