Monday, June 5, 2017

Germany - The 2018 Works Council Election is Getting Closer - what next?

By Bernd Weller, Frankfurt office of Heuking Kühn Lüer Wojtek PartGmbB
Dr. Johan-Michel Menke Hamburg office of Heuking Kühn Lüer Wojtek PartGmbB

In 2017, Germany will be electing a new parliament. There is a lot of talk of political disenchantment and new political parties and movements. The composition of the German Bundestag could change dramatically.

The next important elections will be held in 2018 – the next regular works council elections. And here, too, there will be something new. According to the observations of the undersigned, there were already a lot of changes in the composition of works council bodies in the last elections in 2014; in 2018, this change is set to become stronger and more rapid.
In addition to the change of generation, with many long-serving works council members taking (early) retirement during the last period of office and many others planning to do so during the upcoming period of office, it is above all social changes that will affect the works council bodies.

The rates of union membership have been decreasing for years; many younger employees no longer feel that the traditional unions (with their more traditional distinction between the “oppressed workers” and the “capitalist employers”) represent them. They do not want rules based on a “one size fits all” scheme, but rather, they want to express and implement their individual needs and wishes more strongly, independently and without a “muzzle.” The system of values has changed, company cars and salaries are no longer the main attractions of employment; equalizing and rigid working time systems are often considered a hindrance by younger employees. Many young employees – including works council members – want to focus on designing rather than preventing.

So, more candidates, more lists, and therefore also a fiercer election campaign are to be expected. All of this is more than enough reason for employers to prepare themselves for the elections. In this first article before the upcoming election, we therefore want to raise the following questions and give some recommendations:

• preparation for the elections themselves
• cost and support of the election
• tactical considerations on the employer’s side
• sanctions for attempts to influence the elections
• key points of the election

1. Preparation for the elections themselves

The works council election is a vote by the staff; it is led by the election committee. The employer’s obligations are only supporting ones – it must provide information and offer time and money to support the elections.

So why should employers and company management consider the topic and prepare themselves in advance?

First of all, every election costs money. During the election meetings and the election itself, every employee has a claim to free time off work, costing time and productivity. In addition, the employer must finance the election preparations and must also accept that members of the election committee will have to meet, undergo training, and if necessary obtain consultation weeks or even months prior to the election, which will result in further expenses.

In addition, as a result of and during the election campaign, productivity will decrease. Employees are involved in organization and discussions. Discussions that are sometimes controversial will take place in the workplace. In addition to the short-term effects on productivity, this can also have a long-term effect on the mood of the workforce. Employers will and should be concerned if their staff disintegrates into “political fractions.”

Taking all of this into account, each company should consider working through or examining the following checklist:

• training of executive staff and managers on key issues
• training of all other managers on dos and don’ts
• definition of the employer’s role in the election (preparations) (see item 3.)
• tactical considerations (see item 3.)
• human resources planning (see item 3.)
• handling of key topics (see item 3.)
• preparation by the employer for the election process (see item 3.)

Executive staff and general managers should be trained on key topics before each election. This includes, in particular, being sensitive to the fact that your statements on the election and particularly about individual election candidates can easily exceed the threshold of impermissible influence on elections. In addition, you should develop a fundamental understanding of what the works council elections are and what the basic procedure is. This will prevent unnecessary disputes in case of impairments to company activity as a result of the works council election (preparations). Not least, the top management group should be committed to the shared company line about how the company/management views the election (deliberately distanced/neutral or rather deliberately supportive/neutral). Finally, the executive staff should be prepared for the fact that in works council elections (as a result of imminent thresholds for the size of the body or the number of releases from work duties), there may be repeated operational discussions or even court disputes about its status.

All other executives should also be trained prior to an election and before the beginning of preparations for it. They are not executive staff and therefore also participate in the works council elections like all other employees – as voters or candidates. At the same time, they also represent the employer’s side for the workforce – and often also for labor courts and unions – and therefore the employer’s intents. This means that executives have to make a strict distinction between their supervisor roles and the role as voter/candidate. They must always also ensure that they do not give the impression that they:

1) are speaking for the employer,
2) are participating in the political discussion and election “as a representative” of the employer or
3) would take advantage of their supervisor role in connection with the elections (promising advantages, threatening disadvantages for incorrect political attitudes).

