Collective Labour Agreements

From Max-EuP 2012

by Martin Henssler

1. Subject and purpose

A collective labour agreement (collective contract, collective agreement, convention collective) is a bilateral agreement between two competent contracting parties defining rules for conditions of employment. The contract is concluded between a trade union and either an employers’ association or a single employer.

Collective labour agreements and collective contracts defining working conditions exist in every Member State of the European Union. Their impact is enormous. In Belgium, Finland, France, Germany, Spain and Sweden, for example, the number of employment relationships regulated by collective labour agreements is extremely high, this figure at times exceeding 80 per cent. In most Member States collective labour agreements between a trade union and an employers’ association are much more common than company-level collective labour agreements with a single employer. In Germany, however, collective labour agreements with single employers are starting to become more attractive because of their greater flexibility compared with collective labour agreements between a trade union and an employers’ association. Collective bargaining is guaranteed under the constitutional law of all Member States, except the United Kingdom. The law concerning collective labour agreements is based on provisions in the respective Member State’s legal system which do not reach the constitutional level. It is only in Denmark, Italy and Ireland that the codification of collective labour agreement law is partially or completely absent.

Collective labour agreements resulted from the social questions which arose primarily during the Industrial Revolution in the second half of the 19th century. A new working class was generated in the course of the transition from handcraft to industrial production. Manufacturers held the capital assets, while industrial workers depended on ‘selling’ their manpower to secure their existence. Employees had very little bargaining power in face-to-face confrontations with their employers. In individual negotiations the employees were exposed to a great danger of being undercut by competition, and one’s own job was at risk because of those employees who sold their manpower for less. In reaction to this imbalance and the disastrous working conditions which resulted for members of the working class, employees were essentially compelled to organize themselves. Associations of workers and soon afterwards—when the formation of associations was no longer prohibited—trade unions evolved. Initially, collective labour agreements were concluded by trade unions after strikes and did not specify a fixed duration or peace obligations. Later on, they also aimed for stable and general regulation of working conditions. To date freedom of association, which is very often fixed in constitutional law, remains the basis of collective labour agreements.

Collective labour agreements have, first and foremost, served the purpose of protecting individually powerless employees (protection function) and helping to ensure equitable wages (distribution function). Additionally, they have created a certain typology and harmonization of work conditions (order function). Finally, in many Member States collective labour agreements guarantee that strikes concerning questions regulated by these agreements are forbidden during their period of validity (peace function).

2. Trends in the development of European law

The competence of the European Union in the entire field of collective labour law and especially in the area of collective agreement law is very limited. According to Art 153(5) TFEU/137(5) EC, the provisions of Art 153 TFEU/137 EC (Competence of the EU to support and complement the activities of the Member States in fields such as working environment, working conditions, social security, and social protection of workers) shall not apply to pay, the right of association, the right to strike and the right to impose lock-outs. However, collective employment law is not restricted to the national level. European umbrella associations have long been established by national social partners, ie by employees’ and employers’ associations of the Member States. The most important associations are the Union of Industrial and Employers’ Confederations of Europe (UNICE), the European Centre of Employers and Enterprises providing Public services (CEEP) and the European Trade Union Confederation (ETUC). Such collaboration between social partners was established in 1985 in the Val Duchesse-Talks and has subsequently been continued through regular meetings. However, genuine European collective labour agreements with normative impact do not exist. Attempts to set up agreements of this nature were blocked by the English veto during the negotiations on the Maastricht Treaty in 1992. Nevertheless, by the end of the negotiations a social dialogue had been established which was then transformed into primary law (Art 155 TFEU/139 EC). It has been complemented in a non-binding manner by numbers 11 and 12 of the Community Charter of the Fundamental Social Rights of Workers (Freedom of association and collective bargaining) and Art II-88 of the failed Constitutional Treaty (Right of collective bargaining and action). Thus, a fundamental right of freedom of association and collective bargaining is not yet a part of primary law.

