An Explainer: What Are German-Style Works Councils?

We’ve been covering the developments at Volkswagen’s plant in Chattanooga, Tennessee, and the negotiations between VW and the United Auto Workers to establish a “German-style works council.” 

But what exactly is a German-style works council?  Professor Sachs already recommended reading Joel Rogers and Wolfgang Streeck’s excellent summary.  Thomas Geoghegan, an American labor lawyer, also wrote a summary geared towards a popular audience in Harper’s Magazine

Rogers & Streeck define works councils as “institutionalized bodies for representative communication between a single employer” and their employees.  A works council represents all of the workers at that workplace – regardless of whether those workers are union members.  

A union might co-exist with a works council at a given workplace.  Rogers & Streeck outline the types of conflicts or collaboration that might exist between the work council and the union as they negotiate their respective role in advocating for workers at a given workplace, but one division of labor is pre-set: works councils do not negotiate for wages or benefits, and do not call strikes.  Professor Sachs outlined Rogers & Streeck’s typology of works councils:

“Paternalistic councils (designed mainly to prevent unionization), consultative councils (intended to improve communication between management and workers and thus to enhance economic competitiveness), and representative councils (formed to “enable workers to assert distributional . . . interests”).” 

John Addison, Claus Schnabel, and Joachim Wagner present a literature review in the British Journal of Industrial Relations showing that overall, it appears German works councils have a positive effects on the German economy.  Moreover, Martin Behrens, writing in the Cornell Industrial and Labor Relations Review, presents data showing that in addition to works councils and unions working together, work councils often play an important role in effectively recruiting new union members. 

Some U.S. academics advocate for works councils as an alternative, or addition, to our union system.  For example, Stephen Befort has advocated for a system similar to works councils based on data that American workers want a “voice” in the workplace.  He identifies the important role of works councils in allowing workers to “discuss[] with an employer conditions that out to be changed, rather than quitting the job.”  He argues that unionization is a powerful mechanism for creating such a voice, but given the long decline in union membership, it’s time for a new model. He presents multiple alternative models workers to collective or individually have a “voice” in the workplace, drawing on Japanese “employee participation programs” and German-style works councils.

Rogers & Streeck, in chapter thirteen of their aforementioned book, argue that a works council system might provide benefits for workers who are not able to unionize today.  Specifically, such a system could, first, provide “at least some representation to those American workers who want increased voice in firm decision making” but do not want, or cannot join, a traditional union.  Second, it could improve information flow between management and workers.  This might be particularly valuable improving training and productivity, even if not in changing compensation.  And third, it could “improve the effectiveness of government regulation of the workplace” by providing another “set of eyes and ears” to monitor government regulations.  

Richard Freeman, in his 2007 book “America Works” suggests that workers embrace works councils for similar reasons.  Freeman notes that some “non-union organizations” have tried to fill this gap by facilitating communication between workers and employers.  These have operated primarily as external activists — such as legal organizations or human rights activists — not as membership organizations for employees.  There are some membership-based groups filling this space, but Freeman voices skepticism: thus far, data shows such organizations are simply not effective because they don’t represent a large enough segment of the workforce.

Of course, all of these scholars note the existing legal barriers to creating works councils in U.S. companies: in a non-union workplace, it would violate section 8(a)(2) of the NLRA. As Professor Sachs explained, “That section makes it an unfair labor practice for an employer to ‘dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it.’”  So, to implement a works council in a non-union company, there would need to be a legislative fix.  Befort, in his article, considers multiple changes ranging from loosening the section 8(a)(2) requirements, to passing entirely new legislation.

It’s worth noting that there is some debate on this point.  The Wall Street Journal published an op-ed arguing that a works council in the Chattanooga VW plant would be lawful even if the plant does not unionize.  Professor Sachs responded to the WSJ op-ed, arguing that it misinterprets the law.  Former NLRB member John Raudabaugh is quoted in the Chattanooga Times Free Press as supporting the position that works council-style collaboration between workers and management may be lawful even without a union.  Raudabaugh concurred in Electromation—the NLRB’s major case in this area—and expressed the view that “[c]ooperative programs are seen by many as a necessary response to competition in a global economy,” and offered there a more flexible approach to interpreting 8(a)(2).