Bundesverfassungsgericht

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Act on Uniformity of Collective Agreements is for the Most Part Compatible with the Basic Law

Press Release No. 57/2017 of 11 July 2017

Judgment of 11 July 2017
1 BvR 1571/15, 1 BvR 1477/16, 1 BvR 1043/16, 1 BvR 2883/15, 1 BvR 1588/15

In a judgment pronounced today, the First Senate of the Federal Constitutional Court decided that the provisions of the Act on Uniformity of Collective Agreements are for the most part compatible with the Basic Law. The interpretation and application of the Act, however, must be in conformity with the autonomy of collective bargaining (Tarifautonomie) which is protected as a fundamental right under Art. 9(3) of the Basic Law (Grundgesetz – GG). It is for the regular courts to decide in detail those matters that are yet unresolved. The Act is incompatible with the Constitution only to the extent that it lacks precautions ensuring that the interests of members of particular professional groups or sectors are not neglected one-sidedly when existing collective agreements are supplanted. In this respect, the legislature has to remedy the situation. Until the Act is recast, a collective agreement may, if collective agreements conflict in one and the same company, only be supplanted if it is demonstrated in a plausible manner that the trade union that organises the majority of employees in the company (Mehrheitsgewerkschaft) has seriously and effectively considered the interests of members of the minority trade union (Minderheitsgewerkschaft) within its collective agreement. Subject to this proviso, the Act remains applicable. New provisions have to be enacted by 31 December 2018.

In parts, the decision was not adopted unanimously; two members of the Senate submitted a separate opinion.

Facts of the case:

The Act on Uniformity of Collective Agreements regulates conflicts that arise if several collective agreements are applicable in one company (Betrieb). The Act prescribes that, in case of a conflict, the collective agreement of the trade union which has fewer members in a company is supplanted and it provides for court proceedings to determine which union organises the majority. Also, if the employer engages in collective bargaining, it has to inform the other trade unions with collective bargaining competence in the company and all unions have the right to present their tariff-related demands to the employer. The union whose collective agreement is supplanted in the company also has the right to adopt the collective agreement of the majority union (Nachzeichnung).

With their constitutional complaints, trade unions that organise specific professions (Berufsgruppengewerkschaften), sectoral trade unions, one umbrella organisation and one union member directly challenged the Act on Uniformity of Collective Agreements. They mainly claim that their right to freedom of association (Koalitionsfreiheit) (Art. 9(3) GG) has been violated.

Key Considerations of the Senate:

1. a) The fundamental right set out in Art. 9(3) GG is, first and foremost, a fundamental freedom. It protects all activities which are typical for associations, and does so in particular regarding free collective bargaining and measures taken in labour disputes (Arbeitskampfmaßnahmen) which are aimed at concluding a collective agreement. The fundamental right does not, however, grant an absolute right to exploit, for one’s own benefit, key positions in a company and related power to obstruct a business for tariff-related purposes. Art. 9(3) GG does not guarantee protection of the status quo of individual associations either. However, the right to freedom of association is explicitly guaranteed to every individual and to every occupation or profession. Therefore, state measures would be incompatible with Art. 9(3) GG if they were specifically targeted at driving particular trade unions out of the collective bargaining process or at generally depriving particular trade unions, such as trade unions that organise specific professions, of their basis of existence. Furthermore, self-determination regarding the inner structure of an association is an essential component of this right, including the determination of one’s own profile also by defining it in terms of sectors, fields or professions, so that specific requirements to that end would be impermissible.

b) The provision in the Act regulating which collective agreement supplants another in the case of a conflict in a company interferes with the right to freedom of association. Moreover, it can unfold advance effects (Vorwirkungen) that impair fundamental rights because the threat that a trade union’s own collective agreement may be supplanted as well as the determination by a court that a union is the minority in a company can weaken the trade union with regard to its membership recruitment or with regard to its ability to mobilise for taking measures in labour disputes and can influence decisions regarding that trade union’s tariff-related approach or strategy. The scope of protection of this fundamental right covers the trade union’s decision as to whether and to what extent it wants to cooperate with other trade unions as well as its own choice of a profile, and this decision is influenced as well.

