Germany: The OECD Guidelines, Sustainable Business And Employment

The OECD Guidelines for Multinational Enterprises set standards for responsible business conduct, including in relation to supply chain ethics and worker representation. In recent years, they have been deployed as a powerful 'soft law' tool in a range of contexts both in Germany and internationally.

International law can be a powerful tool to drive change in our communication-driven world, particularly in topical areas such as supply chain matters, discussions about the 'S' for social in 'ESG' or the protection of trade union activity.

The OECD Guidelines for Multinational Enterprises are an effective way for political and trade union networks to address these types of topical issues. First introduced in 1976, the Guidelines provide government-backed recommendations on responsible business conduct. They are regularly reviewed to ensure they reflect the concerns of an evolving global economy and the most recently version dates from 2011.

Numerous recent cases have confirmed their impact, especially in the area of employment law. This article describes and evaluates the Guidelines and their potential application from a German perspective and beyond.

The OECD Guidelines

While the introduction of national supply chain laws in Germany has attracted a lot of attention and continues to do so, given they come into force on 1 January 2023, the OECD Guidelines for Multinational Enterprises are rarely mentioned in this context. Nevertheless, the OECD Guidelines are the most important comprehensive international tool for promoting responsible business conduct, providing recommendations for corporate conduct in the areas of human rights, employment and industrial relations, the environment, anti-bribery, consumer interests, science and technology, competition and taxation. These principles are available in full in the OECD Guidelines for Multinational Enterprises, 2011 edition.

Compliance with the OECD Guidelines by companies is voluntary; there is no statutory requirement. Nevertheless, the Federal Government of Germany has a clear expectation that multinational enterprises operating in or from Germany will comply with the principles set out in the Guidelines and participate constructively in the complaints procedures relating to them. This is set out in the Procedural Guideline produced by the OECD German National Contact Point (NCP) .

Part 1, Chapter V of the OECD Guidelines (Employment and Industrial Relations), suggests various actions for enterprises within the framework of applicable law, regulations and prevailing labour relations, employment practices and applicable international labour standards (the most relevant sections from a labour law point of view are 1. a), 1. c), 1. d), 1. e), 2. a), 3., 5., 6. and 8. of this chapter).

Implementation in Germany

In order to put the OECD Guidelines into practice, Germany (like other countries) has set up a National Contact Point (NCP). The NCP promotes the effective implementation of the Guidelines and offers a conciliation or mediation procedure for complaints about the application of the Guidelines in specific individual cases (see p68 Guidelines).

The German NCP is located in the Federal Ministry for Economic Affairs and Energy. It is supported by the Interministerial Committee on the OECD Guidelines for Multinational Enterprises. In the Committee, issues related to the application of the OECD Guidelines are discussed and decided by consensus on the proposal of the lead Federal Ministry of Economics. In addition to the Federal Ministry of Economics and Technology, the Committee includes seven other (federal) ministries.

The NCP itself aligns with the key criteria of visibility, accessibility, transparency, and accountability. Its tasks are:

• to raise awareness of the OECD Guidelines among companies, trade unions and civil society and to promote their application;
• to provide a neutral forum for dispute resolution in the event of complaints about possible violations of the OECD Guidelines;
• to cooperate with other National Contact Points and the OECD in the further development of the Guidelines and, where appropriate, assist with complaints procedures that fall under the jurisdiction of other Contact Points;
• to respond to general enquiries and specific individual questions arising in the application of the OECD Guidelines.

The NCP is also advised and supported by the OECD Guidelines for Multinational Enterprises Working Group. The working group is a forum for exchange on all issues related to the implementation of the OECD Guidelines. In addition to the ministries represented in the Interministerial Committee, it is composed of representatives of the three OECD stakeholder groups (employers, employees and civil society) as well as additional participants with expertise in responsible business conduct (BT-Drs. 19/32685, 3).