Although this sounds easy in theory, it sometimes ends up being difficult in practice. Of course, a supervisor may not promote himself or herself or another candidate during team meetings that he/she has scheduled (as the supervisor) (and that are paid for as working time). But is any critical confrontation already considered use of the supervisor position? While in many cases the courts consider even a strongly polarizing or confrontational election campaign to be legal and promote the give and take of political discussion by each employee, they nevertheless often impose a higher level of restraint on executives than on “normal” employees during election campaigns. Executives should be prepared for the traditional election argument in particular from unions that they are “working undercover” for the employer’s side, simply because they have a supervisory role.

2. Cost of the election

The law makes it very easy – the employer is responsible for the cost of the election, Section 20 German Works Constitution Act.

Traditional cost items of the Works Council Election are:
- election documentation (ballot, if applicable also in other languages)
- ballot box(es)
- working time (for voters, candidates, election committee, human resources department (for researching information))
- shipping (for postal votes)
- journey/transportation cost (in case of multiple operating sites for the transportation of ballot boxes and journeys by the election committee, etc.)
- equipment of the election committee (paper, etc.)
- training cost (election committee, if applicable also record keepers)
- consultant cost (election committee, if applicable also record keepers)
- cost for election advertising (printers, paper, etc.)
- cost for the removal of election advertising (cleaning, etc.)
- any court cost (declaratory proceedings in accordance with Section 18a Works Constitution Act)
space cost (meetings of the election committee, election meetings, election, determination of the election result)

Most stated cost factors will be expenses that are incurred “anyhow” in a works council election. The employer, however, does have a certain influence, for example, on expenses used for the election. The employer does not have to hold an (even extensive and colorful) election campaign. The employer is not obligated to finance:

• election gifts,
• election materials (brochures, posters, stickers, etc.), or even
• “election parties.”

The employer must do one thing above all before and during an election: it must treat all election candidates/lists equally. It must therefore not give support to one list and skimp on others. It the employee therefore prohibits – prior to the election – any use of its company resources (printers, paper, ink, etc.), this will mean of course that it saves cost. At the same time, this may also send a signal to the workforce that the employer is against the actual works council election. If, on the other hand, it grants all candidates/lists the right to use its resources (to a limited extent) for election advertising, the election unavoidably becomes more expensive. At the same time, it sends a signal to the workforce that the employer is supporting the election.

With regard to the training and consultant cost, the employer also – in any case effectively – to have an opportunity for influence. The employer can defend itself here traditionally because then many election committees can waive training and/or involvement of a consultant in case of doubt. At the same time, this increases the probability that the election procedure becomes more prone to error and there will have to be new (more expensive) elections – as a result of successful election challenges) or if the election committee comes to decisions that are based more on the result (exclusion of unwelcome applicant lists) than on a neutral election.

3. Tactical considerations from the employer’s point of view

Even the brief statements about the cost of the works council election show clearly that employers would do better not to make decisions during the works council elections “off the hip,” but rather should consider them strategically in advance. This initially involves a status analysis:

• Is the works council about to reach certain threshold values (number of employees and releases from work duties)?
• Is a “quiet” election emerging or is there a reason for the assumption that the election campaign will be harder than usual (change in generation, occurrence of a new group in the operation, participation of the union with own list, pending/completed/ongoing upheaval in the operation (redundancies, restructuring, new owners, etc.), division/polarization of the works council body, etc.)?
• Are measures/changes pending, about which the works council body does not know/anticipate anything?
• Does the works council doubt the status of the executive staff?
• How is the relationship between the employer and the works council/majority fraction? Would the company prefer to preserve the body or a new composition?
• How is the workforce expected to develop over the next few years?

On the basis of this status analysis, the employer should make a decision at an early stage:

3.1 Pending measures

In particular if the employer is considering drastic measures, i.e., there are signs of an operational change as defined under Section 111 Works Constitution Act, the employer has the potential to maneuver. Should it announce the measure during the election preparations and during an election campaign?

The result is then not infrequently a large number of employees who take advantage of promises of advantages under unfair dismissal law in accordance with Section 15(3) German Unfair Dismissal Act by becoming a candidate for the works council election. There is a threat of a collective glut of candidates. In addition, in such scenarios the struggle for the places in the future works council body is particularly fierce. Not least, the employer is then subject to the threat of having to negotiate again with new works council members (elected for the first time), who:

• have not found an internal balance of power yet and are therefore unpredictable,
• are uncertain in their role and their options because of their lack of knowledge and experience and are therefore unpredictable, reluctant, and unreliable negotiation partners.
In contrast, the negotiations with a “settled” and experienced body after an election can have many advantages with regard to the negotiations and implementation of the operational change.
Of course, the aforementioned considerations will also apply if not the whole operation but an individual department is affected by the measure.

