Order of 11 December 2024 - 1 BvR 1109/21
In an order published today, the First Senate of the Federal Constitutional Court granted the constitutional complaints of two employers challenging court decisions that ordered them to pay higher supplementary allowances for night work than those determined in the collective agreements. The constitutional complaints lodged by the associations that had negotiated the affected rules in the collective agreements were dismissed as inadmissible.
The constitutional complaints are directed against two judgments issued by the Federal Labour Court (Bundesarbeitsgericht). The Federal Labour Court had ordered the employers – who are members of employers’ associations – to pay to the plaintiffs in the initial proceedings, who work regular night shifts, higher supplementary allowances than those determined in the collective agreements. According to the court, the difference in supplementary allowances paid for irregular night work and those paid for regular night shifts are incompatible with Art. 3(1) of the Basic Law (Grundgesetz – GG); the collectively agreed rules on supplementary allowances must therefore be ‘adjusted upwards’. The associations whose collectively agreed rules were found to be incompatible with the Constitution were not parties to the proceedings before the labour courts.
While the constitutional complaints lodged by these associations against the court decisions are inadmissible, the decisions of the Federal Labour Court do violate the fundamental right under Art. 9(3) first sentence of the Basic Law of the employers who lodged constitutional complaints. The interpretation adopted by the Federal Labour Court, according to which the collectively agreed rules on supplementary allowances for regular night shift work are incompatible with Art. 3(1) of the Basic Law and the higher allowances paid for irregular night work must consequently be applied (‘upward adjustment’), does not take into account the freedom of labour coalitions in the way required by constitutional law. It is true that parties to a collective agreement, who are free to engage in collective bargaining as private actors, must take into account the principle of equal treatment (Art. 3(1) of the Basic Law) when laying down rules in a collective agreement. However, in reviewing the collective agreements, the Federal Labour Court failed to sufficiently take into account the significance that free collective bargaining protected by Art. 9(3) of the Basic Law has for the scope of the binding effect of Art. 3(1) of the Basic Law and for the consequences of a violation of Art. 3(1) of the Basic Law.
The judgments of the Federal Labour Court were reversed and the matters were remanded to the Federal Labour Court.
This decision was taken with 7:1 votes as regards the reasons. Justice Wolff filed a dissenting opinion.
Facts of the case:
The constitutional complaints are directed against two judgments issued by the Federal Labour Court. In the initial proceedings, the Federal Labour Court had ordered the employers to pay higher supplementary allowances than those determined in the collective agreements to the plaintiffs, who work regular night shifts. The Federal Labour Court found that the respective rules on supplementary allowances for (regular) night shifts in the applicable collective agreements were incompatible with Art. 3(1) of the Basic Law, given that higher allowances were paid to workers who performed irregular night work. The Federal Labour Court further held that the legal consequence was an ‘upward adjustment’, in the form of retroactive payment of the (higher) allowances established for irregular night work to the disadvantaged night shift workers. In proceedings 1 BvR 1109/21 (proceedings no. I.), the Federal Labour Court additionally found that the employer will also be required to pay supplementary allowances for regular night shift work that are determined on the basis of the collectively agreed rules on allowances for irregular night work in the future.
According to the collective agreements at issue, employees receive a 50% supplementary allowance for irregular night work, while employees working regular night shifts merely receive a 25% supplementary allowance. In principle, employees who work regular night shifts are additionally entitled to time off for a certain number of shifts worked, paid breaks and the possibility to add up various supplementary allowances.
The plaintiffs in the initial proceedings, who work regular night shifts and are members of the respective trade unions that negotiated the collective agreements, sued their employers – the complainants in the present proceedings – for payment of higher supplementary allowances than those provided for in the collective agreement for regular night shift work.
