Holding the Shop Together

German Industrial Relations in the Postwar Era

Stephen J. Silvia

• Publisher: ILR Press
• Year: 2013
• Print ISBN: 9780801478970
• eBook ISBN: 9780801469657
• Topic: Politik & Internationale Beziehungen
• Subtopic: Arbeits- & industrielle Beziehungen

Since the onset of the Great Recession, Germany's economy has been praised for its superior performance, which has been reminiscent of the "economic miracle" of the 1950s and 1960s. Such acclaim is surprising because Germany's economic institutions were widely dismissed as faulty just a decade ago. In Holding the Shop Together, Stephen J. Silvia examines the oscillations of the German economy across the entire postwar period through one of its most important components: the industrial relations system.As Silvia shows in this wide-ranging and deeply informed account, the industrial relations system is strongest where the German economy is strongest and is responsible for many of the distinctive features of postwar German capitalism. It extends into the boardrooms, workplaces and government to a degree that is unimaginable in most other countries. Trends in German industrial relations, moreover, influence developments in the broader German economy and, frequently, industrial relations practice abroad. All these aspects make the German industrial relations regime an ideal focal point for developing a deeper understanding of the German economy as a whole.Silvia begins by presenting the framework of the German industrial relations system—labor laws and the role of the state—and then analyzes its principal actors: trade unions and employers' associations. He finds the framework sound but the actors in crisis because of membership losses. Silvia analyzes the reasons behind the losses and the innovative strategies German labor and management have developed in their efforts to reverse them. He concludes with a comprehensive picture and then considers the future of German industrial relations.

CHAPTER 1

The Enduring Resilience of the Law and the State in German Industrial Relations

In this chapter I examine the role of law and the state in German industrial relations. This is to familiarize readers with the distinctive history and contemporary features of German labor law because they profoundly shape the reckoning of German employees and employers about what are possible and preferable policies in the field of industrial relations. I also make clear that law and the German state have been crucial in supporting and sustaining the postwar industrial relations regime.

I challenge two commonly held perceptions about labor law and the role of the state in Germany. First, some scholars have asserted that the German economy was more successful in the immediate postwar era because losing the Second World War wiped the slate clean of prewar laws and deals between interest groups and the state that hindered growth.1 An examination of the facts, however, demonstrates that postwar German law and practice in most areas consist largely of borrowings from the Weimar Republic and even the Second Empire. They have been, if anything, more numerous and encompassing than in previous eras. This is certainly true for postwar industrial relations. Second, labor and management practitioners typically stress collective bargaining autonomy and underplay the important role the state plays in providing the prerequisites for that autonomy. Rather, the German state has served as a sturdy trestle supporting the postwar industrial relations regime. Contrary to the erosion and exhaustion arguments discussed in the introduction, the foundations of the law and the state have remained as robust components of German industrial relations.

I am also clearing the field here for one of my larger arguments, namely, that the forces driving membership trends for German trade unions and employers associations differ. Unionization is primarily a sociological phenomenon, whereas employers association membership is principally an economic calculation based on sectoral considerations. State support of German industrial relations is quite important, but it has been a constant; it therefore cannot be held responsible for change in the postwar era.

German Labor Law: A Brief Overview

Germans commonly refer to the start of postwar reconstruction in May 1945 as “hour zero,” largely because of the devastating impact of the war and the wholesale scrapping of Nazi state structures. A brief review of the contents and antecedents of statutes delineating freedom of association, collective bargaining, and adjudication of workplace disputes reveals, however, that most of the components of the postwar regime are refurbished versions of prewar institutions, practices, and structures. I begin with a discussion of the freedom of association, which is the bedrock on which both the statutes and the jurisprudence for industrial relations is built. In subsequent sections, I examine the legal provisions undergirding collective bargaining, contracts, labor courts, and the regulation of industrial disputes.

Freedom of Association

In industrial relations, freedom of association (Koalitionsfreiheit) means the right of employees to organize trade unions and of managers to form employers associations. This right existed formally even in Imperial Germany, though it was often difficult for employees to exercise it in practice. Most business associations and individual firms in Imperial Germany went to considerable lengths to avoid having to deal with unions. Employers frequently used ties to local police and politicians to harass unionists and to disrupt their organizations. At times the German national government also made life difficult for unionists. Under the leadership of Imperial Chancellor Prince Otto von Bismarck, the German state banned all socialist activities and organizations, including socialist trade unions, from 1878 to 1890.2 Even after the expiration of the antisocialist laws, government officials at all levels in Imperial Germany frequently subjected unionists to spying, harassment, dismissal, police violence, and sensational trials before biased judges. The famous statement of Judge Lujo Brentano summarizes the contradictory attitude of the Imperial German state toward trade unions: “Workers possess the freedom of association. If they make use of it, however, they will be punished.”3 In contrast, the German state did not inhibit the creation and operation of business associations during this same period. In fact, it even permitted the formation of cartels.

