This article was authored by Axel Braun.
The conciliation committee: an important tool within the practice of labor law
Background: A conciliation committee (Einigungsstelle) is an arbitration board between an employer (Arbeitgeber) and a works council (Betriebsrat). It is regulated in the Works Council Constitution Act (Betriebs-verfassungsgesetz, BetrVG), the main legal source in Germany for the relationship between employers and works councils. Depending on the specific matter, the workers representative body can also be the central or group works council (Gesamt- oder Konzernbetriebsrat). While differences of opinion between these parties concerning points of law are generally handled by labor courts, settling differences related to collective regulatory issues within the establishment is the primary task of conciliation committees.
The Works Council Constitution Act (WCCA) provides that certain working conditions be jointly regulated by the employer and the works council on the basis of a consensus that normally has to be in writing. This obligation for a written consensus is described by the term codecision in its proper sense (full codecision), whereas the obligation to hear or to consult with the works council or even the works council’s veto rights are basically considered in Germany a “soft version” of codetermination.
The WCCA distinguishes between compulsory and voluntary codetermination (Section 76 of the WCCA). A codecision is compulsory if the WCCA explicitly states that the ruling of a conciliation committee is binding and replaces an agreement between the employer and the works council if the parties fail to reach an agreement. An employer’s instruction to work – for instance, to work at a certain time on a certain day – is null and void if a matter of codecision is affected but not regulated by a shop agreement with the works council or a decision of a conciliation committee. The scope of matters subject to full codecision is very broad, ranging from rules concerning a workers’ conduct at the workplace; working-time regulations of any kind, including overtime and vacation planning; technology in the workplace that allows the performance or conduct of an employee to be monitored; pay structure; and so on (Section 87  of the WCCA) to setting up a social plan in the case of mass lay-offs (Section 112  of the WCCA).
In general, works councils and employers are obligated to work on a basis of mutual trust (vertrauensvolle Zusammenarbeit, Section 2 of the WCCA) and try to settle contentious issues internally (Section 74 of the WCCA). Nevertheless, amicable agreements cannot always be reached due to the different interests of employers and works councils. If attempts fail, the law foresees the conciliation committee as an instrument of institutional conflict resolution (Section 76 of the WCCA). Established at the request of either the employer or the works council, the committee acts as an arbitration body to resolve a collective dispute and in these cases has the authority to establish a binding regulation. In practical terms, the committee initially assumes a moderating role, with its chair always placing a focus on helping the parties reach consensus. In practice, more than 90% of all conciliation committee proceedings end in consensus. Meanwhile, no responsibility is given to the conciliation committee for specific conflicts between the employer and individual employees.
Composition of the committee
In each matter of codecision, the size of the conciliation committee and the person who chairs it must be agreed on by the works council and the employer. Formation of a permanent committee is possible; however, it is quite exceptional in general practice (Section 76  of the WCCA).
The key person in any conciliation committee proceeding is of course the individual chairing the committee. The law only says that the person has to be neutral; and although formal skills are not required, normally a former or active labor judge serves as chair. If the employer and works council cannot agree on an individual, the chairperson will be nominated by the local labor court. In order to not anticipate any outcome of conciliation committee proceedings, the labor court will only refuse to nominate a chairperson in the very exceptional situation that it is obvious no codecision right can be affected.
The law doesn’t state a specific number of committee members, only saying the committee has to consist of the same number of members (Beisitzer, or assessors in English) from each side and this number has to be agreed on. In the absence of agreement, the labor court again decides on the size of the committee. In practice, the number ranges between two and four (mostly three), depending on the complexity of the respective dispute as well as the expertise and experience of the intended committee members. Although separately nominated by each side without influencing the other, assessors are formally independent from instructions and orders. Despite this certain amount of distance, they do represent the interests of the party that nominated them.
The costs of the committee are borne entirely by the employer; they include remuneration for the chairperson and external committee members as well as expenses for legal advice. External members are typically representatives of trade unions or employers’ associations, lawyers or, as the case may be, experts in finance, IT or workplace health and safety. Company employees who take a seat on the committee are released from their work duties for the length of the proceedings and continue to receive their standard remuneration.
In compulsory matters of codecision, conciliation committee proceedings can be initiated upon the request of one party alone; in matters where the law does not foresee compulsory codecision however, the proceedings require consensus between the employer and the works council. This consensus has to continue for the entire length of the proceeding. Voluntary codecision seems to be a very rare situation, but in practice it occurs quite frequently when setting up special incentive programs to motivate the workforce such as company pension plans or bonus programs, special-purpose incentives and the like.
According to Section 76 of the WCCA, a conciliation committee has to take action immediately after its formation. The committee holds verbal discussions and can even obtain experts’ opinions or examine witnesses. In practice, however, this is rather unusual, and the chairperson acts as a mediator who puts all his or her efforts and skills into finding a deal between the parties. The “power to convince” that the chairperson can exercise on the employer and the works council draws from his or her potential right to vote. If a deal cannot be reached, the committee as a whole must reach a decision by a majority vote. This makes the chairperson’s vote decisive, and the party refusing to agree to a compromise always runs the risk of losing everything. The decision adopted by majority vote is binding on the employer and the works council.
In compulsory proceedings, the decision of the conciliation committee replaces an agreement be-tween the works council and the employer; in voluntary proceedings, the committee’s decision is only binding if both parties submit themselves to it in advance or by accepting it afterward.
Effect on judicial proceedings
Conciliation committee decisions can be subject to legal appeal before the local labor court, which has to assess if the ruling was fair and does not violate the law. In practice, conciliation committee decisions that are appealed on the basis of an alleged violation of the law typically concern the conciliation committee not having authority over the codecision matter, violation of procedural rules or, sometimes, the rule of equal treatment. Quite often though the parties discuss whether the conciliation committee has pronounced a fair ruling within the limits of reasonable discretion. If the latter is contested, the appellant has to act within the very short two-week period of appeal.
Conciliation has traditionally been seen as a very expensive arbitration process with an unpredictable outcome. This view has changed, however. The burden of cost cannot be contested, but conciliation can lead to a practical solution that the parties would not have been able to find without external help. Looking at it this way, the costs associated with conciliation can be seen as an investment that should not be postponed to a point when a conflict has already reached a point where it would be difficult for any mediator to get the parties in conflict back to business.