In contrast, the right protected under Art. 9(3) GG to put pressure or counter-pressure on the respective opponent by measures taken in labour disputes in order to reach a collective agreement is not touched on by the Act on Uniformity of Collective Agreements. The uncertainty arising before the conclusion of a collective agreement about the risk that a collective agreement may be supplanted does not establish a trade union’s liability risk for measures of industrial action, neither in case of clear nor in case of uncertain majorities. If necessary, the labour courts have to apply the liability provisions accordingly, in conformity with the Constitution.

c) Art. 9(3) GG entitles the legislature to regulate the relationship between opposing parties of collective agreements in order to create structural preconditions for facilitating a fair balance in the process of collective negotiations, to thus generate reasonable economic and working conditions. However, the effectiveness of free collective bargaining does not only include the structural parity between employers and employees. It also includes the conditions of negotiating collective agreements that ensure that freedom of association can unfold in cases in which several actors compete with each other on one side, either on the side of trade unions or on the side of employers. Also in these cases, the legislature has a wide scope of action and is not barred from changing relevant parameters; be it for reasons of the common good, in order to re-establish impaired parity, or to ensure a fair balance on one side alone.

2. When interpreted and applied in the constitutionally required manner, the provisions of the Act on Uniformity of Collective Agreements are, for the most part, compatible with Art. 9(3) GG.

a) It is the purpose of the Act to offer incentives for a cooperative approach on the side of employees when negotiating collective agreements, and to thus avoid conflicts between such agreements. In doing so, the legislature pursues the legitimate objective of regulating the relationship between trade unions in order to ensure the structural conditions of collective negotiations. The challenged provisions are a suitable means for achieving that objective, even if it is uncertain that the desired effect actually sets in. There are no effective constitutional concerns against their necessity either. In any case, there are no means at hand to achieve the legitimate objectives in a manner that is undoubtedly equally effective, yet which only impairs the fundamental rights of trade unions and their members to a lesser extent. Also, the legislature did not violate its margin of assessment or its latitude for prognosis.

b) Overall, the burdens arising in the context of the Act on Uniformity of Collective Agreements are, for the most part, reasonable, provided their sharp edges are softened by a restrictive interpretation of the supplanting provision (§4a(2) Collective Agreements Act, Tarifvertragsgesetz – TVG), by supporting procedural provisions, and by an extensive interpretation of the right to adopt the supplanting provisions of the collective agreement.

aa) The weight of the impairment caused by the provisions is relativised by the fact that the persons concerned are, to a certain extent, in control of whether the provisions unfold their supplanting effect or not. Whether the supplanting provision will be applied can be determined within a collective agreement. However, all concerned parties then have to agree.

bb) Furthermore, in cases of conflicting collective agreements in one company, the Act itself already limits the supplanting effect in several respects. In addition, the labour courts are obliged to interpret collective agreements in cases of conflict in a way that protects the fundamental rights positions impaired by the supplanting effect to the largest possible extent. If and in as far as it objectively corresponds to the intentions of the parties to a collective agreement that agreements of competing trade unions may supplement their provisions, those provisions will not be supplanted. If there are reasons to assume that provisions of conflicting collective agreements are intended to coexist, neither will be supplanted.

cc) To avoid unreasonable hardship, certain benefits which are guaranteed by a collective agreement may not be supplanted. This concerns longer term benefits on which employees typically rely in their life planning and which they legitimately expect to be permanent, such as contributions to old-age provision or benefits relating to job guarantees or their working life. The legislature has not adopted any protective provisions in that respect. In those cases, courts have the constitutional obligation to ensure that supplanting a collective agreement remains reasonable. If hardship cannot be avoided by applying the law governing the continued provision of such benefits, the legislature is obliged to regulate this matter.

