The declaration of general applicability of collective agreements is an exceptional instrument.

With around 78,000 collective agreements currently in force, the collective bargaining partners have created a differentiated system of industrial relations. The declaration that collective agreements are generally binding is the exception in our German collective bargaining system, which is characterised by freedom of association and collective bargaining autonomy.

If a collective agreement (link to text of collective agreement) is declared generally binding under section 5 of the Collective Bargaining Act (Tarifvertragsgesetz - TVG), it applies nationwide or regionally to all companies and employees in a sector. Companies must therefore apply this collective agreement even if they were not previously bound by it - for example, because they are not members of the employers' association that concluded the collective agreement.

However, the constitutionally protected freedom of association and collective bargaining autonomy (links to the text Collective bargaining autonomy) includes not only the right to join a collective bargaining party - but also the right to stay out of such a coalition. For this reason, the AVE of collective agreements plays a special role in the German collective bargaining system. Not every sector and collective bargaining party is eligible for the AVE of collective agreements. The comparatively low number of collective agreements declared generally binding in relation to all applicable collective agreements documents their exceptional character (443 AVE in 2017, Federal Ministry of Labour 2017).

Dealing responsibly with the AVE
As the umbrella organisation of the German employers' associations, the BDA, in agreement with its members, stands for freedom of association and a responsible and cautious use of the instrument of AVE. The goal and aspiration of collective bargaining policy (link to text Collective bargaining policy) should be to have its own assertive and formative power as well as broad acceptance of collective agreements in order to be able to hold its own in competition with other forms of determination of working conditions on the part of companies. This can only be achieved with balanced, productivity-oriented, differentiated and flexible collective agreements. Collective bargaining conditions should be minimum conditions in order to maintain and promote competitiveness and employment in an industry.
The AVE must be in the public interest
The legal prerequisites for AVE in the Collective Bargaining Act (TVG) were fundamentally changed by the new legal regulation in 2014. The "public interest" is now the essential prerequisite for an AVE. As a rule, an AVE appears to be in the "public interest" if "the collective agreement has become of overriding importance in its area of application for the shaping of working conditions" or, alternatively, "the safeguarding of the effectiveness of the collective agreement's standard-setting against the consequences of economic undesirable developments requires an AVE".
The extension of a collective agreement to employers and their employees who are not yet members of a collective bargaining party always requires a special justification. The decisive factor for the "public interest" is therefore the protection of employees. The "public interest" is only given if, due to the employment situation and taking into account sector-specific peculiarities, uniform and appropriate employment conditions are necessary for their protection.
Collective bargaining committee as a control and formative body
The Federal Ministry of Labour (BMAS) can only declare a collective agreement to be generally binding in agreement with the collective bargaining committee at federal level (collective bargaining committee at the BMAS), which is made up of equal numbers of representatives of the employers' and employees' umbrella organisations, at the request of both parties to the collective agreement. In parallel, the competent Land authorities may, in agreement with the respective Land collective bargaining committee, declare collective agreements valid for their Land to be generally binding.

The collective bargaining committees exercise a control and formative function within the framework of the AVE procedure. When assessing whether an AVE appears to be in the "public interest", their members have a margin of appreciation. By taking into account the interests of the applicants and their members, of outsiders, but above all of the economy as a whole, the balance between positive and negative freedom of association is maintained, i.e. the freedom to join an employers' association or a trade union or to decide against such membership. In this way, the collective bargaining committees make an essential contribution to the preservation of collective bargaining autonomy. At the same time, the right of the central organisations of employers and employees to have a say in the AVE procedure underlines the neutrality of the state in the regulation of working conditions. The collective bargaining committees are thus an expression of the subsidiarity principle of the social market economy, according to which tasks should be performed at the level which is best able to do so.