Collective Bargaining Compliance No Taxpayer Money for Wage Dumping: Collective Bargaining Compliance Act Not Consistent

It should actually go without saying: When the federal government awards contracts—that is, uses taxpayer money—these contracts should not go to companies that offer poor working conditions.

But that has certainly been the case so far. Public procurement often follows the motto “cheap is best.” Social or environmental criteria play a secondary role. The federal government is thus failing to live up to its role as a role model.

That is now set to change to some extent. After lengthy discussions, the Bundestag has passed the Federal Collective Bargaining Compliance Act. As a result, new rules will apply to public contracts in the future: Anyone wishing to receive a contract must prove that the company pays wages in accordance with collective bargaining agreements and that the working conditions stipulated in those agreements apply.

No taxpayer money for low-wage operators and exploiters—that is the idea behind the law. In this respect, it is an important step for all workers and all taxpayers in the country.

“Taxpayer money in the form of federal contracts must not be spent on wage dumping,” says Christiane Benner, President of IG Metall. “This is a matter of fairness toward employees, but also toward society.” The Collective Bargaining Compliance Act puts a stop to this in many areas.

However, Benner criticizes: “Unfortunately, the law passed today in the Bundestag does not consistently follow this path; rather, it contains loopholes left and right that run counter to its intent and purpose.”

IG Metall criticizes the following points:
 

• The Collective Bargaining Compliance Act only applies to contracts worth 50,000 euros or more. This high threshold means that more than a quarter of contracts fall outside the scope of the law.
• The new law does not apply to the defense sector (supplies and procurement)—ironically, the very sector in which massive investments are currently being made. For IG Metall, this is unacceptable, as it means that the collective bargaining criterion plays no role in a large portion of upcoming government investments.
• In terms of procedural regulations, the law provides too few incentives for employers to commit to collective bargaining agreements.

Christiane Benner’s conclusion: “This Collective Bargaining Compliance Act is far from sufficient to sustainably strengthen collective bargaining coverage in Germany.” This is not only IG Metall’s conviction but also a requirement of the European Union: “The EU Minimum Wage Directivemandates a national action plan for Germany; this must now be presented as soon as possible and, above all, implemented.”

Background: The EU Minimum Wage Directive aims for 80 percent collective bargaining coverage. In Germany, however, only about 49 percent of employees currently benefit from collectively bargained wages (sectoral and company-level collective bargaining agreements).

The federal government must therefore present a plan to increase the share of wages covered by collective bargaining agreements—but has not yet done so.

Majority in Favor of Collective Bargaining Compliance

An effective law on collective bargaining compliance enjoys broad support among the public. Fifty-nine percent of employees are in favor of awarding public contracts only to companies that pay collectively agreed wages. This is shown by a recent survey by the German Trade Union Federation (DGB).

This is a mandate for the federal government: The Federal Collective Bargaining Compliance Act that has now been passed can only be one step—further steps must now follow quickly.