The First World War substantially changed the configuration of Germany’s sociopolitical relations, which helped to advance the legitimization of trade unions. Once war broke out, nationalism trumped cross-national class solidarity for most workers and their organizations, despite considerable rhetoric to the contrary in socialist circles in the years leading up to the conflict. German labor backed the war effort and quickly offered to participate in a “national unity front” to maintain a “civil peace” (Burgfrieden) for the duration of the conflict.4 Labor’s initial contribution to the civil peace was a no-strike pledge. In return, employers and the government agreed to stop harassing trade unions and to cooperate with them throughout the war. The highpoint of the civil peace came on 5 December 1916. The imperial government’s Third Supreme Military Command headed by Gen. Paul von Hindenburg and Gen. Erich Ludendorff enacted the Auxiliary Patriotic Service Act (Gesetz betreffend den vaterländischen Hilfsdienst). This act recognized unions as legal bargaining agents for workers, opened the public sector to union recruitment, and required the establishment of employee committees in medium- and large-sized workplaces. In return, labor accepted a work requirement for all able-bodied males between seventeen and sixty and a stipulation that employees gain permission from their current employer before changing jobs. Labor leaders hoped that the civil peace would permanently anchor trade unions within Germany’s economy and society, but achieving this objective proved elusive.5

Germany’s defeat in the First World War unleashed considerable turbulence. The kaiser abdicated on 9 November 1918, two days before Germany signed the armistice to end hostilities. On November 10, a mass gathering of Berlin workers’ and soldiers’ councils elected a five-person council of “people’s commissars” as the new government. All of the commissars were social democrats. Three were from the larger and more moderate Social Democratic Party of Germany (Sozialdemokratische Partei Deutschlands, SPD), and two were from the left-wing Independent Social Democratic Party of Germany (Unabhängige Sozialdemokratische Partei Deutschlands, USPD). Friedrich Ebert, head of the SPD, became provisional chancellor.6

The kaiser’s abdication did not induce union leaders to change their integrationist course, but it did trigger a renegotiation of labor’s arrangement with German employers. The unrest of the moment and the social democratic monopoly in the new provisional government put labor in the stronger strategic position. The upsurge of radicalism prompted significant numbers of German employers to abandon their rejectionist attitude toward organized labor and to embrace the reformist trade unions as a way to save capitalism. Many established union leaders feared a full-blown socialist revolution nearly as much as did employers, because it would most likely sweep them and their organizations away along with the institutions of capitalism. Thus, a common interest in preserving the status quo served as a foundation for cooperation and compromise between German labor and management.7

On 15 November 1918, business and union leaders acted on their own to start to build a post-Imperial industrial relations system. A delegation of social democratic trade unionists led by the head of the Generalkommission der Gerwerkschaften Deutschlands (General Commission of German Trade Unions), Carl Legien, and a group of prominent businesspeople led by Ruhr industrialist Hugo Stinnes signed a twelve-point pact known as the Stinnes-Legien agreement. The agreement took the form of a private contract rather than legislation because of doubts about the stability and legitimacy of the provisional German government. Most prominently, the Stinnes-Legien agreement recognized independent trade unions as the sole legitimate collective representative of employees, declared collective agreements to be inviolate, permitted the formation of works councils (Betriebsräte) in workplaces with more than fifty employees and instituted the eight-hour workday as a standard.8

Germany’s new republican constitution, drafted in the city of Weimar in 1919, greatly improved the legal anchoring of labor’s freedom of association. Article 159 of the Weimar constitution adopted much of the language of the Stinnes-Legien agreement, including the guarantee of the right of employees to form unions. Employers also remained free to create associations. The German state generally respected this freedom of association during the Weimar era, although it did not always defend trade unions and their members from hostile employer actions (e.g., the use of strikebreakers and dismissal of union activists).

Freedom of association soon came to an end after Adolf Hitler rose to power in January 1933. His National Socialist government did permit trade unionists to hold their traditional May Day celebration in 1933, but the motivation was by no means benign. The Nazis used the demonstrations to identify union activists. On the following day, autonomous union representation came to an abrupt end. Nazi officials conducted a massive nationwide sweep, arresting thousands of trade unionists and shutting down all independent labor organizations. In the place of unions, the Nazis set up the subservient Deutsche Arbeitsfront (DAF, German Labor Front).9 Nazis were far less confrontational with business associations, but they dissolved them nonetheless in 1934, replacing them with the Reichsgruppe Industrie, which had compulsory membership and a subservient relationship with the Nazi state.

