Parliamentary process on the German Collective Agreement Compliance Act: status of the legislative process and practical implications for companies

In its German bill to strengthen collective bargaining autonomy by ensuring compliance with collectively agreed wages in the award of federal public contracts (German Collective Agreement Compliance Act (Tariftreuegesetz) or “Bill”) the German government is seeking to strengthen collective bargaining autonomy and reduce distortions of competition affecting companies bound by collective agreements when public contracts are awarded by the federal government. At the heart of the planned legislation is the Federal Collective Agreement Compliance Act (Bundestariftreuegesetz) “Federal Collective Agreement Compliance Act” or “Act”, which as an amending act is intended to introduce uniform national requirements for compliance with working conditions under collective agreements when federal public contracts and concessions are awarded and performed.

In our Noerr Insight dated 27 August 2025, we provided a detailed overview of the new regulatory framework for public procurement envisaged by the Bill and the challenges it poses for companies.

The Federal Collective Agreement Compliance Act is currently still going through the parliamentary process. After the federal government passed the Bill on 6 August 2025 and forwarded it to the Bundesrat (the German upper house of parliament) as part of the preliminary parliamentary procedure, the Bundesrat issued its opinion (documents in German only) on 26 September 2025. The Committee on Labour, Integration and Social Policy (“LIS Committee“) and the Committee on Economic Affairs (“Economic Affairs Committee”) submitted a number of practical proposed amendments, such as excluding supplies of goods from the scope of the Federal Collective Agreement Compliance Act, but the Bundesrat did not take these up when adopting the Bill.

Following the Federal Government’s counterstatement and the first reading in the German Bundestag (lower house of parliament) on 10 October 2025, the Bill was referred to the Committee on Labour and Social Affairs. As part of the committee’s deliberations, a public hearing of experts was held on 3 November 2025 (documents in German only) where significant doubts regarding EU and constitutional law as well as economic and administrative policy objections were the main topics discussed.

Since then, consultations on the planned legislation have been ongoing at parliamentary group and committee level; a second and third reading in the plenary session of the Bundestag that was originally scheduled for December 2025 will now not take place until spring 2026.

This article summarises how the parliamentary process for the Collective Agreement Compliance Act has advanced up to now. It focuses on the committees’ recommendations and the opinion of the Bundesrat (see A below) as well as the federal government’s counterstatement (see B). We also examine some key legal and practical criticisms from the statements raised by experts at the public hearing in the Committee on Labour and Social Affairs and put them in a legal context (see C). Finally, we set out the next steps in the process and explain what companies should bear in mind to mitigate the bureaucratic and business-related challenges associated with the new legislation (see D).

The parliamentary process to date: committee recommendations and opinion of the Bundesrat

In September 2025, the German government’s draft bill was first submitted to the Bundesrat for comment, in line with the parliamentary legislative procedure set out in Article 76(2) of the German constitution, or “Basic Law” (Grundgesetz). First, the committees of the Bundesrat – here the LIS Committee and the Economic Affairs Committee – submitted a range of recommended amendments to the plenary. Although these committee recommendations indicate possible areas of conflict for the further legislative process, only a few of them were reflected in the Bundesrat’s final opinion, which is examined in more detail below.

Supplies of goods to be excluded from the scope of the Federal Collective Agreement Compliance Act

With respect to the scope of application of the Federal Collective Agreement Compliance Act, the LIS Committee and the Economic Affairs Committee recommended limiting section 1(1) of the Act to the awarding and performance of public construction and service contracts and excluding supplies of goods from its scope. Section 1(1) of the Federal Collective Agreement Compliance Act contained in the federal government’s draft bill covers supply, service and construction contracts.

The committees justified this welcome recommendation primarily on the grounds that for supply contracts there is no practical and legally watertight way of establishing the relationship of the paid labour to the public contract in question because contracts often involve different types of work and the part covered by collective agreements cannot be clearly distinguished from the rest of the production process.

In this context, the committees also referred to the explanatory memorandum on section 3(1) of the Federal Collective Agreement Compliance Act, which links compliance with working conditions under a collective agreement to a commitment to adhere to collective agreements as a contractual condition for performance and is typically not meant to cover activities used for the serial production of new goods based on dimensions, number or weight. They said that in view of this, the simultaneous inclusion of supplies of goods in section 1(1) of the Federal Collective Agreement Compliance Act and the envisaged exemption for suppliers in the second sentence of section 3(2) appeared inconsistent and rendered the provisions meaningless.