In the appeals on points of law (Revision), the Federal Labour Court found that the different allowances for irregular night work and regular night shifts provided for in the collective agreements amounted to violations of Art. 3(1) of the Basic Law. According to the Federal Labour Court, while parties to collective agreements are not directly bound by fundamental rights when laying down rules in a collective agreement, fundamental rights do have indirect horizontal effects in legal disputes between private actors; as decisions on values enshrined in the Constitution, they serve as ‘guidelines’ that have a permeating effect on private-law relations. As bodies exercising state authority, the courts must give effect to this permeating effect in their decisions. The Federal Labour Court held that it falls to the labour courts to protect the fundamental rights of employees subject to collective agreements; this includes limiting the exercise of fundamental rights by parties to collective agreements if such exercise conflicts with the fundamental freedoms, equality rights or other rights guaranteed by the Constitution of employees subject to collective agreements. According to the Federal Labour Court, the general guarantee of the right to equality in Art. 3(1) of the Basic Law constitutes a fundamental standard of justice that places an unwritten limit on free collective bargaining. The Constitution’s mandate of protection requires the courts to prevent collectively agreed rules from including differentiations that are contrary to the right to equality and to refuse to give effect to such rules.
Based on these standards, the Federal Labour Court held that the different supplementary allowances for irregular night work and regular night shifts provided for in the collective agreements violate Art. 3(1) of the Basic Law. Both supplementary allowances were based on the criterion of work performed at night, as defined in the collective agreements. The court held that the differentiation between irregular night work and regular night shifts for the groups of employees working at night results in unequal treatment. The court further stated that the collective agreements do not provide any indication that the parties to the collective agreements could have pursued a purpose based on an objective reason when agreeing the doubled supplementary allowance for irregular night work. The court found that this unequal treatment is incompatible with Art. 3(1) of the Basic Law and can only be remedied through ‘upward adjustment’.
With their constitutional complaints, which are directed against the judgments of the Federal Labour Court, the employers and associations challenge a violation of Art. 9(3) of the Basic Law in particular.
Key considerations of the Senate:
I. While the constitutional complaints lodged by the associations are inadmissible, the constitutional complaints lodged by the employers are admissible and well-founded. The challenged judgments of the Federal Labour Court violate the employers’ fundamental right under Art. 9(3) first sentence of the Basic Law.
1. The constitutional complaints lodged by the associations are inadmissible. While the associations have standing because the protection afforded by Art. 9(3) of the Basic Law generally also encompasses the application of collectively agreed rules in individual employment contracts, their constitutional complaints are inadmissible because they have not sufficiently demonstrated that they complied with the principle of subsidiarity. In particular, the procedure under § 9 of the Collective Agreements Act (Tarifvertragsgesetz – TVG) gives at least those who are party to a collective agreement the opportunity to have the legal validity of collectively agreed rules determined, independent of a particular case and with binding effect for those subject to the rules. The associations, which are parties to the collective agreements at issue, did not make use of this possibility, at least not in a timely manner; they also failed to sufficiently demonstrate that this procedure could not have prevented the asserted fundamental rights violations.
2. By contrast, the constitutional complaints lodged by the employers are admissible; with regard to Art. 9(3) of the Basic Law, they are also well-founded.
a) The fundamental right to freedom of labour coalitions is not guaranteed without limitation; it can be restricted. One of the restrictions on free collective bargaining is that parties to a collective agreement, when establishing collectively agreed rules, are in principle bound by the general guarantee of the right to equality under Art. 3(1) of the Basic Law. This follows from Art. 9(3) of the Basic Law, which does not just protect the individual and collective freedom of labour coalitions, but also establishes a unique link between them. Under free collective bargaining, a collective agreement is legally binding on individual employment contracts subject to the collective agreement. This also means that, in order to protect their members, parties to a collective agreement are bound by the general guarantee of the right to equality under Art. 3(1) of the Basic Law when establishing binding collective agreements. While individual freedom is, in principle, strengthened by the legally binding effect of collective agreements, it can also be jeopardised by the determination of collective working and economic conditions. This is because individual members of labour coalitions typically cannot directly influence specific collective negotiations, yet their outcome becomes legally binding on them. They are reliant on their interests being properly represented in the negotiations and properly reflected in the outcome. This structural risk is not fully eliminated by the possibility of terminating one’s voluntary membership of the respective collective bargaining association. Neither Art. 1(3) of the Basic Law nor the Basic Law’s legislative history preclude the binding effect of Art. 3(1) of the Basic Law on parties to collective agreements.
b) aa) Given that parties to collective agreements are bound by the general guarantee of the right to equality, both the purpose of collective bargaining – allowing for negotiations of collectively agreed rules that are in principle free – and the ensuing margin of appreciation and assessment of the parties and their leeway to design must be taken into account. This limits the scope of judicial review. Where rules in collective agreements concern core working and economic conditions and it is not ascertainable that there is any specific need for protection or any indication that minority interests have been neglected, judicial review is limited to whether the rules concerned are arbitrary.
bb) In reviewing the collective agreements at issue, the Federal Labour Court acted in breach of these standards.
