Status quo of the planned law on collective bargaining agreements (Tariftreuegesetz) (update)

At a glance

• The current coalition agreement promises that public contracts will be awarded to employers who commit to compliance with representative collective agreements for their sector.
• January 2024 had been slated as the implementation date for the new rules, but so far only a working version of a draft law has been made available.
• European and constitutional concerns have been expressed about the draft law and it remains difficult to predict when the new rules will come into effect.
• Companies wishing to participate in public procurement procedures in future are nonetheless recommended to familiarise themselves with relevant collective agreements now.

Update 9 October 2024: 

A draft bill for the law on collective bargaining agreements has been presented. Please refer to this news item.

The current coalition agreement 'Daring more progress' commits to the goal of 'strengthening the autonomy of collective bargaining, the collective bargaining partners and collective bargaining commitment so that fair wages are paid in Germany'. In order to achieve this specific goal, 'the awarding of public contracts by the federal government should be tied to compliance with a representative collective agreement in the respective sector'.

Some time ago, the Federal Ministry of Labor and Social Affairs and the Federal Ministry of Economics and Climate Protection worked together to draft a law to ensure compliance with collective bargaining agreements (Tariftreuegesetz). Although Federal Minister Heil had announced that the law would come into force in January 2024, only a preliminary working version from May 2023 is available so far.

The first laws ensuring compliance with collective bargaining agreements were passed in individual federal states several years ago. Efforts have also been made at federal level in the past to create collective bargaining compliance regulations, but these have so far failed, mainly due to European and constitutional requirements.

Collective bargaining in order to control the labour market

The awarding of public contracts is of considerable economic importance. Numerous contractors, ie employers, and their employees are dependent on public contracts. Public contracting authorities spend an estimated EUR300 billion annually on the public procurement of goods and services and therefore have an enormous potential influence on the labour market.

Planned Tariftreuegesetz

The preliminary working version provides for contracts awarded by the Federal Republic of Germany with an estimated value of EUR10,000 or more to be covered. If this value is reached, the conditions of the relevant regional collective agreement, which would apply on the assumption that the company awarded the contract is bound by the collective agreement, would apply comprehensively to all employees who are deployed within the scope of the respective contract. Individual sectors, such as legal advice, are excluded. Companies will be required to commit to obligations corresponding to those under the collective agreement (including to any subcontractors used) and provide evidence of compliance. Violations will be sanctioned.

European and constitutional concerns have been expressed about the preliminary working version: The envisaged regulations would create a de facto collective bargaining obligation, which would constitute a violation of the right to freedom of association. It is also foreseeable that the planned regulations could result in a high level of bureaucracy for companies due to obligations to provide evidence the detail of which cannot be anticipated. Also, in view of the contradictory and incomplete data on existing collective bargaining coverage, it remains to be seen what added value such a collective bargaining law can offer at federal level.

Takeaways for employers

The new law is intended to make collective agreements more widely applicable by requiring companies to comply with the relevant collective bargaining regulations when carrying out the numerous and extensive public contracts which are awarded. Despite implementation having been announced for January 2024, it is not yet possible to predict when the law will come into force. In view of the expected bureaucratic burden, companies wishing to participate in public procurement procedures in the future are advised to familiarise themselves with the relevant collective agreements now.