The complaint and decision procedure

One of the main tasks of an NCP is to conduct complaint procedures. To this end, the NCP has established a grievance procedure to reach agreement on contentious issues in a dialogue-oriented and consensual manner. This procedure is regulated in the German NCP Guideline, which substantiates the procedural instructions and explanations from the OECD Guidelines.

Confidentiality, especially with regard to personal data and business secrets, is an important principle and so is ensuring sufficient transparency of the procedure. Furthermore, if a complaints procedure is to reach a successful conclusion, all of the parties must cooperate constructively in the proceedings and abide by the principle of good faith.

One of the main aspects of the procedure is that a final report is published regardless of the outcome. Participation of the respondent (usually multinational companies) is not mandatory. However, constructive participation can be taken into account when granting foreign trade instruments and delegation visits by the Ministry of Economic Affairs (these points are set out in an Economic Affairs Ministry flyer).

The way the NCP procedure works is set out below.

1. Filing and form of the complaint

The complaint is filed by completing a written or electronic complaint form by email or letter to the relevant email address. The complaint is forwarded to the opposing party. An opportunity to comment is offered.

2. Competence

By default, complaints are handled by the NCP of the country in which the issues in hand have arisen. This means the German NCP is competent if an infringement is alleged to have occurred in Germany. The NCP also forwards complaints to the relevant foreign NCP about issues that have arisen in another country adhering to the Guidelines. If the complaint concerns parts of the company or business activities in several participating states, the NCP coordinates with the contact points there on how to proceed. The NCP may also be competent in an infringement abroad if the alleged infringement was committed by a company with its registered office in a non-participating state.

3. Right to appeal

Any natural or legal person as well as trade unions or non-governmental organisations may file a complaint. They must have a legitimate interest. 'Legitimate interest' is broadly interpreted and includes any direct, indirect, actual or potential concern. Complainants can also act on behalf of a third party if they can demonstrate that they are authorised to do so.

4. 'Passive' competence

The addressee, in contrast, must be a multinational company. It must therefore be a company, regardless of size, which has different company parts in several countries and there must be coordination of business activities between these parts. Small and medium-sized multinational enterprises are also subject to the Guidelines. Within the procedure, consideration will be given to the fact that these smaller companies do not have the same possibilities and capacities as large corporations. The Guidelines apply to all sectors of the economy and to all activities of business partners of multinational enterprises including suppliers and subcontractors.

5. Parallel proceedings

Court or administrative proceedings taking place in parallel are not in themselves grounds for a case to be dismissed by the NCP. The NCP takes a decision on the specific case, assessing whether an offer to intervene could make a positive contribution to resolving the issues raised and do so without causing serious prejudice for either of the parties involved in these other proceedings or risking contempt of court.

6. Grounds for complaint and legitimate interest

The NCP may be contacted by claimants if the following cumulative conditions are met:

• An allegation of violation of OECD Guidelines is made in good faith by the claimant.
• There is a sufficiently substantiated submission.
• The violation is supposed to have occurred in Germany, or
• An alleged violation has occurred abroad, if the complaint is directed against a German company and if there is no local NCP in the country concerned, meaning that the NCP has local jurisdiction.

The NCP also checks the complaint for a legitimate interest, whether there is a link between the respondent's business activity and the issues raised in the complaint and whether other proceedings are already pending in front of other NCPs.

7. NCP initial assessment

After the complaint has been received, the NCP carries out an initial assessment of the complaint. If the complaint is not accepted at all, the NCP issues a unilateral statement and informs the parties of the reasons for this decision. The parties are given the opportunity to comment, usually within ten days. Whether or not these comments are included in its statement is up to the NCP.

If the complaint is accepted, the parties are informed in writing about the NCP's decision but the information is not made public. Acceptance does not mean that the issues raised have been given final consideration and does not constitute a 'prejudgement' against the respondent. The NCP offers to proceed via a mediation or conciliation procedure.

8. Mediation

Mediation talks are then held with the consent of the parties between the NCP and the parties to the complaint. These can take place in a joint meeting or separately. External mediators may also be called in.

