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 agreements. However, collective agreements between the works council and the employer (Betriebsvereinbarung) are called works agreements. They can also establish important additional rights. This article explains questions around works agreements: what it is, what types are there, what can it regulate and what not, what advantages does the individual employee gain from these agreements, and much more.

The most important points at a glance:

• A works agreement is a contract between the works council and the employer. It can regulate issues relating to remuneration, working conditions and rules in the workplace.
• Requirements for validity: A works agreement must be in writing and signed by both parties. The parties to the agreement may not exceed their powers under the Works Constitution Act (BetrVG). They may not make any provisions that are already contained in a collective agreement.
• Effect: A works agreement has a direct 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 on workplace level (“Betriebsvereinbarung“). The Works Constitution Act (BetrVG) stipulates what works councils and employers (parties in the workplace) are permitted to regulate and what effect this has on employment relationships within the workplace.

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 a solution is reached, the parties conclude a works agreement.
• If no solution is reached, an arbitration committee can be called upon. The arbitration 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 arbitration 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 final and binding award of the arbitration committee. The result is a binding works agreement.

Formal requirements

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

• Works agreements must be decided jointly by the works council and the employer and must be recorded in writing.
• It must be signed by both parties. Exception: The arbitration committee made an award.
• The employer and works council must sign the same document electronically if it 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 works agreement stipulates overtime for a specific department. If the relevant requirements are met, the employee is obliged to work overtime. In lieu he is entitled to the agreed time off or the agreed additional remuneration.

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

Contents of a works agreement

A works agreement can regulate issues relating to remuneration, other working conditions and rules in the workplace.

Restriction: If a collective agreement regulates certain points, the parties in the workplace may not conclude a works agreement (“Regelungssperre“, Section 77 (3) BetrVG). The parties to the collective agreement have priority. If a collective agreement permits the conclusion of supplementary works agreements (“Öffnungsklausel“), the parties in the workplace may only make arrangements within this permitted framework.

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

• Issues relating to rules in the workplace: 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 leave arrangements: This includes the preparation of a leave schedule, fixing the time at which the leave is to be taken by individual employees, 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 devices designed to monitor the behaviour/performance of employees, e.g. 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 collective agreement. 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 workplace can only make arrangements if the employer has decided to introduce home office or remote work.

Works agreements and other arrangements

There are also oral agreements between the works council and the employer (“Regelungsabrede“):

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

Collective agreements take precedence. A works 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 parties in the workplace may not make separate agreements on the same topics. This is known as the regulation ban (Regelungssperre, Section 77 (3) BetrVG).

Exceptions:

• The parties to the collective agreement allow the parties within the workplace to make provisions in the collective agreement (“Öffnungsklausel“).
• 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 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 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 workplace cannot agree on such issues, a company arbitration committee will be convened at the request of one party.
• The arbitration committee can settle the matter by means of a unilateral binding decision.
• If an enforceable works agreement is terminated, a continuing effect (“Nachwirkung“) 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 workplace may also conclude voluntary 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 workplace 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 works 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)