(1) The challenged rules on supplementary allowances for irregular night work and regular night shifts form part of the core of the parties’ right to design collective agreements protected by Art. 9(3) of the Basic Law. Collectively agreed rules on supplementary allowances for irregular night work and regular night shifts concern basic elements of the exchange of services. The differences in supplementary allowances are also not based on personal attributes within the meaning of Art. 3(3) of the Basic Law. For the rest, too, there are no signs of serious failures in representation by the respective associations.
(2) It is true that the collectively agreed rules under review in the initial proceedings result in unequal treatment between irregular night workers and regular night shift workers. In particular, irregular night work is compensated by a higher supplementary allowance in both collective agreements, while the additional benefits for regular night shifts include time off following a certain number of shifts and paid breaks.
However, with its review of the collective agreements, the Federal Labour Court violates Art. 9(3) of the Basic Law, because the unequal treatment of employees working regular night shifts and employees performing irregular night work resulting from the collectively agreed rules is not objectionable on the basis of the standard of arbitrariness, which is the applicable standard here.
With its application of Art. 3(1) of the Basic Law, the Federal Labour Court fails to recognise the leeway to design of the parties to collective agreements following from Art. 9(3) of the Basic Law. While it posits a limited standard of review in the challenged decisions, it in fact conducts a detailed review. In doing so, it fails to recognise that objective reasons are ascertainable for the differentiations in the collective agreements in light of their overall concept and the specific circumstances at the time the collectively agreed rules were laid down. It is not sufficient for the review to consider only those justifying purposes that are reflected in the text of the collective agreements. Objective and compelling reasons for different rules in the collective agreements on irregular night work and regular night shifts include the varying degrees of social strain resulting from differences in the predictability of work schedules, the aspect of raising the cost of night work for employers, and the consideration that the higher supplementary allowance can motivate employees to work at night. These purposes are covered by the parties’ leeway to design collective agreements protected by Art. 9(3) of the Basic Law.
c) The legal consequences ordered in response to the assumed violation of the right to equality in the challenged judgments of the Federal Labour Court likewise violate Art. 9(3) first sentence of the Basic Law when it comes to the retroactive effects ordered in both proceedings and the prospective effects in proceedings no. I.
aa) In determining the legal consequences of collectively agreed rules that are contrary to the right to equality, the courts must take into account the freedom of labour coalitions and in particular parties’ leeway to design in factual and legal terms. When parties to a collective agreement have made use of their power to regulate working and economic conditions by concluding a collective agreement, which is protected by fundamental rights, this constitutionally guaranteed leeway for laying down collectively agreed rules continues if there are different options of remedying the unequal treatment found; the parties then in principle have the primary power to remedy such unequal treatment.
Insofar as the rule that the parties intended to lay down cannot be derived from the collective agreement itself and the parties have different options of remedying the violation of the right to equality, they must at least be given the chance to remedy this violation through collective bargaining. In such cases, the courts may therefore not directly order a new set of rules for bringing about the required equal treatment that is legally binding in the individual case and de facto has an indirect binding effect on similar cases. In individual legal disputes involving remuneration rules contrary to the right to equality, the courts may only provide for ‘upward adjustment’ – meaning the extension of the favourable rule to the disadvantaged group – if the discretion of the parties regarding how to exercise their specific leeway to remedy the violation of the right to equality is reduced to one single option – granting the more favourable treatment to both groups.
bb) The challenged judgments do not sufficiently take into account the parties’ primary power to remedy the violation.
