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Eagerly awaited, but still more questions than answers: The ruling of the German Constitutional Court on the Tariff Unity Act

On 11 July 2017, the German Constitutional Court (Bundesverfassungsgericht, BVerfG) issued its eagerly awaited decisions on various constitutional challenges to the German Tariff Unity Act (Tarifeinheitsgesetz), which had come into effect on 10 July 2015. The complaints had been made by several small trade unions, known as occupational unions (Spartengewerkschaften), representing the interests of certain occupational groups within a company. These included Marburger Bund, representing medical staff mainly in hospitals, Vereinigung Cockpit(VC), representing the interests of pilots and flight engineers, the flight attendants' union UFO and the GDL union, which represents the interests of train drivers. In the past, extensive strike action saw these occupational unions clash with their employers, like Deutsche Bahn or Lufthansa, while interruptions to flights or train services over several weeks also garnered the unions' negative public attention. These strike actions were exceptional because a comparably small number of union members in key areas managed to completely restrict their employers' business by halting trains or flights. Attempts to overcome the application of the Act by way of interim injunctions failed in October 2015. The judgments of the Constitutional Court in these cases were therefore met with great interest, not only by the parties involved and legal professionals, but the general public as well.

Initial situation

Prior to 2010, the German Federal Labour Court (Bundesarbeitsgericht, BAG) had consistently backed the principle of ‘one company - one tariff agreement’. Once the Federal Labour Court abandoned this principle of tariff unity, there was increasing industrial action, mostly by occupational unions exercising their right to strike in order to force employers to meet tariff demands. The key roles of union members as pilots, train drivers or air traffic controllers meant such strikes could be crippling to their employers, giving these unions real power.

The Tariff Unity Act of 10 July 2015 was designed to counteract the huge power of occupational union strikes. The Act was intended to restore the former tariff unity principle by replacing the tariff agreement of the minority union with that of the union with the largest number of members in a company (majority union). According to the explanatory memorandum, the Act aimed to ensure the freedom of collective bargaining in cases of conflicting tariff agreements. This situation arises when multiple unions sign multiple tariff agreements in one company, with different tariffs applicable to the same occupational groups. The big trade unions under the umbrella of the German Trade Union Federation (Deutscher Gewerkschaftsbund, DGB), such as IG Metall or the service sector union ver.di, negotiate tariff agreements for all occupational groups working at airlines, Deutsche Bahn or in hospitals, and these unions naturally compete with the smaller occupational unions.

As a consequence of the Tariff Unity Act, a strike by a minority union for the enforcement of a tariff agreement was unreasonable if that tariff agreement would not take effect because it was superseded by the majority tariff agreement. The occupational unions, such as Marburger Bund, VC, UFO and GDL, now felt threatened because when replacing ‘their’ tariff agreement, they would have little enforcement power and membership would become unattractive for the employees of a company, resulting in dwindling membership numbers.

Judgment

The Constitutional Court ruled that the Act was largely compatible with the German constitution (Grundgesetz). It was considered unconstitutional only insofar as it did not ensure that the majority tariff agreement sufficiently took into account the interests of the minority occupational groups. The legislature now has to revise the Act until 31 December 2018.

The Constitutional Court also held that the replacement of the minority union's tariff agreement with the majority union's agreement must be interpreted restrictively. In particular, any unreasonable hardship must be avoided. This means that certain benefits guaranteed in the minority tariff agreement may not under any circumstances be replaced by the majority tariff agreement. Examples given by the Constitutional Court are retirement benefits, a workplace guarantee or benefits regarding working life (e.g. sabbticals or early retirement).

Although the occupational unions had hoped to have the Act ruled unconstitutional in its entirety, the Constitutional Court's statement regarding their right to strike should be welcome news. In this respect, the Court made it clear that, despite the replacement rule for competing tariff agreements of different unions, occupational unions may generally fight for tariff agreements, including by means of strike action, if necessary. For this reason, there will be no liability risk for a striking occupational union, even where there are clear majorities in a company. The lawfulness of such strikes and their legal consequences will have to be established in detail by the labour courts.

Practical implications

All in all, it is clear that the Constitutional Court has not declared the Tariff Unity Act void, but has confirmed the protection of occupational unions. The Act will not bring about the intended shift of power in favour of the large DGB trade unions, as intended by the legislature and the large unions.

Yet the reasoning of the Constitutional Court raises more questions than it answers. It is expected that the labour courts will still have to deal with the issue of the lawfulness of strikes.

It also remains to be seen what instrument the legislature can develop for the protection of minority occupational groups, without calling into question the very core of the Tariff Unity Act.

It is expected that competing unions representing the same staff groups in a company will work together more closely in the future. This was often the case in the past, when these unions jointly negotiated tariff agreements with the employer or the employers' association. On the other hand, occupational unions in particular will endeavour to increase membership numbers, so as to become the majority union and have even greater clout in tariff negotiations.

If you have any questions related to this topic, please feel free to contact
Markus Künzel (Lawyer, Licensed Specialist for Labour Law).

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Arbeitsrecht

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Markus Künzel T   +49 89 35065-1131 E   Markus.Kuenzel@bblaw.com