They also pointed out that the geographical scope of the above Act is limited to the territory of the Federal Republic of Germany for reasons of EU law. In its judgment Bundesdruckerei (C-549/13), for example, the European Court of Justice (“ECJ”) made clear that national minimum wage requirements must be limited in geographical scope to services provided within the territory of the Member State concerned. Extending them to employees of subcontractors based in another Member State who carry out their work entirely abroad constitutes a disproportionate interference with the freedom to provide services under Article 56 TFEU. Section 1(3) of the Federal Collective Agreement Compliance Act follows this approach and expressly limits the geographical scope of the Act to services provided within the Federal Republic of Germany. If supplies of goods were included, the Federal Collective Agreement Compliance Act would primarily affect German companies, while providers from other European countries without production sites in Germany would have greater leeway on costs and prices, potentially causing an objectively unjustified distortion of competition to the detriment of domestic companies.

However, the Bundesrat did not adopt this recommendation in its opinion.

Extension of verification requirements to include subcontractors

The committees of the Bundesrat also focused on the verification requirements set out in section 9 of the Federal Collective Agreement Compliance Act. Section 9 of the Act obliges contractors and concessionaires to contractually bind their subcontractors and concessionaires to submit suitable evidence of compliance with collective agreements. On this basis the Federal Collective Agreement Compliance Monitoring Authority (Prüfstelle Bundestariftreue) can carry out the checks provided for in section 8(2) of the Act. The contractor has to document that the employees deployed were granted the working conditions laid down in the collective agreement throughout the entire performance of the contract by providing payslips, payment receipts, employment contracts or working time records, for example.

With regard to section 9 of the Federal Collective Agreement Compliance Act, the committees suggested that this verification requirement should be explicitly extended to include subcontractors and temporary employment agencies, arguing that this is necessary for effective ad hoc checks by the Federal Collective Agreement Compliance Monitoring Authority. They maintained that if subcontractors and temporary employment agencies were not included, checks and the detection of any infringements would be incomplete and the protection of employees could not be fully guaranteed.

The Bundesrat did not specifically address this recommendation in its opinion.

Distinction from state laws on adherence to collective bargaining agreements: Federal Collective Agreement Compliance Act not to apply to state and local authority contracts

In its opinion, the Bundesrat followed the recommendation of the LIS Committee and the Economic Affairs Committee and called for clarification that the Federal Collective Agreement Compliance Act does not apply to the contracting bodies referred to in section 1(1), first sentence, paragraphs 2 to 6 of the Federal Collective Agreement Compliance Act where the bodies themselves act as bidders or contractors in procurement procedures of the federal states or local authorities and subcontract to other companies in accordance with the relevant state laws on adherence to collective bargaining agreements during the contract term. The contracting bodies referred to in section 1(1), first sentence, paragraphs 2 to 6 of the Federal Collective Agreement Compliance Act are:

• public contracting authorities which are predominantly administered, controlled or financed by the federal government (paragraph 2);
• companies that carry out activities in sectors such as water, gas or transport or concessionaires subject to a controlling influence by the federal government (paragraph 3);
• public contracting authorities pursuant to section 99(4) of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen) that are mainly subsidised from federal funds (paragraph 4);
• regional contracting authorities acting on behalf of the federal government under a special arrangement (paragraph 5); and
• contracting authorities that are at the same time attributable to the federal government and a state in accordance with the above paragraphs (paragraph 6).

The background to this is that according to the explanatory memorandum on section 1 of the Federal Collective Agreement Compliance Act the procurement procedures of federal states and local authorities are to remain unaffected, thereby avoiding a conflict of rules: if one of the federal contracting bodies listed in section 1(1), first sentence, paragraphs 2 to 6 of the Federal Collective Agreement Compliance Act acts as a contractor in a state or local authority procurement procedure, only the relevant state law on adherence to collective agreements should apply and the Federal Collective Agreement Compliance Act should not apply alongside it.

Possible exemption for companies already bound by collective agreements by exercising discretion

The Bundesrat committees then recommended considering providing targeted relief for companies already bound by collective agreements. Section 5(3) of the Federal Collective Agreement Compliance Act is in principle intended to regulate conflicts between collective agreements that are not identical in content but overlap in their geographical, subject-matter and personal scope. In a conflict, the Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales) would decide which collective agreement is the most representative. The committees suggested that the Ministry’s discretion in issuing, amending and repealing statutory instruments under section 5 of the Federal Collective Agreement Compliance Act should be strengthened and that the planned publication of amended working conditions in the Federal Gazette (Bundesanzeiger) and the repeal of the fixed working conditions envisaged in section 7(1) of the Federal Collective Agreement Compliance Act can be designed as “optional provisions”.