(1) In neither of the two cases at issue here could the legal consequence ordered – ‘upward adjustment’ – be based on the intent of the parties to the collective agreement. The statements submitted in the proceedings concur that irregular night work, for which higher supplementary allowances are paid, is a rare exception in the companies bound by the collective agreements, while regular night shift work is common. Irregular night work is only performed in very few cases. According to the statements submitted, this ratio of irregular night work to regular night shift work is well-known and the parties were likely aware of it when they concluded the collective agreements and laid down the differentiated rules. Taking into account the actual employment structure and the considerable increase in pay that would result from such a decision, it is not evident that the parties, had they known that the rules on supplementary allowances for regular night shift work were contrary to the right to equality, would have agreed on an across-the-board supplementary allowance of 50% for all employees working at night in addition to the other rules.
(2) Furthermore, the overall assessment to be conducted in the challenged court decisions does not sufficiently reflect the underlying concept of the collective agreements. The presumption that the right to equality has been violated is derived from the comparison of two different systems – regular night shift work and irregular night work – for which differentiated rules are provided in the collective agreements, which include, but are not limited to, mere supplementary allowances. In solely referring to ‘rules on supplementary allowances’ when determining the legal consequences in the challenged decisions, the Federal Labour Court fails to recognise the underlying concepts of the collective agreements and the right to choose how to regulate night work that is afforded to the parties to the collective agreements; the possibly resulting preferential treatment of those workers who work regular night shifts risks being incompatible with the underlying will of the parties to the collective agreements.
(3) The legal consequences ordered by the Federal Labour Court violate the freedom of labour coalitions of the employers, because the leeway of the parties has not been reduced to ‘upward adjustment’ as the only viable option.
(a) Insofar as the Federal Labour Court granted the application for a declaratory judgment, the challenged decision disregards the primary power to remedy the violation protected by Art. 9(3) first sentence of the Basic Law. In light of the leeway of the parties to a collective agreement to design future arrangements, the courts generally cannot remedy collectively agreed rules that violate the right to equality through an ‘upward adjustment’ for the future, but rather only for the past. It is not ascertainable in this case that there are special aspects relating to the need for protection of those subject to the collective agreements that could justify, by way of exception, setting aside the leeway generally afforded to the parties for the future.
(b) Finally, the Federal Labour Court also violates Art. 9(3) first sentence of the Basic Law insofar as it assumes that an ‘upward adjustment’ with retroactive effect is necessary as the legal consequence in both decisions.
When it comes to new rules in a collective agreement that apply to the past – i.e., the time before a court found a violation of the right to equality – the parties to a collective agreement are, in principle, also afforded leeway to design. However, this leeway can be limited, in particular by the protection of legitimate expectations.
Assuming that the collectively agreed rules violate the right to equality, the parties to the collective agreements had leeway, including for the time before the courts found a violation of the right to equality. Moreover, with regard to the past, too, several options were available to the parties for remedying the assumed violation of the right to equality for a large number of employment relationships bound by the collective agreements. The parties would also have been free to declare, by way of a supplement to the collective agreement, that the higher supplementary allowance for irregular night work serves to compensate for the lack of predictability of work schedules.
Nor was the leeway reduced to an ‘upward adjustment’ as the only viable option in view of the protection of legitimate expectations. Even on the basis of the strict standards applicable to retroactive provisions enacted by the legislator, a general ‘upward adjustment’ would not have been the only option. It is true that parties to collective agreements, who are in part bound by fundamental rights, must, in laying down retroactive rules by way of collective bargaining, observe standards that are structurally comparable to those to be observed by the legislator; they must also take into consideration the underlying legal doctrine of the prohibition of retroactivity for laws, the protection of legitimate expectations and the requirement of legal certainty. However, unlike in the relationship between the state and citizens, the protection of legitimate expectations works both ways for rules in collective agreements, which means that the legitimate expectations of both sides bound by a collective agreement must be protected. Thus, the protection of legitimate expectations does not prescribe a specific rule in cases where it can be invoked by both employers and employees bound by a collective agreement – as in the present case.