In contrast, collective bargaining granted on the national level is subject to control by the European Court of Justice (ECJ) in the event of a violation of EU fundamental freedoms. Recently, the ECJ declared a strike disproportional in a case which involved a Finnish ferry company (Viking) that owned and operated a ferry flying a Finnish flag which was manned predominantly by a Finnish crew and benefited from a collective labour agreement negotiated by the Finnish Seamen’s Union. Legal proceedings were prompted by the decision of Viking to register the ferry as an Estonian ship and carry a crew of Estonian seafarers paid lower wages. The strike’s intention was the completion of a collective labour agreement which would have prevented this outcome. While acknowledging a fundamental European right of collective labour action and the direct relation of such action to an employer’s freedom of establishment, the ECJ concluded that an infringement of the latter is impermissible where a labour action exceeds what is necessary to achieve the objective pursued (ECJ Case C-438/05 – Viking Line).

3. Structure of national law systems

Apart from the ‘social dialogue’, pursuant to Art 155 TFEU/139 EC, action on the European level has not yet been taken to harmonize collective bargaining law. This is due, among other reasons, to very heterogeneous systems of collective bargaining laws ie the structures of collective labour agreements vary considerably among the Member States and cross-border similarities are rare.

The completion of a collective labour agreement always requires collective bargaining capacity, which is the competence to be a party to a collective labour agreement. Therefore, signatory parties must fulfil certain criteria. Generally, the parties can be employers, employers’ associations and trade unions. Concerning trade unions, most legal systems of the Member States require an association of employees formed voluntarily and constituted in such a way as to be independent of the other side. They are eligible to act as collective bargaining partners only if they are large and powerful enough to exert sufficient pressure on the other side to induce it to negotiate and conclude an agreement. It is to be avoided that the economically stronger employer be able to dictate the terms of employment. Rather, the aim is a fair balance of interest between both parties. In accord with this notion, only associations representing a sufficient number of employees can conclude collective labour agreements in the following Member States: Belgium, the Czech Republic, France, Greece, Hungary, Italy, Luxemburg, the Netherlands, Poland, and (after formal accreditation by government authorities) Austria. In Germany, the criterion of representativeness (formally determined by the number of members) has been replaced by a more restrictive measure of social and organizational power created by the German Federal Labour Court (Kriterium der sozialen Mächtigkeit), BAG 6 June 2000, NZA 2001, 160.

In the United Kingdom, trade unions first need to be accepted as a negotiating partner (recognition) by employers if they wish to start talks on collective labour agreements. This demands that trade unions possess a great deal of social power and a preparedness to engage in labour disputes. If necessary, strike actions become the means for achieving recognition by the employer. No requirements concerning the representativeness of a trade union are made by Denmark, Estonia, Finland or Sweden.

The impacts of collective labour agreements on individual employment relationships are enormous. In the European Union, agreements with a so-called double content are very common. Here, a collective labour agreement not only contains an obligatory part clarifying the rights and duties of both parties, but also consists of a ‘normative part’ with regulations having a normative nature. The legal standards set by the collective labour agreement are directly applicable and mandatory for those falling within the territorial, personal and occupational scope of the collective labour agreement. This means that on the level of individually negotiated contract terms, the collective labour agreement is applied automatically and directly just as a statutory act, eg in Austria, Belgium, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Poland, Spain, and Turkey.

The binding character of a collective labour agreement’s regulations implies that norms cannot usually be circumvented by an agreement in a specific contract of employment between employee and employer. This can take the form of a prohibition of departure from the collective contract in the individual employment contract. If there is no right to vary terms either to the employee’s benefit or to his disadvantage, the collective labour agreement thus simultaneously implies a minimum and a maximum of wages and working conditions. This binding effect for both sides, serving the realization of harmonized working conditions, is very popular in Austria, Belgium, Denmark, Finland, the Netherlands and Sweden (the effect at least being attainable through corresponding terms written into the collective labour agreements).

Most of the other legal systems do not accept agreements which prohibit a departure from the collective labour agreement for the employee’s benefit, owing to the protective function of collective labour agreements and in order to avoid a considerable constraint on private autonomy. Thus, the so-called ‘favourability principle’ accepts agreements on the level of individual em- *ployment contracts departing from collective labour agreements only if the terms are in the employee’s favour (see Günstigkeitsprinzip in Germany, § 4(3) TVG). In these cases, only the employer is obligated to the degree that working conditions may not be worse for the employee than they are laid down in the collective labour agreement.

