Federal Tariff Compliance Act expected to enter into force in April 2026

At a glance

• The Federal Tariff Compliance Act (Bundestariftreuegesetz) (Act) is expected to take effect in April 2026.
• Under the Act, companies not bound by collective bargaining agreements may be required to comply with the working conditions set forth the agreements when they carry out a public contract.
• Specifically, the collective bargaining terms and conditions applicable to the respective industry will be determined by regulations issued by the Federal Ministry of Labour and Social Affairs.
• Within the scope of the Act, contractors performing public contracts must ensure that employees engaged on the contract receive at least the applicable collective bargaining terms and conditions set out in the relevant regulation.
• Regulations cover provisions regarding pay, holiday, maximum working hours, minimum rest periods, and breaks.
• The Act generally applies to federal public construction and service contracts with an estimated contract value of at least EUR50,000.

On 27 March 2026, the Bundesrat approved the Act. The Act will enter into force on the day after promulgation, which is currently anticipated to occur in April 2026.

Companies performing a public contract for the federal government must ensure that employees deployed on those contracts are paid in accordance with the relevant sector-specific collective agreement, granted the agreed contractual leave, and comply with the applicable working time requirements.

The Act generally applies to public construction and service contracts and concessions (ie procurement procedures) awarded by the federal government with an estimated contract value of at least EUR50,000. For start-ups, the threshold is EUR100,000, excluding VAT. Companies based abroad that are performing a federal public contract in Germany must also grant their employees deployed in Germany, for this purpose, the working conditions that are binding under a statutory regulation.

The collectively agreed working conditions applicable to the respective sector are specified by statutory regulations issued by the Federal Ministry of Labour and Social Affairs. Regulations cover provisions regarding pay, holiday, maximum working hours, minimum rest periods, and breaks. Any implementing regulation must incorporate the relevant collective agreement provisions without modification. The ordinance is issued upon application by one or both parties to the collective agreement (trade union and / or employers’ association).

Employers who are contractors of public contracts within the meaning of the Act are subject to the following obligations.

• Tariff compliance commitment: Federal contracting authorities must require contractors to grant employees engaged in the performance of the contract at least the working conditions specified in the relevant statutory regulation (tariff compliance commitment). These performance conditions form part of the contractual obligations that the contractor must fulfill. Contractors must pass this obligation on to their subcontractors and ensure that they also comply with the tariff compliance commitment.

• Employees’ entitlement to working conditions: Employees have a legal right to be granted the working conditions laid down in the relevant regulation and may enforce this right before the labour courts. The entitlement applies exclusively to work performed in connection with the specific public contract. Employees deployed on such a public contract must be informed in writing of their working conditions no later than the 15th day of the month following the start of their assignment.
• Documentation obligations: Contractors are required to document compliance with the tariff compliance requirements and to provide evidence upon request. The relevant records must be submitted to the competent federal office.
• Certification and prequalification: Proof of compliance with the tariff commitment can be provided to prequalification bodies; submission of a corresponding certificate relieves the contractor from the documentation obligation. A certificate can, in particular, be obtained by demonstrating that the company is already bound by a collective agreement, provided that the applicable collectively agreed working conditions meet or exceed those set out in the relevant statutory ordinance. Non–collectively bargained companies may obtain a certificate if they provide the required evidence to the prequalification body.
• Sanctions: At the civil law level, violations may result in contractual penalties of up to 1% of the contract value (or up to 10% in the case of multiple violations) as well as immediate termination of the public contract. In addition, sanctions under public procurement and competition law are stipulated. Contractors must ensure that the subcontractors they engage comply with the collective bargaining agreement; otherwise, they may be held liable as subcontractors under Section 12 of the Act.

Companies that participate in, or plan to participate in, public procurement procedures should closely monitor legal developments and, where applicable, identify which legal regulations will apply to them in the future in the context of federal public contracts. They should then assess whether their existing working conditions already meet these requirements or whether adjustments are needed. Particular attention should be paid to protection against subcontractor liability.