3.2 Human resources planning

On the contrary, a reduction in the staff after the election does not lead (directly) to a reduction in the size of the body; at most a reduction in the number of optional works council members takes place immediately when the number of members of the workforce decreases. If the employer is aware that operations will decrease significantly (shortly) after the election, this should be taken into account. The options here are as follows:

• not to say anything,
• to announce the reduction before the election so that it can be taken into account in the election
• or to perform the reduction in the first half of the period of office in order to force a new election ahead of schedule in accordance with Section 13 Works Constitution Act.

In the first case, the problems mentioned under 3.1 in the election campaign are avoided, but a body that is too large, i.e., that has too many members, will be accepted (at least for a term of 2 years).

In the second case, the topics mentioned under item 3.1 must of course be dealt with.
In the last case, things may be peaceful prior to the election, but even just after the election and when the staff cuts are implemented, there will probably have to be another election. The staff cuts will often be a feature of this, the works council will be exposed to significant accusations (of not having negotiated hard enough, etc.). The fear of this may become apparent even during the negotiations on the reduction in staff.

Irrespective of these major topics, human resources planning must be performed before the election with a cool head. There are many questions to be answered:

• What number of employees should be indicated to the works council (and the likely members of the election committee)? Should the number of (likely) employees be kept below important threshold values in order to reduce the size of the body? Doing so would provoke critical questions among executive staff…
• When do limited term contracts/trial periods expire? Are employees being given incentives to be a candidate unnecessarily as a result of this?
• How many temporary agency workers are being included in the plans? These will also count (and vote).
• Are there more female employees? This can influence the guarantee of the minimum representation of the minority sex in the works council body – there can be a significant influence on the chances of success of individual applicants and candidate lists.

3.3 Tactical considerations with regard to the election itself

In view of the significance of the works council body and its composition for operations and cooperation with the employer, it is appropriate for the employer to consider the election, the election campaign, and possible outcomes of the election. In this process, employers are rightly attempting – contrary to what is repeatedly conjectured by some employee representatives –to have their own "preferred candidate" in the election in rare cases only. This is not advisable in view of sanctions (see item 4).

Irrespective thereof, attempts of this kind are also not advisable for another reason: employers who wish to push “agreeable" works council members into the body are often not doing themselves any favors. Again and again, they look for "yes men" hoping to avoid conflicts with the works council body in this way. This has repeatedly turned out to be a big mistake. “Yes men” are extremely unsuited as members of works councils. Irrespective of the fact that they are often unable to attract any votes, they are also unable to perform the office. They lack the standing and presence in order to represent their own point of view to employers, the workforce, and other works council members. They regularly become less important in the body during the term of office and also usually vote along with the more ideological representatives in the body.

When employers consider the works council elections, other topics are often more important for them:

• cost savings,
• proper election process (without election challenges),
• avoidance of splits in the workforce,
• avoiding becoming a victim of the election campaign (the works council shows its “muscles” and blocks important projects in order to gain votes) and
• maintenance/creation of a good relationship with the works council body.
Often, employers are therefore more interested in maintaining the status quo rather than putting it at risk by means of reckless maneuvers. If that is the case, the employer can and should be prepared:
• The employer supports a “due and (predominantly) error-free election” by means of training and granting of external legal counsel for the election committee.
• By training supervisors, the employer prevents them from trying to influence the election campaign in an uncoordinated and awkward (or even punishable) manner.
• If the employer restricts the opportunities of the election campaign, it tends to support the status quo; the opening up of election campaign resources makes it possible, on the other hand, for an “opposition” to be formed.
• The employer may be able to influence the mood in the workforce – to the advantage or disadvantage of the members of the works council in office by means of holding negotiations and through its demeanor during the term of office.
• Finally, the employer can procure the most important election items itself – through its own purchasing – and in this way possibly achieve significant cost savings.
• The analysis of the workforce (how many employees cannot speak German or cannot speak German sufficiently well and must be informed of the election and the election process in their native language or in another language?) can help to arrange the election process more smoothly later.