After the Second World War, Western occupying powers gradually restored freedom of association, but it was ultimately up to Germans themselves to decide how such freedom should be structured in a postwar republic. From the summer of 1948 to the spring of 1949, a constitutional convention consisting of representatives elected by the parliaments of the western German states (Länder) met to draft a provisional constitution, which they called the Basic Law (Grundgesetz). Article 9, section 3 of the Basic Law does not use the word “union” (Gewerkschaft), but it explicitly declares: “The right to form associations to safeguard and improve working and economic conditions shall be guaranteed to everyone and to all occupations.” This expansive language, which includes all public-sector employees as well as white-collar employees with supervisory duties, exceeds the rights granted in many other countries (e.g., the United States). It should be noted that the general language of article 9, section 3 also gives firms full freedom to form employers associations. The only restriction in the realm of industrial relations is a ban on company-dominated unions. Courts have ruled that company unions deny employees a genuine right to freedom of association.10

Mindful of the compulsory nature of most Nazi organizations, court rulings have also interpreted article 9, section 3 of the Basic Law to protect the freedom not to be forced to belong to an organization, which in German legal parlance is called “negative freedom of association” (negative Koalitionsfreiheit). The doctrine of negative freedom of association forbids compulsory union membership (i.e., a “closed shop” or a “union shop”) as a condition of employment, which is permissible in many English-speaking countries. Since the 1960s, court rulings have forbidden collective bargaining agreements that give some benefits to union members only, concluding that these amount to indirect pressure on employees to join a union. This interpretation of article 9, section 3 has deprived unions of a means to neutralize a significant free-rider problem that has deprived them of members and dues.11 Still, the Basic Law contains the strongest language protecting the rights of both employees and employers to organize ever found in any German constitution.

Collective Bargaining and Contracts

Whereas freedom of association simply guarantees the right of unions and employers associations to exist, a collective bargaining regime goes one step further. It establishes the ground rules for negotiations between employers and trade unions, and—in instances when talks fail—industrial conflict. German jurisprudence has built out the concept of “collective bargaining autonomy” (Tarifautonomie) as a predicate of the freedom of association. Collective bargaining autonomy at its foundation should not be equated with the absence of state involvement. The state does provide substantial support for collective bargaining “without, however, involving itself in the substantive issues dealt with around the bargaining table.”12 To draw an analogy, the role of the German state in industrial relations is like that of a fish bowl. The state’s role in defining and sustaining the contours of a highly constructed realm of industrial relations is crucial, but it is in the background and often not immediately apparent to actors and observers alike. If it were withdrawn, however, the state’s full significance would become immediately apparent to all, just as fish would immediately notice the disappearance of their bowl. The state’s supporting role in industrial relations is consistent with postwar Germany’s general approach to regulation, which has been to create underlying “framework conditions” (Rahmenbedingungen) that tilt the playing field for economic decision making in a constructive direction, but then let private parties interact without interference.13

The German state did not always provide supportive framework conditions for collective bargaining. Before the First World War, collective bargaining was a precarious endeavor. Although Imperial Germany had a series of laws regulating working conditions, it had no industrial relations legislation. Collective agreements fell uneasily into the category of private contracts concluded by collective actors. Since cartels were legal in the Second Empire, there was no foundation in law to attack collective bargaining agreements as a restraint of trade, which was a common antiunion tactic in English-speaking countries at the time. Instead, judicial opinions varied widely. Some judges found collective bargaining agreements to be illegal, but others did not. A few judges even ruled that collective agreements were binding on all employees, including non-union members.14

The 1916 Auxiliary Patriotic Service Act ended the legal ambiguity surrounding collective bargaining agreements by definitively establishing their legitimacy, but it was only in the immediate post-Imperial years that the German state adopted specific legal ground rules for collective bargaining. The Collective Agreements Order (Tarifvertragsordnung, TVO) of 23 December 1918 laid the procedural foundation for collective bargaining in interwar Germany. The TVO had an unusual pedigree. Large portions of the order (which is quite short) came directly out of the Stinnes-Legien agreement that labor and management had crafted on their own six weeks earlier. The short-lived provisional German assembly passed it. The German governme...

Table of contents

• Preface
• Abbreviations
• Introduction
• 1. The Enduring Resilience of the Law and the State in German Industrial Relations
• 2. Codetermination
• 3. A Quantitative Analysis of Membership Developments in the Postwar German Trade Union Movement
• 4. Trade Unions in Germany
• 5. Employers Associations
• Conclusion
• Notes