Public corporation, DGB, advocates for collective negotiations in government purchasing processes
German Government Introduces Law to Enforce Collective Bargaining Agreements in Public Contracts
In a significant regulatory development, the German government has announced a new law requiring companies awarded federal public contracts with a value of at least €50,000 to adhere to sector-specific collective bargaining agreements. This obligation extends to both contractors and their subcontractors, who must comply with collectively agreed working conditions such as pay, vacation, and rest periods.
The new law, which came into effect mid-2025, is aimed at reversing the decline in collective bargaining coverage in Germany, which has fallen from about 75% of jobs covered to around 50%. DGB chief Reiner Hoffmann, who has been advocating for this change, sees collective agreements as essential to ensuring fair wages, decent work, social partnership, and preventing wage dumping in publicly funded projects.
However, the law has been met with criticism by some employer associations, especially in eastern Germany, who argue that it interferes with the constitutional autonomy of collective bargaining and potentially disadvantages medium-sized enterprises.
Meanwhile, Hoffmann has also been speaking out in response to allegations against electric vehicle manufacturer Tesla that it prevents works councils from being established. Hoffmann argues that taxpayers' money should not go to companies that gain an economic advantage through lower wages. He asserts that even Elon Musk, the CEO of Tesla, must comply with German laws regarding works councils, and employees have the power to found a works council and join IG Metall.
In a separate statement, Hoffmann described the situation as a "double subsidy" where companies pocket taxpayers' money while workers have to supplement their income. He emphasised that companies involved in public contracts should only be awarded to those that comply with collective bargaining agreements, and non-compliance can lead to penalties of up to 10% of the contract value and special termination rights allowing contract cancellation without notice.
Despite Musk's reputation as a popular figure in Germany, Hoffmann noted that Musk has no power to prevent a works council. Employees have the power to found a works council, and Tesla's alleged actions to prevent this are being closely monitored.
In conclusion, the new law marks a significant step forward in ensuring fair wages and decent work in Germany's public procurement and labor law landscape. As the debate around Tesla's alleged actions continues, it is clear that the government is committed to upholding the rights of workers and ensuring that taxpayers' money is not used to subsidise lower wages.
[1] Bundesregierung setzt Kollektivverträge für öffentliche Aufträge durch [2] Germany to enforce collective bargaining agreements on public contracts [3] Germany's new collective bargaining law for public contracts: Implications for businesses
[1] The new German law, enforcing collective bargaining agreements on public contracts, could have significant implications for businesses operating in the sports, industry, finance, and other sectors that seek federal public contracts, as they must adhere to sector-specific collective agreements and comply with fair working conditions.
[2] As the German government aims to boost collective bargaining coverage in the wake of a declining trend, companies in various industries may find themselves subject to penalties if they do not comply with obligations covering pay, vacation, and rest periods in public contracts valued at €50,000 and above.