dd) The impairment resulting from the Act is also mitigated by interpreting the provision governing conflicts in the way that a collective agreement is only supplanted for as long as the supplanting collective agreement is in place and no further collective agreement has a supplanting effect. Subsequently, the supplanted collective agreement then revives with effect for the future. It is for the courts to decide whether this has to be assessed differently in order to avoid short-term changes between different collective agreements.

ee) The burdening effects of having one’s collective agreement supplanted are mitigated by the right to adopt the supplanting provisions of another collective agreement (§ 4a(4) TVG). That has to be interpreted in conformity with the Constitution to the effect that the entitlement relates to the entire supplanting collective agreement. That way, the right to adopt the supplanting provisions of the collective agreement at least corresponds to the extent to which rules are supplanted, but it can also reach further.

ff) The impairment of rights provided in Art. 9(3) GG is also reduced by procedural and participation rights granted to the trade unions affected by the supplanting collective agreement. The employer is obliged to announce within the company in due time that it will engage in collective bargaining, and the trade union which is not involved in the negotiation but competent for collective bargaining in the company is entitled to present its views to the employer. These procedural positions have to be regarded as constituting full legal obligations. If they are violated, the requirements for supplanting a collective agreement are not met.

gg) The uncertainty of the employer regarding the trade union’s actual clout due to its number of members is particularly significant with respect to the parity between trade unions and the employer, which is protected under Art. 9(3) GG. The newly introduced proceedings pursuant to § 2a(1) no. 6, § 99 of the Labour Court Act (Arbeitsgerichtsgesetz – ArbGG) involve the risk to result in a disclosure of the number of members of trade unions. The regular courts have to use all available means of procedural law to avoid this from happening to the largest possible extent. However, if this does not always succeed, it is overall reasonable with regard to the legislative objective.

3. The impairments that are linked to the supplanting of a collective agreement are disproportionate to the objective sought by the legislature to the extent that there are no precautions against the one-sided neglect of members of particular professions or sectors by the majority trade union. The legislature did not take any precautions to ensure that the interests of members of smaller profession groups in a company whose collective agreement is supplanted are sufficiently taken into account. Thus, it cannot be ruled out that their working conditions and interests are, even in the event the supplanting provisions of the collective agreement are adopted, disregarded to an unreasonable extent, because they are lacking effective representation within the majority trade union. The legislature is obliged to remedy this situation; in that respect, it has wide latitude.

4. The fact that § 4a TVG is partly unconstitutional does not lead to it being voided, but only to the finding of incompatibility with the Basic Law. The deficits do not affect the core of the provision. The structural parameters of collective bargaining which the legislature seeks to ensure are, in comparison, of great significance. Until the Act is recast, the provision may therefore only be applied provided that one collective agreement only supplants another if it can be plausibly demonstrated that the majority trade union has, in its collective agreement, seriously and effectively considered the interests of the professions whose collective agreement is supplanted.

Separate Opinion of Justices Paulus and Baer

Justices Paulus and Baer agree with the Senate with respect to the requirements which result from the fundamental freedom guaranteed under Art. 9(3) GG to ensure free collective bargaining. However, they cannot endorse the judgment with respect to its evaluation of the means by which the legislature wants to strengthen this freedom, the majority decision that the Act remains applicable, and the decision to delegating the regulation of fundamental rights issues to the regular courts. In their opinion, the objective to ensure free collective bargaining is legitimate, but the means of supplanting a concluded collective agreement is too severe. Also, it is for the legislature rather than the Court to decide complex questions. Furthermore, the other constitutional deficits of the Act on the Uniform Application of Collective Agreements which the judgment identified must be resolved either by a mandatory interpretation in conformity with the Constitution or by enacting new provisions, and thus by the legislature.