The committees believe that the Federal Ministry of Labour and Social Affairs should be given more discretion in relation to this mechanism. This is because in certain sectors such as the construction and construction-related industries there are often overlapping collective agreements with relatively advantageous working conditions. Changes to one of these collective agreements would inevitably also have an impact on the working conditions set down in a statutory instrument under section 5 of the Federal Collective Agreement Compliance Act. In the committees’ view, however, it would be neither feasible nor appropriate to have to automatically adjust the statutory instrument in such situations whenever there is a change in a collective agreement. They argued that granting additional discretionary powers to the Ministry could in practice open up exemptions for companies already bound by collective agreements and prevent them from being subject to more rigid obligations to adjust their collective agreements despite them already meeting high standards. The Bundesrat incorporated this recommendation in its opinion, thus taking up the proposed increase in the Ministry’s discretionary powers.

Clarification of section 4 of the Federal Collective Agreement Compliance Act: scope for individual legal claims under state collective bargaining laws

Section 4 of the Federal Collective Agreement Compliance Act obliges employers to grant the working conditions laid down in the statutory instrument and establishes a separate legal entitlement for employees.

In its opinion, the Bundesrat took up the committees’ recommendation on section 4 of the Federal Collective Agreement Compliance Act and advocated making it clear in the continuing legislative process that the individual legal entitlement to binding working conditions provided for in the Act does not constitute an exhaustive rule under national law. Although employment law is classified as concurrent legislation under Article 74(1), paragraphs 11 and 12 of the Constitution, it believes that the federal states should still have the option of establishing corresponding individual legal claims in their own laws on adherence to collective bargaining agreements. This would allow the obligations of contractors under state laws on this topic – which was mainly structured under public procurement law up to now – to be extended to include direct claims by the employees concerned and would improve employee protection in the context of public contracts.

Counterstatement by the federal government

The federal government responded to the amendments requested in the Bundesrat’s opinion in October 2025 with its counterstatement.

It started by addressing the scope of application set down in section 1(1), first sentence, paragraphs 2 to 6 of the Federal Collective Agreement Compliance Act, stating that the Act remains limited to contracts and concessions attributable to the federal government, and said that it would consider an explicit clarification of this. The federal government rejected the Bundesrat’s suggestion that section 5(6) and section 7(1) of the Act should be drafted as discretionary provisions in its counterstatement. It stressed that publication of amended collective bargaining terms and conditions in the Federal Gazette pursuant to section 5(6) of the Federal Collective Agreement Compliance Act is mandatory to maintain the transparency of the basis for the commitment to adhere to collective agreements. It also stated that repealing a statutory instrument where a more representative collective agreement exists, as provided for in section 7(1) of the Act, was also mandatory to ensure that the working conditions of the representative collective agreement form the basis for the commitment to adhere to collective agreements.

Similarly, the federal government did not accept the recommendation on section 4 of the Federal Collective Agreement Compliance Act taken up by the Bundesrat. It considered that it is not necessary to include explicit clarification in the wording of the law that the individual right to binding working conditions provided for in section 4 of the Act does not constitute a conclusive national rule because the Federal Collective Agreement Compliance Act is designed to apply exclusively to contracts awarded by the federal government and therefore cannot block state laws on adherence to collective bargaining agreements.

First reading in the Bundestag and public consultation in the Committee on Labour and Social Affairs

As the legislative process progressed, the main points of the political and legal discussions became clear, especially during the first reading in the Bundestag and the subsequent public consultation in the Committee on Labour and Social Affairs (“Committee on Labour and Social Affairs ”). While the Bill was broadly welcomed during the first reading in the German Bundestag (see 1 below), statements from academia and industry during the committee’s public consultation highlighted the draft’s contestability under EU law (see 2 below). We set out how the additional questions arising under EU law, especially those regarding minimum requirements for public procurement, fit into the national and European legal frameworks (see 3).

General support for the Federal Collective Agreement Compliance Act in the Bundestag

Following the opinion by the Bundesrat and the counterstatement by the federal government, the government draft of the Collective Agreement Compliance Act was debated in the German Bundestag on 10 October 2025 during its first reading. In the plenary debate, the desire to strengthen adherence to collective bargaining agreements was largely supported. At the same time, questions were raised about its practical feasibility, administrative burdens on companies and compatibility with EU law. The draft was then forwarded to the Committee on Labour and Social Affairs as the lead committee for further consultation.

Statements from academia and industry

Companies and trade associations have criticised the Federal Collective Agreement Compliance Act above all due to the considerable bureaucratic burdens created by new information, documentation and verification requirements, which they believe contradicts the political goal of reducing bureaucracy. They also take a critical view of the low threshold of €50,000 above which contracts may be subject to the Act and the broad scope of application, since it would capture numerous smaller contracts and place a disproportionate burden on small and medium-sized enterprises and start-ups. On 3 November 2025, the committee held a public consultation on the government draft during which experts and associations submitted written statements and explained their positions.