3.4 Handling of key topics

Another part of the tactical consideration is approaching important topics with the works council in a timely manner prior to the election so that they can be negotiated before the election and therefore before any risk of politicizing or the risk of a delay as a result of a lack of time by members of the works council when it comes to dealing with practical issues during the election campaign.

In this respect, too, company policy is not a lot different from governmental politics. When the election campaign is announced, only the most urgent factual issues will be processed. And in this process, the assessment of what is urgent can differ significantly between the employer and the works council …

4. The threat of sanctions for attempts at influence

In everything that the employer does, it must be aware of the consequences of its actions:

4.1 Criminal liability

The employer – and each individual employee (including executive staff!) – may be subject to criminal liability or a fine in accordance with Sections 20, 119 Works Constitution Act.
Each intervention in the democratic process of forming opinion is subject to punishment. While it is often said during disputes between employees that such disputes are part of a democratic process and have to be “put up with,” the situation is quite different regarding the (apparent) conduct of the employer. The sensitivity of labor courts, unions, public prosecutors, and above all the press is entirely different.

Each statement by an executive staff member is weighed up and can easily be understood as an (attempt at) influencing the election. Some courts go so far here as to accusing employers of the fact that a general information event about the election and the election process could only be associated with the intention to influence the election; otherwise, an employer would not hold such an event. The worldview of some judges imparted in this way sometimes leaves a deep impression.

With things as they are, it is a good idea to be careful. Under no circumstances should there be a risk of mixing the supervisor’s function with the function of a “normal” employee who is entitled to vote.

4.2 Disavowal of candidates

In addition to the legal sanctions, there is a risk of another sanction – at the ballot box. If the employer/supervisor creates the impression that they would particularly prefer/fight against a candidate/candidate list, there is a risk of a sanction at the ballot box, a “protest or solidarizing vote.” In many companies – and to some extent, in society overall – it is still presumed that there are two diametrically opposed poles, the employer and the employees. Every employee representative, to whom too employer-friendly conduct and/or support from the employer is attributed, is vulnerable. Such candidates are easily disavowed. They lose authenticity, credibility, and therefore the support of parts of the workforce. Praising the employer for many employees is praising the wrong side. It does more harm than good.
Employees could also get the impression (or such an impression could be imparted by competing candidates) that the employer wishes to influence the election and then consciously vote for the other side.

Restraint is therefore also appropriate on the employer’s part from a tactical point of view with regard to elections.

5. Key points of the election

Finally, we should mention a few more key points of the election, as a brief overview. A differentiation is made between:

• normal election procedures (in companies with more than 100 employees entitled to vote) and
• simplified election procedures (in companies with up to 50 employees entitled to vote).
• In companies with 51-100 employees entitled to vote, employees and the election committee can agree on the simplified election procedure, but if one of the two does not agree, the normal procedure is to be applied.

The normal election procedure can be divided into five main sections:

a) appointment of the election committee,
b) preparation of the list of voters,
c) announcement of the election notice,
d) submission, review, and announcement of the proposal lists, as well as
e) performance of the actual election procedure, as well as the counting of votes and notification of the election result.

The election committee is of central importance in the election procedure - it:

• prepares the list of voters, so it decides who can vote and who can be elected,
• checks and decides on the validity of candidate/list proposals submitted,
• controls the entire election procedure (publishes the election notice and controls the scheduling).

It is even more surprising at first glance that employees of the election committee are also allowed to be candidates. In a federal/state election this would (correctly) be unimaginable. In companies, this “propriety” can, however, not simply be granted because of a lack of people; elections would then only be possible in companies with significantly more than 5 employees.

If only one candidate list is permitted in an election, the election of a person (majority vote) will take place; if there are several lists, the election will take place in accordance with the principles of proportional representation. The distribution according to d’Hondt will be applied here – with one modification. The election committee must state what proportion of each gender the workforce is composed of. The minority gender is guaranteed a minority share of the seats in the body – in legal breach of the principles of voting equality. Irrespective of the number of votes achieved – as long as there is a sufficient number of candidates of the minority gender.

In contrast, the simplified procedure is significantly trimmed down and rapid.

• After the election committee has been elected (by the works council in office),
• it issues this election notice and voter list and issues an invitation to an election meeting,
• during which the voting proposals (submitted in the meantime) are voted on.