(4) In light of this, there was no basis for the Federal Labour Court to circumvent, by ordering ‘upward adjustment,’ the leeway of parties to collective agreements protected by Art. 9(3) of the Basic Law, which must also be granted to the employers in this case. Even assuming a violation of the right to equality, the parties to the collective agreements should first have been given the opportunity of reconciling the conflicting positions through free collective negotiations. In this respect, procedural law provides for sufficient possibilities.
II. The judgments of the Federal Labour Court are reversed on the grounds of a violation of Art. 9(3) first sentence of the Basic Law. The matters are remanded to the Federal Labour Court.
Dissenting opinion of Justice Wolff:
I fully concur with the Senate’s decision to review the collectively agreed rules at issue here against a prohibition of arbitrariness; however, I do not agree with the way that this standard of review was established in the case at hand. The correct view is that the possibility of review against the standard of arbitrariness arises from the indirect horizontal effects of fundamental rights. I cannot concur with the opposing view of the Senate majority that the exercise of free collective bargaining of labour coalitions must be directly measured against the fundamental rights of the Basic Law. The Basic Law does not provide that labour coalitions are directly bound by fundamental rights. In my personal opinion, a binding effect of fundamental rights on labour coalitions, especially when this is not limited to the prohibition of arbitrariness, restricts labour coalitions within the meaning of Art. 9(3) first sentence of the Basic Law in the exercise of their fundamental freedoms in ways not intended by the Basic Law.
1. Art. 9(3) of the Basic Law does not expressly provide that labour coalitions are bound by fundamental rights. An unwritten extension of the binding effect enshrined in Art. 1(3) of the Basic Law to the holders of the fundamental right under Art. 9(3) first sentence of the Basic Law in the exercise of free collective bargaining is also not evident. It is a key feature of fundamental rights protection under the Basic Law that it is the state that is bound by fundamental rights and not private actors; this is especially true in this case, as free collective bargaining is characterised by the absence of state involvement.
2. a) Therefore, labour coalitions, like private actors in general, are bound by fundamental rights only through their indirect horizontal effects. Where a rule of the civil law system requires interpretation or further determination, the indirect horizontal effects of fundamental rights allow them to permeate such civil law provisions.
b) In the present case, the permeating effect of fundamental rights could be based on § 4(1) first sentence of the Collective Agreements Act, on the general principles of the law on collective agreements derived from judicial development of the law, or on §§ 242 and 138 of the Civil Code (Bürgerliches Gesetzbuch – BGB); the many different potential grounds for this permeating effect do not alter the clarity of the outcome. Given that the powers of parties to collective agreements to lay down rules for those subject to such agreements are set forth in § 4(1) first sentence of the Collective Agreements Act, this provision should be considered to be the ‘conduit’ for the indirect horizontal effects.
c) Given that § 4(1) first sentence of the Collective Agreements Act, in connection with employees joining a labour coalition, confers on the labour coalition the legal authority – similar to the authority of legislative bodies – to directly shape the individual employment relationships of its members, it follows from the permeating effect of Art. 3(1) of the Basic law that the labour coalition may not discriminate against individual groups in a way that arbitrarily disadvantages them. The applicability of the prohibition of arbitrariness – as a limitation to the direct and mandatory effect of rules in collective agreements ordered by § 4(1) of the Collective Agreements Act – is based on the permeating effect of this fundamental right. When it comes to the review of rules in collective agreements, the Senate majority appears to find it conceivable that the general guarantee of the right to equality can have a binding effect that goes beyond the aforementioned aspects (by assuming direct effects of fundamental rights) in cases that differ from the present one; yet such a binding effect probably cannot be derived from indirect horizontal effects. Firstly, Art. 3(1) of the Basic Law does not contain an objective constitutional principle according to which legal relations between private actors would generally be subject to equality guarantees. Secondly, such a binding effect would contradict the absence of state involvement underlying Art. 9(3) first sentence of the Basic Law and result in restrictions of free collective bargaining that would not accommodate its particular features.
d) As set forth in detail in the Senate decision, it cannot be found that the different treatment of the two types of night work violates the prohibition of arbitrariness in the aforementioned sense. Given that the challenged decisions of the Federal Labour Court disregard this aspect, they excessively restrict the free collective bargaining of the affected labour coalitions and therefore violate Art. 9(3) first sentence of the Basic Law.