At the consultation, the experts expressed fundamental concerns under EU law about the declaration of compliance with collective agreements provided for in section 3 of the Federal Collective Agreement Compliance Act in which the company undertakes to grant the employees used to perform the services the minimum working conditions laid down for the duration of the public contract. There is a risk that such obligations violate the freedom to provide services under Article 56 TFEU because they make it harder for companies from other EU Member States to access the German procurement market and can act as an inadmissible protectionist measure in practice.

To illustrate this, reference is made to the ECJ’s decision RegioPost (C-115/14), in which the court considered a procurement-specific minimum wage to be admissible. However, it should be noted that there are now significant differences to the present legal context: the RegioPost judgment concerned a minimum wage for public contracts set down in state law, not the extension of complete collective agreements to public contracts as a performance condition. Furthermore, the judgment related to the situation prior to the introduction of the general statutory minimum wage. Against this background, the justification of additional collective bargaining requirements in public procurement law on the grounds of employee protection is largely considered to be ruled out.

In terms of public procurement law, the statements centred on the relevance to the subject matter of the contract. Referring to recital 97 of Directive 2014/24/EU (“Public Procurement Directive”), the experts argued that collective bargaining requirements for supplies of goods typically only affect general wage and cost structures and therefore company policy, and do not have a sufficiently concrete connection to the subject matter of the contract. The Directive makes clear that general corporate policy objectives should not be enforced through public procurement law, reasoning that general corporate policy should therefore not be enforced through performance conditions.

The considerable doubts raised at the consultation about EU and constitutional law show that the Bill is subject to significant legal concerns. It is up to the legislators to address these concerns as the proceedings move forward and to reflect them in fundamental regulatory revisions.

Assessment of EU law requirements and case law

Under EU law, the ECJ’s ruling in RegioPost must be assessed the light of the current legal situation. The case involved a minimum wage under state law which made the awarding of public contracts contingent on an undertaking to pay a specific minimum hourly wage to the employees assigned to carry out the work. At that time, there was neither a general statutory minimum wage under the German Minimum Wage Act (Mindestlohngesetz) (“Minimum Wage Act”) nor a relevant statutory minimum wage under national law for the sector concerned. The state law at issue did not contain any provisions on paid minimum annual leave.

The ECJ considered the state provision examined in RegioPost to be a justified interference with the freedom to provide services under EU law because it guaranteed a minimum level of social protection to the workers concerned. However, this line of argument can no longer be directly applied to the present context, in which the Minimum Wage Act and the German Federal Leave Act (Bundesurlaubsgesetz) already ensure an extensive and specific level of protection. This is particularly true considering that the minimum wage is adjusted on a regular and continual basis. It therefore seems highly questionable at least under EU law whether additional, contract-specific remuneration or paid minimum annual leave requirements linked to individual collective agreements can still be justified as being proportionate. This will create considerable legal uncertainty for the procurement procedures affected.

Outlook and recommendations for companies

The Bill provides that the law should enter into force on the day after its promulgation, but no earlier than 1 January 2026. Owing to parliamentary delays, the date of entry into force will be postponed again. But because it is a bill requiring consent by both houses of parliament, it has to be adopted by the Bundestag and approved by the Bundesrat. This gives companies some time, but they should use it to align their operating processes with the planned requirements of the Federal Collective Agreement Compliance Act.

Given the continuing parliamentary deliberations, potential contractors should pay particular attention to the following points of the Federal Collective Agreement Compliance Act:

• Verification requirements (sections 3 and 9 of the Federal Collective Agreement Compliance Act): contractors must ensure that subcontractors and temporary employment agencies also comply with binding working conditions. The Federal Collective Agreement Compliance Monitoring Authority bases its checks on evidence provided by the contractor, such as payslips or employment contracts. Companies should design contract chains and documentation processes so that compliance with collective agreements can be verified along the entire supply/service chain.
• Certification, checks and penalties (sections 8 and sections 11 to 13 of the Federal Collective Agreement Compliance Act): the draft provides for a Federal Collective Agreement Compliance Monitoring Authority; any infringements found can be recorded in the Competition Register and may lead to exclusion from the procurement process. For this reason, companies should think about using the certification procedure under section 10 of the Federal Collective Agreement Compliance Act at an early stage. This involves a prequalification stage during which evidence can be provided that contractors comply with the commitment to adhere to collective agreements.

As long as the Committee on Labour and Social Affairs’ recommendation for a resolution, the Bundestag’s resolution and the Bundesrat’s approval are still pending, normative changes are possible – for example to the scope of application, content of the statutory instruments or extent of the obligations to provide evidence.

We will continue to monitor the parliamentary process and any amendments and assess their practical implications on an ongoing basis and will keep you posted on any relevant developments.