Transformations and co-determination: legal requirements and practical challenges

1. The special features of transformations in the company

Transformation projects in companies today are characterized by a high degree of complexity and dynamism. Unlike traditional reorganization projects, which focus on a clearly defined set of objectives and a fixed package of measures, transformations are often characterized by a large number of parallel changes at different levels. It is typical that the final target image is not yet fully defined at the start of implementation or that it evolves over the course of planning and implementation. This requires a high degree of flexibility and agility from everyone involved - both in planning and in implementation. 

2. Legal framework conditions: The Works Constitution Act as a challenge

The Works Constitution Act (BetrVG) regulates the participation rights of works councils. This includes, in particular, participation in the event of fundamental changes to the company structure or organization. In such cases, the works council must be involved in accordance with §§ 111 ff. BetrVG must be involved. If new technical elements are used or health and safety measures are to be considered, enforceable participation rights under Section 87 BetrVG also apply. 

The BetrVG assumes clear, plannable and conclusively defined measures in which the employer can conclusively explain its ideas to the works council and negotiate with it. However, transformation projects often involve iterative, flexible and sometimes still open ideas on the part of the employer. This discrepancy presents companies and works councils with particular challenges, as the statutory co-determination rights nevertheless apply without restriction. 

3. Procedure and requirements of the co-determination process under the BetrVG

The co-determination process is clearly structured in the law and places high demands on the employer. One step must be taken after the other:

• Early and comprehensive information: The employer is obliged to inform the works council comprehensively and in good time about planned measures and their impact on the workforce. This includes not only oral information , but also the provision of all relevant documents, such as expert opinions, planning documents or profitability calculations.
• Duty to consult: The employer must consult with the works council on the planned operational change, the introduction of new software or the other subject of co-determination. The aim is to attempt a reconciliation of interests and, if necessary, to conclude a social plan or a works agreement.
• Specification of the planning: The employer can only fulfill the duty to consult if the information is so specific that the works council can form a complete picture of the planned measure and its effects. Mere declarations of intent or vague objectives are not sufficient to meet the requirements of the law.
• Negotiations within the framework of a conciliation committee: In principle, an employer can only call upon the conciliation committee if serious negotiations have been held on a specifically described operational change or other co-determined measure without result. Within the conciliation committee, the requirements for the implementation of the corporate measure depend on the content of the participation right. No agreement is required for a planned operational change measure; if the negotiations also fail in the conciliation committee, the company can implement the measures without the consent of the works councils. If a social compensation plan or measures within the meaning of Section 87 BetrVG are involved, forced arbitration is required if the parties to the agreement fail to reach an agreement. 

In transformation projects, however, these requirements often cannot be met in the clear sequence described here. Nevertheless, in order to satisfy the co-determination process and ultimately ensure that the planned measures are implemented, it is essential that the co-determination rights of the works council are continuously observed and that the information and negotiation obligations are regularly fulfilled. 

4. Practical solutions: Combining flexibility and legal certainty

In order to combine the legal requirements with the necessary flexibility of transformation projects, various approaches have proven themselves in practice:

• Subdivide the transformation into sub-steps: The overall measure is broken down into clearly defined sub-steps that build on each other. The co-determination rights are observed separately for each step and the necessary information is provided. If an agreement is reached with the works council, sections and parts of the transformation can be implemented gradually and in a legally secure manner. Such a procedure presupposes that the individual sub-steps can be implemented independently and without unresolved cross-connections to other operational units. If the works council rejects an agreement and the company's (partial) plans meet these requirements, the implementation options described in section 3 apply.
• Process agreements with the works council: It is advisable to conclude a process agreement with the works council. Process agreements can clarify questions of responsibility (e.g. powers to negotiate and conclude agreements) and make valuable procedural arrangements with so-called monitoring and conflict resolutions. Monitoring can, for example, stipulate that the implementation of certain measures may already begin, while the works council continues to be informed about the specification or modification of plans as part of a precisely defined procedure and, if necessary, is also involved. The route to the conciliation committee and its composition can also be clearly defined in order to remain capable of acting quickly in the event of differences of opinion (permanent conciliation committee).
• Linking social plan benefits and training measures to project progress: Incentives can be created by only granting certain social plan benefits or training measures once certain steps have been implemented or after further agreements have been reached, or by extending them to other employee groups. This maintains the incentive for both sides to constructively support and promote the transformation process.
• Agreement on guidelines: Where individual target images and implementation steps are not yet sufficiently concrete, it can also be helpful to at least agree on the principles of implementation with the works council. One example would be the merging of two areas without staff cuts. It is then possible, for example, for the works councils to agree to the implementation of certain steps as long as this takes place within the defined guidelines.   
• Transparent communication and documentation: Open and continuous communication with the works council and careful documentation of all information and consultation processes are also essential in order to ensure legal certainty, avoid subsequent disputes and, in the event of a failure to reach an agreement, find a way to the conciliation committee as quickly as possible.

Conclusion

The implementation of transformations in companies requires a delicate balance between flexibility and compliance with statutory co-determination rights. Through forward-looking planning, subdivision into sub-steps, process agreements and transparent communication, companies and works councils can work together to find solutions that meet both the requirements of modern transformations and the provisions of the Works Constitution Act.