Employees can participate in the organization in which they work in a variety of ways, such as through a works council (WC). In many organizations, especially larger ones, employee participation has become indispensable. In this article, therefore, we will discuss in short the laws and regulations relating to employee participation. If you have any further questions or would like more detailed advice, please do not hesitate to contact a member of our employment law team.
Establishing a works council
The legal framework for employee participation is set out in the Works Councils Act (WCA). Under the WCA, every company that employs at least fifty people is required to set up a WC. In companies with between ten and fifty employees, an employee representative body (ERB) can be established, which is mandatory only if requested by the majority of employees.
WC members are elected by and directly from among the employees. Before these elections can take place, preliminary WC regulations are drawn up, including information on the election system itself, the timing of the elections and the number of WC members to be elected. The WCA contains further provisions regarding the election process. For example, any employee who has been employed by the company for 3 months is eligible to vote and stand for election.
Although mandatory, there are no direct sanctions for failing to establish a WC once the 50 employee limit is exceeded. However, any employee can demand that a WC be set up, and can ultimately enforce this in the sub-district court. If the employees are initially unwilling to participate in the WC, this does not relieve the company of its obligation to establish a WC. In this case, the company must continue to monitor interest.
Participation in a group structure
Where a group of two or more companies together exceed the threshold of fifty employees, there is also an obligation to establish a WC. This can be done by establishing a separate WC for each company, but the WCA also provides for the establishment of a group works council (GWC) if this is conducive to the proper application of the WCA. The members of the GWC must come from all the companies involved, so that each company is represented in the GWC.
The WCA also provides for the possibility of establishing a central works council (CWC), which acts as an umbrella works council over several (group) works councils in a joint venture. The CWC deals with matters of common interest at central level and its members are elected by and from the participating WCs.
Rights and powers
The WCA gives the WC various rights and powers, the most important of which are:
- Right of consultation (Article 24 WCA). At least twice a year, the employer and the WC meet for a consultation meeting to discuss the general course of the company’s business, including decisions requiring consultation and approval that the employer is preparing;
- Right of consultation (Article 25 WCA). The WC must first be consulted on a wide range of proposed decisions. For example, consider a proposed reorganization or the appointment and dismissal of a director ( Article 30 WCA);
- Right of consent (Article 27 WCA). Consent is the most far-reaching right of the WC. The consent of the WC is required for the adoption, amendment or revocation of certain regulations. This applies, for example, to the amendment of a bonus scheme, but also to the adoption of a whistleblower regulation. The latter will be on the agenda of many companies with the recently enacted Whistleblower Protection Act;
- Right to information (Article 31 WOR). The company must provide the WC with all the information it needs to carry out its duties.
The WCA gives the WC and the ERB essentially the same rights, but the powers of the ERB are more limited. For example, the ERB’s right of consultation only applies to a proposed decision that may lead to job losses or to a significant change in the work, employment conditions or working conditions of at least one quarter of the workforce.
Employers often see employee participation as a challenge because it would limit their freedom or delay decision-making. However, if properly organized, employee participation can actually work to the employer’s advantage, for example by increasing support for change within the organization. Our team supports and advises both employers and works councils in all stages of employee participation.
