2024: a year of strikes? ‒ Options for employers to react to industrial action (Part II)

Germany had just recovered from the German train drivers’ union’s (Gewerkschaft Deutscher Lokomotivführer, GDL) last rail strike when the union called and carried out the longest rail strike in the country’s history last week. In light of this, we have prepared Part II to our article on options for employers to react to industrial action, which explores the strategies employers can resort to during industrial action and the judicial redress mechanisms available to them.

Industrial action by employers

Employers’ “traditional” industrial actions, such as lockouts or plant closures, play almost no role in practice anymore as they tend to exacerbate or increase the already often significant economic damage caused by industrial action. Rather, companies should try to find ways and means of ensuring operations continue as smoothly as possible despite industrial action. Various options can be considered for this purpose:

Strike-breaking bonuses

Employers may, for example, offer financial incentives, known as strike-breaking bonuses, to employees who continue to work regularly instead of participating in strikes. The timing of these bonuses is important: they must be promised before or during the industrial action in order to be considered a legitimate means of industrial action (Federal Labour Court (Bundesarbeitsgericht, BAG) of 14 August 2018 – 1 AZR 287/17). If, on the other hand, such bonuses are only offered after the conclusion of a strike, this will generally violate collective agreements and/or statutory prohibitions on retaliatory measures. There are no universal guidelines as to the amount of these bonuses. They can therefore be based on the situation and tailored to the individual case (see, for example, Braunschweig Labour Court (Arbeitsgericht, ArbG) of 2 June 2016 ‒ 6 Ca 529/15: €200 gross per working day was considered permissible).

When offering strike-breaking bonuses, companies should be aware that unions typically demand, following the conclusion of industrial action and during subsequent collective bargaining, that any bonuses paid during the dispute be subsequently paid to all other employees as well. While the short-term effect of a strike-breaking bonus may be to keep some employees from participating in a strike, companies should factor in the expected compensation claims from the union in their strategic planning from the outset.

Use of strikebreakers

Generally, during industrial action, companies should explore which (additional) workers can be utilised to minimise the strike’s negative impact on operational processes as far as possible. To this end, employers can try to motivate their own employees to perform the work. Furthermore, it is permissible to reassign employees from different areas or even from other company operations to the workplaces of strikers to optimise the distribution of the available workforce. In this context, employers are also permitted to request overtime from employees who are willing to work through the strike period.

Additionally, engaging external personnel is a viable option, but it is important to ensure that such engagements are structured and actually executed as legitimate outsourcing under a service or work contract (Dienst- oder Werkvertrag). This is because only personnel recruited in this way can be legally used as strikebreakers to replace striking employees without any special restrictions. If bogus work contracts or disguised personnel leasing are involved, section 11(5) of the German Temporary Agency Workers Act (Arbeitnehmerüberlassungsgesetz, AÜG), which prevents temporary workers from being employed in companies directly involved in industrial action, will apply. This extensive ban on deployment has been a subject of intense debate but was ultimately upheld as constitutional by the Federal Constitutional Court (Bundesverfassungsgericht, VerfG on 19 June 2020 ‒ 1 BvR 842/17). Consequently, if the company employing the temporary workers is affected by a union’s strike call, it is not permissible for temporary workers to replace striking employees, either directly or indirectly.

Co-determination in industrial disputes

In considering all of the options an employer has in response to industrial action, it is important to note that, according to case law, existing co-determination rights of the works council can be restricted by interpreting them in a way that is consistent with industrial action (established case law, Federal Labour Court of 13 December 2011 ‒ 1 ABR 2/10). Therefore, actions such as recruitment or transfers due to industrial action, as defined by section 99 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), can generally be implemented without co-determination.

Judicial redress mechanisms

Employers have various redress mechanisms available to them in the face of unlawful industrial action.

Interim injunctions

If a strike is imminent, an interim injunction is the right legal remedy to halt an impending strike or at least to negotiate an emergency staffing agreement. The prerequisite is that the strike action is unlawful, such as when the strike pursues an objective that cannot be regulated by a collective labour agreement. For instance, Hesse Regional Labour Court declared a pilots’ strike unlawful because it was directed against the establishment of an airline abroad (Hesse Regional Labour Court of 9 September 2015 ‒ 9 SaGa 1082/15).

