Reposted from Law A La Mode 

Labor Unions and Collective Bargaining Agreements

As the profits of German online retailers increase, so too do the HR pressures that such businesses face. As electronic retail businesses hire more and more workers, they are increasingly faced with labor law issues. For example, the primary German trade union for the retail sector, ver.di, has tried desperately to get a foot in the door at several online retailers.

In particular, ver.di has tried to organize the employees in these businesses by initiating works councils elections.

The main goal of ver.di, however, is to achieve the conclusion of collective bargaining agreements (CBA), providing an identical wage level in retail- and mail-order businesses. Currently, most of the big online retail businesses are not bound by CBAs and pay lower wages corresponding to those in the logistics and distribution sector.

However, it seems like the market may be difficult for ver.di. The support among employees is not great; only a relatively small number of employees seem to participate in the labor union’s efforts. Other employees have even been known to protest against the strike activities of the labor union members and supporters, for instance by signing lists and giving press interviews voicing their strong anti-strike sentiments.

Nonetheless, online retailers, being pressed by trade unions for change, are gradually increasing wages and have started offering benefits to employees, such as holiday pay. But, on the other side and even more importantly, such companies are also looking for alternative solutions to the problem. First steps have already been taken in this respect, with some online retailers considering opening locations in other countries or changing their legal form from a German Aktiengesellschaft to a Societas Europaea, resulting in fewer participation rights for their employees.

These developments show the business framework and changes that online retailers are likely to face in the future as well. In Germany, labor unions and union members have a constitutionally protected right to strike. However, since these unions have a comparatively small number of members working at online retailers, even big market names like Germany based online shop “Zalando” (selling clothes and shoes) or shopping club “Brands4Friends”, an ebay subsidiary, have so far stayed under the radar with regard to wage agreements and working conditions. Overall, also in classic retail businesses with brick-and-mortar stores, the number of employees organized in labour unions is relatively low. It remains to be seen which online retailer is the first to agree a CBA, or whether online retail will be spared.

Support Only For Peak Seasons?

Faced with fluctuating demands, online retailers need alternating levels of support in peak times like the Holiday season and whenever sales are increasing or decreasing. As opposed to brick-and-mortar stores, online warehouses are not limited by the physical conditions of the shop. Online retailers want and need to make use of this advantage. Therefore, flexibility in human resources management is a key factor for a successful business.

The use of temporary workers in Germany is governed by the European-law based TemporaryWorkers Act. Temporary Worker Agencies that connect employees with jobs must be registered and licensed by the German state. The law sets specific requirements that both the Temporary Worker Agency and the hiring business need to fulfill, for instance with regard to length and type of the employment agreement, compensation or payment of social security benefits and taxes. Under the Temporary Workers Act, the temporary worker is considered as an employee of the agency and not the hiring business. Thus, the agency will be held responsible as employer, while the hiring business is bound to the temporary workers agency by way of a service agreement.

Even though the regulations on temporary workers have been in place for several years, they have allowed business a flexible approach to staffing. Recently, however, the use of temporary workers has been under scrutiny in German politics. Currently, the coalition agreement of the governing parties provides for a limitation of 18 months of temporary employment, meaning that a worker may not work for the same hiring company for more than 18 months. This limitation is based on two main considerations: Firstly, they fear an impact on the social security system if wages of temporary workers do not exceed the minimum contribution level. Secondly, differences in wages between a company’s permanent workforce on one side and its hired, temporary workforce on the other side are considered unfair, in particular if the employees carry out the same work.

Keeping this in mind, employers might have to expect new legislation trying to limit the use of temporary workers. Although the scope and effect of the law cannot be foreseen in detail, a loss of flexibility is to be expected.