In the United Kingdom, a completely different regulatory concept of collective bargaining is applied. There, collective labour agreements are not subject to legal obligation and jurisdictional enforceability. The presumption (now statutorily specified on the basis of the common law) exists that the parties to a collective labour agreement do not wish to be legally bound unless a term in the collective labour agreement explicitly states this to be the desire of both parties. Such clauses are relatively rare in practice. Nevertheless, the terms of collective labour agreements indirectly entail binding consequences when individual contracts refer to them as English employment law often makes use of the means of implied references.

Moreover, the parties are, in practice, bound to the collective labour agreement. Due to the lack of any legal consequence, no-strike clauses purportedly forbidding strikes during the contract period also carry no legal effect. Thus, with a certain deference to the British trade unions’ slogan ‘Bite with the law, and be bitten by the law tomorrow!’, most companies stick to the collective labour agreement to avoid the risk of an imminent strike. The situation in Ireland is very similar where collective labour agreements are also not binding as long as they are neither part of the employment contract nor have been registered at the Labour Court.

The Danish and Swedish legal systems adopt yet a different approach as concerns the effects of collective labour agreements. Taking a position between the two contradictory models described above, an agreement carries normative effect on the one hand but no legally binding effect on the other. Concerning compliance with collective labour agreements, employers are bound only to trade unions, but not to single employees. This means that only trade unions, and not single employees, can assert their rights before the court. In practice, this regulatory concept has led to a high number of employees organized in trade unions and a societal approval of such organizations.

As collective standards are not mandatorily applicable in the UK legal system, there the question of the binding effects of collective labour agreements does not arise, ie which employment relationships can normatively be influenced by both parties. In contrast, in systems attaching mandatory and direct applicability to the terms of a collective labour agreement, determining the scope of application of a collective labour agreement is of particular relevance. Most legal systems imply that—on the side of employers—collective labour agreements are only of a binding nature when the employer is a member of the employers’ association which concluded the agreement or—in the case of a single company’s agreement—when the employer contracts directly with the trade union. Apart from this, for those employers who do not belong to a body which has signed a collective labour agreement, such an agreement only has binding effect under specific prerequisites via a so-called ‘declaration of general application’ (see Allgemeinverbindlicherklärung in Germany, § 5 TVG). Thus, under the German model, for example, the Federal Ministry for Labour Affairs or the highest labour authority in a federal state declares a given collective labour agreement to be generally binding. The result is that its provisions apply even to contractual employment relations outside of the agreement’s scope of application. Such an expansion of the binding reach of collective labour agreements via a public declaration of general application is allowed by various Member States, such as Austria, Belgium, the Czech Republic, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands and Portugal. The collective labour agreement then sets the terms of any employment relationship as long as the employer is part of the industry and the geographical area covered by it.

In cases where the law does not declare the agreement to be generally binding, great differences exist among Member States concerning the legally binding nature of collective labour agreements on employees. In Germany, the principle of both a dual and ‘congruent’ binding (kongruente Tarifbindung) to collective labour agreements is in force (§ 3(1) TVG). This means that the provisions of a collective labour agreement only apply directly when both employers and employees are members of the two signatory parties. In practice and for the benefit of harmonized working conditions, so-called ‘clauses of reference’ in individual employment contracts are widespread. Due to the fact that employers and employees are free to agree on the validity of a collective labour agreement in the employment contract, these clauses lead to parties being compulsorily bound to the collective labour agreement. Such a binding effect can also develop from the implied incorporation of an agreement, eg by a simple internal practice indicating that both employer and employee intend the agreement to be part of the contract. Much more frequently, the Member States make use of models having a general application for all employees. In more than half of all European legal systems, collective labour agreements are legally binding for all signatory employers with regard to all their employees, even to those who are not members of a trade union. Such systems include, eg, France, Greece and Italy, as well as Austria, Belgium, the Czech Republic, Denmark, Finland, Latvia, the Netherlands and Poland.