Another point of contention often arises around the proportionality of the strike measures, which must be assessed by balancing the fundamental rights affected by the strike. For example, factors such as the notice period, the duration of the strike, its scope and its impact on the employer and external third parties all play a role here. However, due to the constitutional protection of the right to strike, any claims of disproportionality must meet very high standards. Consequently, even in sectors providing essential services, such as hospitals, a strike can be lawful if an emergency staffing agreement is in place to ensure adequate care for people. If there is any uncertainty, establishing an emergency staffing service, potentially enforced by the courts, is a less severe measure than banning the strike outright.

Even high financial losses do not inherently imply that a strike is disproportionate. However, if the industrial action is intended to jeopardise the company’s survival, it could be deemed disproportionate, although this is normally difficult to prove. The chances of success of an interim injunction therefore always depend on the circumstances of the individual case.

In the recent interim injunction proceedings concerning the collective bargaining dispute at Deutsche Bahn before the Frankfurt am Main Labour Court and the Hessian Regional Labour Court, the main issue was also the proportionality of the strike. The railway companies argued that the strike was causing enormous financial losses to them and, in addition, damage to the country’s economy due to days of train cancellations. However, the courts did not view these financial losses as a threat to the company’s survival, emphasising that economic damage is an inevitable consequence of strike action.

Damages

If a court deems industrial action unlawful, employers are generally entitled to compensation for the damage incurred. The trade union organising the strike is the main potential defendant. Employees who unlawfully participate in strikes can be prosecuted more effectively with disciplinary measures, including termination without notice, due to the breach of their main contractual obligation to perform their work.

A trade union can only be sued on a contractual basis if it violates a ban on taking industrial action, making statutory claims for damages therefore of primary practical relevance. The protected legal interest is often the “established and exercised commercial enterprise” (eingerichtete und ausgeübte Geschäftsbetrieb). The amount of damage is usually calculated on the basis of lost profits, but proving this in practice can be difficult.

It should also be noted that only employers who are directly impacted by their own employees’ strike are entitled to claim. For example, in the context of a strike by air traffic controllers, airlines that were only indirectly impacted were denied damages.

Attack on the union’s capacity for collective bargaining?

Trade unions are only able to carry out strike action if they are legally entitled to enter into collective bargaining agreements. This requires, among other things, that the union has capacity for collective bargaining. This capacity can be reviewed in court, which does occur in practice from time to time (see, for example, the decisions of the Federal Labour Court on the collective bargaining capacity of the Collective Bargaining Association of Christian Unions for Temporary Work and Personnel Services Agencies (Tarifgemeinschaft Christlicher Gewerkschaften für Zeitarbeit und Personalserviceagenturen) or the Commercial Assistants Association (Deutschnationaler Handlungsgehilfen-Verband (DDHV) ‒ Die Berufsgewerkschaft eV).

German law provides for a special procedure for reviewing a trade union’s collective bargaining capacity, section 97 of the German Labour Court Act (Arbeitsgerichtsgesetz, ArbGG). However, this procedure cannot be used to prevent imminent industrial action as proceedings can go all the way to the Federal Labour Court and it could thus take several months or even years before a legally binding decision is reached. In the context of interim injunction proceedings, a challenge to a trade union’s collective bargaining capacity is only considered if the union’s lack of capacity is evident. Proving this in practice is hardly possible, as the recent proceedings before the Hessian State Labour Court have shown. Furthermore, the established trade unions’ capacity to negotiate collective agreements will not generally be in question anyway. The application proceedings initiated by German national rail operator Deutsche Bahn pursuant to section 97 of the Labour Court Act are probably solely due to the unique circumstances surrounding GDL’s establishment of a cooperative of temporary workers, Fair Train e.G. The future stance of the courts on this matter remains to be seen.

Conclusion

In the face of industrial action, employers generally have a variety of potential responses at their disposal. Which of these are most likely to succeed depends to a large extent on the company concerned, the striking trade union and the circumstances of the individual case ‒ in particular the severity of the (announced) strike.