Works agreements explained: From working hours to working from home

If disputes arise regarding rights and obligations in the employment relationship, the first place to look is the employment contract or collective agreement. However, works agreements can also establish important additional rights. This article explains questions relating to works agreements: what is a works agreement, what types are there, what can it regulate and what not, what advantages does the individual employee gain from a company agreement, and much more.

The most important points at a glance:

• A works agreement is a contract between the works council and the employer that can regulate issues relating to remuneration, working conditions and company rules.
• Effectiveness: A works agreement must be in writing and signed by both parties. In terms of content, the parties to the agreement may not exceed their powers under the Works Constitution Act (BetrVG) and may not make any provisions that are already contained in a collective agreement.
• Effect: A works agreement has immediate and binding effect on the employment relationship, i.e. rights and obligations automatically become part of the employment contract.
• Waiver of rights: If an employee has rights under a works agreement, the employee can only waive these rights with the consent of the works council. If the works council has not expressly agreed to the waiver, the waiver is invalid and the claim continues to exist.

Conclusion of a works agreement

A works agreement is a contract between the works council and the employer at company level. The Works Constitution Act (BetrVG) stipulates what works councils and employers (company parties) are permitted to regulate and what effect this has on employment relationships within the company.

Procedure

If the employer or works council wishes to regulate certain points within the scope of their responsibilities, e.g. a regulation on the ordering of overtime due to an increased order situation, both sides first enter into negotiations:

• If an agreement is reached, the parties conclude a works agreement.
• If no agreement is reached, a works conciliation committee can be called upon. The conciliation committee is made up of representatives of the works council and the employer. A chairperson from outside the company chairs the negotiations. The task of the conciliation committee is to reach an agreement through the mediation of the chairperson. If the chairperson is unable to do so, he or she may, in certain cases, enforce the agreement by means of a ruling of the conciliation committee. The result is a binding works agreement.

Formal requirements

The following must be observed for a valid company agreement to be concluded:

• Works agreements must be decided jointly by the works council and the employer and must be drawn up in writing.
• It must be signed by both parties. Exception: The conciliation committee has decided by ruling.
• The employer and works council must sign the same document electronically if the agreement is concluded in electronic form.

Effect of a works agreement on employment relationships

Once a works agreement has been validly concluded, it is directly and bindingly applicable (Section 77 BetrVG).

The rights and obligations arising from the works agreement automatically become part of the employment contract. They apply to all employees who fall within the scope of the agreement. Example: A company agreement stipulates overtime for a specific department. If the relevant conditions are met, the employee is obliged to work overtime and is entitled to the agreed time off in lieu or the agreed additional remuneration.

Employees and employers are bound by the company agreement, but may agree on more favourable provisions in the employment contract.

Contents of a works agreement

The works council and employer can regulate issues relating to remuneration, other working conditions and company rules in a works agreement.

Restriction: If a collective agreement regulates certain points, the parties to the works agreement may not conclude a works agreement (prohibition of regulation in section 77 (3) BetrVG). The parties to the collective agreement have priority. If a collective agreement permits the conclusion of supplementary works agreements (opening clauses), the parties to the works agreement may only make arrangements within this permitted framework.

Company agreements can cover a wide range of topics. Here are just a few of the most important examples:

• Issues relating to company rules: entry and exit checks at the company, private use of email and the internet, rules on work clothing, etc.
• Distribution of working time: start and end of the daily working time, breaks, distribution over individual days, flexitime, on-call duty, etc. Not included: the duration of the working time.
• Temporary reduction/extension of normal working hours: ordering overtime, introduction of short-time working.
• Establishment of holiday principles: This includes rules on holiday entitlement, how leave is distributed, and any restricted periods. It also covers criteria such as family responsibilities, school-age children, or company-wide holidays.
• Introduction and use of technical equipment that monitors behaviour/performance: digital/mechanical working time recording, tachographs, video cameras, data processing systems, location apps in company cars, standard Internet programmes with monitoring components, etc.
• Issues relating to company wage structures: Establishment of remuneration principles and remuneration methods, such as time-based pay or bonus pay, piecework pay systems or distribution principles for voluntary benefits above the standard rate. The employer alone decides whether a benefit is provided.
• Organisation of mobile work: Regulations on how and where home office or remote work can be performed, how work equipment is allocated, etc. However, the employer alone can decide whether work may be performed in a home office or remotely. The works council cannot enforce any regulations on ‘whether’ this is permitted.
• The parties within the company can only make arrangements if the employer has decided to introduce home office or remote work.

Works agreements and other arrangements

In addition to works agreements, there are also so-called regulatory agreements:

• These are binding agreements between the works council and the employer that are not subject to written form.
• They do not have a direct and binding effect on the employment relationship.

Collective agreements take precedence. A company agreement is a contract between the works council and the employer. A collective agreement, by contrast, is made between trade unions and employers or employers’ associations. If certain matters are already regulated – or typically regulated – by a collective agreement, the company parties may not make separate agreements on the same topics. This is known as the regulation ban (Section 77 (3) BetrVG).

Exceptions:

• The parties to the collective agreement allow the parties within the company to make provisions in the collective agreement (opening clause).
• Social plans are works agreements designed to mitigate economic disadvantages in the event of redundancies for operational reasons or other measures in the event of operational changes. The social plan is not subject to the blocking effect of a collective agreement (Section 112 (1) BetrVG). The parties to the company agreement may regulate points in the social plan even if they are already regulated in the collective agreement.

Types of works agreements

There are enforceable and voluntary company agreements. Here are the differences:

Enforceable works agreements

The BetrVG regulates a number of co-determination rights of the works council that must be observed without exception. Examples: Introduction of short-time working or overtime, distribution of daily working hours, etc.

• If the parties within the company cannot agree on such issues, a company conciliation committee will be convened at the request of one party.
• The conciliation committee can settle the matter by means of a unilateral binding decision.
• If an enforceable company agreement is terminated, a continuing effect applies. This means that the agreement continues to apply even after the notice period has expired until the parties conclude a new agreement. The reason for this is to avoid a regulatory gap during the transition period.

Voluntary works agreements

In addition to mandatory co-determination rights, the parties in the company may also conclude voluntary works agreements. This is only possible if no collective agreement exists on the same matter. Examples include environmental protection measures, setting up social facilities, or rules on voluntary benefits such as bonuses or loyalty payments.

• If the parties within the company cannot agree on voluntary issues, a company conciliation committee can only act with the mutual consent of both parties.
• The conciliation committee cannot settle the dispute unilaterally by means of an award. Both sides must accept an award in advance or retrospectively.
• If a voluntary company agreement is terminated, there is no continuing effect. It expires at the end of the notice period. However, the parties to the agreement may agree on a continuing effect (section 77 (6) BetrVG).

Termination of a works agreement

The employer or works council may terminate a works agreement with three months’ notice. However, they may also agree otherwise. The parties to the agreement can also conclude a new agreement, which then replaces the old one. A works agreement can also be terminated by expiry of a period of time or achievement of its purpose.

Disputes

If the works council and employer disagree on a works agreement or its content, either party can take legal steps. They may initiate proceedings before the labour court to clarify the issue.

If employees and employers disagree about claims from a works agreement, the employee can take legal action. They may file a lawsuit with the labour court to clarify the issue, such as payment claims for voluntary benefits.

Frequently asked questions (FAQ)