Additionally, the Member States have developed different solutions when multiple labour agreements have been concluded within a company. In such instances, more than one collective labour agreement can apply to an employment contract—in other words, a collective labour agreement plurality arises, meaning that a company is covered by different collective labour agreements to which the employer is bound. In the past decades, Germany aimed at applying only one collective labour agreement in a company (the Grundsatz der Tarifeinheit). This principle was quite controversial and was abandoned by the German Federal Labour Court in 2010, BAG 7 July 2010, NZA 2010, 1068. There is now a tendency to apply the collective labour agreements of competing trade unions at the same time, much as it has always been the practice in Austria, Belgium, Italy, the Netherlands, Portugal and Sweden. Other countries, in turn, avoid the emergence of duelling collective labour agreements by introducing legal regulations which explicitly name the associations’ competences for certain branches. In France, employers are forced to invite the participation of all trade unions represented in the company to negotiations on collective labour agreements.

4. Harmonization projects

Globalization of markets, technological progress and growing international competition are leading to an increasing demand for a transnational, harmonized collective bargaining policy of associations and companies. Thus, harmonization projects aimed at adapting the national collective labour agreement systems on the European level are very desirable.

A first step in the right direction and, at the same time, a desirable strengthening of the European social partners’ status is the ‘social dialogue’. It became part of the Treaty on the Functioning of the European Union (TFEU) via the protocol on social policy which was annexed to the Treaty of Maastricht in 1992 and also via the Treaty of Amsterdam. Before submitting proposals in the social policy field, the Commission shall consult the social partners (management and labour) on the possible direction of Union action (Art 154 TFEU/138 EC). Social partners can then forward an opinion or recommendation or they can declare their wish to bargain a framework agreement on the basis of Art 155 TFEU/139 EC (consultation and agreements between management and labour). If they succeed at coming to such an agreement on the contents of the proposal within nine months, the agreement becomes the basis for the legislative enactment procedure. If the social partners do not achieve an agreement within this timeframe—as was the case when implementing the European Works Council—the European Union maintains its full competence in the legislative enactment procedure.

The agreement according to Art 155 TFEU/ 139 EC shall predominantly be implemented through the respective procedures and habits of social partners and Member States, ie through collective labour agreements in the individual Member States or their relevant institutions. Thus, the accomplishment of the agreement still remains a free decision of the Member States and national social partners.

If the signatory parties submit a request on the basis of Art 155(2) TFEU/139(2) EC, the agreement will be implemented by a Council decision on the basis of a proposal by the Commission. This last-mentioned possibility has already been practised on several occasions. Accordingly, the framework agreements on parental leave, part-time work and fixed-term work have been implemented through directives (Dir 96/34; Dir 97/81; Dir 99/70).

The social dialogue as a European model has been taken up by various Member States on the national level, eg recently in France. In Germany, social dialogue between the social partners has not been undertaken of late; in fact, associations limit their policies to blocking necessary reforms. Widespread hope exists that agreements made by the social partners (UNICE, CEEP and ETUC) on a European level will not remain the only ones. The social dialogue between the Member States should be strengthened in the future in order to smooth the path to a European collective labour agreement in the long term. The difficulties which have to be overcome are considerable; many things are disputed not only between, but also within the Member States. A definition of harmonized social standards on the European level—eg the recent discussion regarding minimum wage—requires the establishment of a broad European collective bargaining policy which does not yet exist.

Literature

Commission européenne, La réglementation des conditions de travail dans les États membres de l’Union européenne, vol 1: Droit comparé des États membres, vol 2: Mise en perspecives des systèmes juridiques des États membres (1998); Olaf Deinert, Der Europäische Kollektivvertrag (1999); Robert Rebhahn, ‘Das Kollektive Arbeitsrecht im Rechtsvergleich’ [2001] NZA 763; Gregor Thüsing in Herbert Wiedemann (ed), Tarifvertragsgesetz (2007) para 1, nn 116 ff; Martin Henssler and Axel Braun (eds), Arbeitsrecht in Europa (2nd edn, 2007); Brian Bercussion, European Labour Law (2nd edn, 2007) part 9; Robert Blanpain, European Labour Law (11th edn, 2008) part 2; Martin Henssler, ‘TVG’ in Martin Henssler, Heinz Josef Willemsen and Heinz-Jürgen Kalb (eds), Arbeitsrecht (2008) paras 1 ff.

Retrieved from Collective Labour Agreements – Max-EuP 2012 on 22 May 2022.

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