The company agreement in labor law

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The company agreement

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The legal basis for a company agreement results from § 77 BetrVG. A company agreement is an agreement between the employer and the Works Council. The company agreement regulates rights and obligations for the employees, the employer or the Works Council of the company. In the public sector, there are no company agreements, but so-called service agreements, which are concluded between the staff council and the department. Should there be several Works Councils within a company, a central works council must be made up of these several members. Works Councils be established. 

This is composed of one or two members of each individual works council. However, the central works council is not superior to the individual works councils. In the case of parent companies and subsidiaries, a group works council can be established in such a case, which then adopts the resolutions and then also the works or group agreements for the entire group.

The works agreement must be in writing and signed by both parties. Normally, works agreements regulate, for example, the dress code, smoking bans, working time models or even vacation and occupational health and safety. However, not everything can be regulated in a works agreement. Further or additional regulations that have normally already been concluded by a collective agreement are not legal. This is only different if the collective agreement explicitly permits regulation by works agreement. This clause within the collective agreement is also known as an opening clause. The regulatory power of the works agreement is thus limited in scope, but has a direct and coercive effect.

The agreement concluded must be made known by the employer. For this purpose, it is sufficient if the works agreement has been displayed or hung up in a suitable place in the company. The effect of a works agreement is unlimited in its form. However, it can be terminated with a regular notice period of 3 months or replaced by a new one. However, a works agreement can also be terminated automatically by a time limit, an agreement between the parties to the works agreement to terminate the agreement, the end of the period of employment, or the termination of the agreement. Works Council (if the company agreement was tied to it), the insolvency of the company, or else by a Transfer of operations. Partial termination of the works agreement is not possible. The content of a works agreement can therefore only be valid in full or not at all. 

Exceptions to this general rule only exist if the employer and the works council have agreed on a possible partial termination within the works agreement. However, partial termination of the agreement is only possible if the part that continues to exist makes sense on its own and constitutes a closed regulation. If a works agreement has been terminated, however, this shall have effect in accordance with § 77 VI BetrVG after. This means that the terminated company agreement will continue to exist until there is a new arrangement between Works Council and the employer. However, this also only applies to works agreements where a ruling by the conciliation body could replace the regulation between the employer and the works council.

A works agreement makes sense if the employer wishes to make a regulation which generally requires the positive consent of the works council. If, on the other hand, the works council is involved in matters requiring co-determination, it can even initiate measures itself through its right of initiative.

The scope of a company agreement applies to almost all employees of the company. The agreements concluded also apply to employees who only join the company after a works agreement has been concluded. Thus, the works agreement has an effect on all future employees. However, a works agreement does not apply to persons who are covered by the § Section 5 (2), (3) and (4) of the Works Council Constitution Act (BetrVG) fall. These are not covered by the provisions of a company agreement. These include, for example, legal representatives or a member of a corporate body or executive employees according to the company's employment contract.

Basically, a distinction must be made between two types of works agreements. The first of the two is the enforceable works agreement. In the case of this, the works council has its own right of co-determination, as already mentioned. If the employer refuses to enact a works agreement, the works council can, according to § 87 BetrVG appeal to the conciliation board. The final decision of the conciliation body replaces the agreement between the employer and the works council. 

In this way, therefore, the employer can be forced to enact it. The second type of works agreement is the voluntary works agreement. In these agreements, everything is regulated where the works council has no right of co-determination. The § 88 BetrVG is not conclusive, and only proposals for topics are made. As a result, a works agreement can only be concluded in this way if the employer and the works council agree on its content.

When considering which law and which principle now applies to the individual employee, it is not uncommon for confusion to arise. The question often arises as to which legal source can be used. Does my own employment contract, the collective bargaining agreement or the company agreement apply to me? The general rule is that the employment contract and collective agreement normally take precedence. However, the favorability principle must be observed. This simply means that the regulation that is more advantageous for the employee is used. 

If a works agreement exists, it does not have to be explicitly mentioned in the employment contract, but it still applies. Likewise, the employee does not necessarily have to know about or be aware of the works agreement in order for it to apply to his or her employment relationship. The mere existence of such an agreement is sufficient.

The implementation of the concluded and valid works agreement is then the responsibility of the employer and only the employer. The works council is not authorized to interfere in the management of the company. However, if the employer does not comply with a works agreement or does not implement it, the works council may initiate a labor court resolution procedure, which will then force the employer to implement it.

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