How worker representatives on boards might affect employers

In Germany, works councils, as well as trade unions, have an involvement in forwarding workers’ interests.
In Germany, works councils, as well as trade unions, have an involvement in forwarding workers’ interests.

Theresa May, the UK’s incoming Prime Minister, this week vowed to put worker representatives on boards of major companies. What is worker representation? How might it work in practice? What influence would worker representatives have on a business? Ashok Kanani examines how the system of worker representation operates in Germany.

What is the system of worker representation in Germany?

Germany has a dual system of workers’ representation. Works councils, as well as trade unions, have an involvement in forwarding workers’ interests.

Trade unions represent workers’ overall interests at industry level. Works councils are set up at a local level to protect worker interests at the employer level.

What are the duties of a works council?

In Germany, the law obliges a works council to engage in trustful cooperation with the employer. A works council cannot engage in party politics.

A works council’s duties include promoting equality in the workplace, ensuring compliance with the law, and making recommendations for action to benefit both employer and staff.

Do all companies have works councils?

The law in Germany exempts very small employers from the requirement to have a works council. The requirement for an employer to have a works council applies to business units of five or more employees.

The number of works council members an employer must allow depends on the size of its workforce. A small employer with five employees is required to have just one works council member.

Larger employers with several thousand employees will have a much higher number of works council members. For example, an employer with more than 7,000 employees but no more than 9,000 employees must have 35 works council members.

What rights does a works council have?

The system in Germany requires that the employer and the works council meet regularly and at least once a month. The works council has the right to be consulted on a range of matters including recruitment, grading, workplace closures, business transfers and new working methods.

Works councils are not allowed to organise strikes. They also cannot interfere with pay and employment conditions that are normally regulated by collective bargaining agreements unless the collective bargaining agreement expressively permits a works council to do so.

Reporting to employees

The law in Germany requires a works council to hold a works meeting for all employees every three months and report on its work.

The employer has the right to attend and speak at the works council meetings. The employer must also, once a year, report on developments relating to staffing and welfare, including equal treatment and the economic situation.

Board-level representation

Board-level representation varies according to company size. In most companies with more than 500 employees, the employees are represented alongside shareholders’ representatives on the supervisory board.

In companies with 501 to 2,000 employees, one-third of the supervisory board is elected by the workforce from candidates nominated by the works council or employees. In companies with more than 2,000 employees, half of the supervisory board is elected by the workforce.