Key Considerations of the Separate Opinion:

1. The legislature may react to erosions of the commitment to collective agreements and may enact provisions which limit the freedom under Art. 9(3) GG in a proportionate way. However, it may not aim for “an order free of contradictions”, or for a unitary trade union, or seek to protect employers from claims of various trade unions.

2. The judgment is based on a doubtful assessment of social reality. It has neither been substantiated nor verified otherwise that wages which are negotiated in conflicting collective agreements are currently considered unfair and thus adversely affect the company peace. Furthermore, it cannot be overlooked that the lack of cooperation between trade unions stems from reasons which the judgment underestimates. The existence of multiple collective agreements (Tarifpluralität) is a result of exercising a fundamental freedom and often desired, in particular by employers; conflicts are rare and occur in specific contexts only. For a long time, there have been clarifying proceedings organised by the associations themselves. In addition, it cannot be overlooked that the challenged provisions are the outcome of a one-sided political compromise and that the legislature does not only provide for heavy sanctions, but has also adopted a structurally biased solution.

3. It is questionable whether the challenged provisions are suitable to achieve the objective of a functioning system of collective agreements. It appears very probable that the legislature prompts fiercer competition and status conflicts within individual companies. There are also substantial doubts with regard to the necessity for the Act. The change in the case-law of the Federal Labour Court in 2010 did not lead to an impairment of the functioning of free collective bargaining; even before 2010, there was no consistent uniformity of collective agreements within companies. It constitutes a milder yet equally effective means to create an incentive for the parties to collective agreements to cooperate if a collective agreement can be supplanted only subject to court proceedings.

a) The Act is not only unreasonable in terms of the protection of the fundamental rights of specific professions in an applicable collective agreement. It also concerns the interpretation of the provision as supplanting a collective agreement without a previous decision of a labour court, which the judgment allows for and leaves to the labour courts. The interpretation according to which the conflict is assessed and determined in the court proceedings to identify the union that organises the majority of employees in a company is then mandatory under constitutional law. To supplant a collective agreement in constitutive court proceedings alone is the only way to create legal certainty and avoid unpredictability that additionally burdens the system of collective agreements.

b) The judgment rightly assumes that it would be incompatible with Art. 9(3) GG if the provisions for clashes also led to a loss of claims from a collective agreement which are of a long-term nature and touch on the life planning of individual employees. The legislature did not consider this. It is not for the courts to fill this gap. If interests which are clearly protected by fundamental rights are disregarded, it is the legislature’s responsibility to choose one of many conceivable solutions for this.

c) The Senate majority’s assumption that adopting the supplanting provisions of the collective agreement of a different trade union limits the loss of one’s own collective agreement is based on the dangerous tendency to consider the interests of employees to be uniform. The idea that a specifically negotiated agreement does not matter as long as there are ties to any collective agreement at all also substantively favours large sectoral trade unions. This contradicts the foundational concept of Art. 9(3) GG, which relies on the self-determined commitment of members of all professions with regard to collective bargaining.

d) The judgment creates the possibility that, in the course of court proceedings, the relative strength of trade unions in a company is disclosed. As long as the legislature does not provide for safeguards that prevent the resulting shift of parity in trade bargaining this is also unreasonable.

4. The Senate is unanimous in its view that a provision which does not take into consideration the interests and needs of those whose collective agreements in a company are to be supplanted is incompatible with the Basic Law. Accordingly, however, the provision which is unconstitutional to this extent cannot continue to be applicable. The regular consequence that the provision at issue be voided is indeed severe, yet it is stipulated clearly; and recognised reasons for an exception that mandates the continued application of unconstitutional provisions are not applicable here. Therefore, the Act should have been declared unconstitutional and void at least to that extent; § 4a(2) second sentence TVG would have been inapplicable until the adoption of a new provision. Where the legislature did not set the course for a reasonable limitation of the right to freedom of association, it has to act itself. The Senate now requires that the regular courts assess the substantive reasonableness of collective agreements. In contrast, Art. 9(3) GG trusts the independently exercised freedom of the parties to collective agreements.