Works agreements explained: From working hours to working from home

From working hours and overtime to bonuses, home office rules, and workplace surveillance: works agreements (“Betriebsvereinbarungen”) govern many important workplace issues in Germany, alongside employment contracts. The employer and the works council conclude these agreements and thereby create binding rights and obligations for employees. This article explains what works agreements are, what they can regulate, where the legal limits lie, and why they often play a key role in workplace disputes and termination negotiations.

Conclusion of a works agreement

A works agreement is a contract that the works council and the employer conclude at workplace level (“Betriebsvereinbarung”). The Works Constitution Act (BetrVG) sets out what the works council and the employer may regulate and how these rules affect 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:

• The works council and the employer must jointly decide on a works agreement and record it in writing.
• Both parties must sign the agreement. The only exception applies when the arbitration committee issues an award.
• If the parties conclude the works agreement in electronic form, the employer and the works council must sign the same electronic document.

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.

Limits of works agreements

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.

According to established BAG case law, works agreements may not regulate matters already governed by collective bargaining agreements unless the collective agreement expressly permits supplementary workplace arrangements (BAG, decision of 28 April 2004 – 1 ABR 30/02).

Working hours and overtime

Works agreements often regulate the distribution of working time, including start and end times, breaks, flexitime arrangements, on-call duty, and overtime rules. However, they generally cannot determine the overall duration of working time itself.

Do employees have to work overtime?

In many cases yes — especially where overtime rules exist in a works agreement or employment contract. However, the works council usually has co-determination rights regarding the introduction and scheduling of overtime.

Vacation rules

Works agreements may also regulate leave arrangements. This includes vacation schedules, company holidays, restricted vacation periods, and rules for distributing vacation fairly among employees.

Who decides vacation schedules?

Employers cannot determine vacation schedules entirely on their own. The works council has co-determination rights regarding vacation principles, scheduling rules, and company holiday periods.

Monitoring and workplace surveillance

Works agreements frequently regulate the introduction and use of technical systems designed to monitor employee behaviour or performance, such as working time recording systems, video surveillance, location tracking in company vehicles, or monitoring software.

Can employers install cameras in the workplace?

Only under strict conditions. Video surveillance often requires co-determination of the works council and must comply with German privacy and data protection laws.

Bonuses and remuneration systems

Works agreements can regulate remuneration principles and bonus systems, including performance-related pay, voluntary employer benefits, or bonus distribution rules.

Can an employer cancel or reduce bonuses?

That depends on the legal basis of the bonus. If bonuses are regulated in a works agreement, employees may have enforceable claims. Employers cannot simply ignore binding bonus rules contained in works agreements.

Home office and remote work

Works agreements regulate how employers and works councils organise remote work or home office arrangements, including work equipment, availability requirements, and health and safety obligations. However, the employer usually decides whether to introduce remote work at all.

Can an employer cancel home office arrangements?

Often yes. Unless the employment contract, a works agreement, or a binding company policy guarantees remote work, employers can usually require employees to return to the office. However, the works council normally has co-determination rights regarding how employers organise 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. By contrast, trade unions and employers or employers’ associations negotiate collective agreements. If a collective agreement already regulates certain matters — or typically regulates them — the employer and works council cannot conclude separate arrangements on the same issues. German law refers to this 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)