9. Final reports

As a result of the mediation, the parties either come to an agreement or they do not. In any case, the proceedings are concluded with a final report, which, among other things, describes the matter of the complaint and the course of the proceedings. Where there is an agreement 'on substantial points', the final report will be coordinated with the parties involved. The report should provide information on the issues raised, the procedure conducted by the NCP in the interest of helping the parties reach agreement, and the date of the agreement. Information regarding the terms of the agreement will only be included if parties give their consent.

If the parties do not reach an agreement 'on substantial points' or if one of the parties is not willing to take part in the procedure, the NCP makes a unilateral final report. The NCP can then make recommendations in the final reports.

10. Follow up

Subsequently, cases are followed up over a longer period. There may be a follow-up report.

How does it work in practice in Germany?

Most of the proceedings of the last two years have already been dismissed (as inadmissible) without further examination.

A current example

In the last two years, however, a case has been brought before the German NCP that could change this going forward. The German NCP had to deal with a complaint of four former employees and trade union representatives of a Congolese company against a German Company. According to the final report, there was a follow-up with a corresponding statement by the NCP.

No agreement was found during the mediation procedure. The reason for the procedure was that, according to the claimants, the respondent had failed to comply with its obligations under the OECD Guidelines with respect to certain incidents in its supply chain.

After the parties accepted the NCP's offer of mediation services, the NCP organised several meetings with the parties and held a number of bilateral discussions to assist them in finding a solution on the issues of wages and freedom of association. While the issues raised on wages could be resolved during the talks, no agreement could be reached on freedom of association. In its concluding statement the NCP recommended that, with regard to freedom of association, the respondent should review its reporting and grievance procedures and discuss certain issues with relevant stakeholders, and that the claimants should submit a contribution to the respondent's review.

In the follow-up procedure, the claimants made three suggestions as to how the respondent could optimise its reporting and grievance procedures. The respondent submitted an interim report and a final report in response to these proposals and, although it did not report any review or discussion apart from these proposals, developed measures in response to two of them, one of which entailed a change in its reporting procedures.

This is particularly interesting because it means that a violation of rules which concerns a typical supply chain problem can be made public according to the Guidelines, and can be effectively asserted entirely independently of any question of national violation of rights and access to justice. This is precisely the idea of 'soft law'.

In current discussions about sustainability and ESG, this means a 'legal remedy' is available entirely independently of discussions on the jurisdiction of supply chain legislation. Given the importance in communication terms of a violation of an OECD guideline, this is possibly of far greater significance than a national court decision. From the perspective of procedural justice, there are questions over whether it is right that an executive body should be able to make such far-reaching decisions without further legal remedies. However, it is certainly politically effective. Supervisory boards, HR boards, compliance and sustainability officers will have to take this into account when considering the importance they want to assign to compliance with OECD Guidelines in the hierarchy of their ESG approaches.

Further German NCP actions

The Head of the German NCP recently signed a revised cooperation agreement between Deutsche Post DHL Group and the international trade union federations International Transport Workers Federation and UNI Global Union. The structured cooperation between the parties follows a mediation process managed by the NCP that concluded successfully in 2016.

In the agreement, the parties commit to an ongoing dialogue on employment and industrial relations. The parties also developed a work plan on issues of common interest, such as the implementation of the German Supply Chain Sourcing Obligations Act and concerns around employment and human rights.

This is a good example of the long-lasting effects of a complaint procedure under the OECD Guidelines even though they are just 'soft' law.

Proceedings across the border

A glance at comparable cases abroad confirms the the tendency observed in Germany.

1. Unite Here v Natixis

The Unite v Natixis case involved employment disputes at a Californian hotel indirectly owned by NGAM, a subsidiary of the French bank Natixis.

The complaint was filed on 15 September 2016 and the French NCP issued its final report on 5 December 2017 after initial negotiations between the parties, a published initial assessment, further investigation and a preliminary assessment.

The complaint dealt with the allegation of failure to respect workers' freedom of association as well as anti-union practices. Natixis and NGAM were alleged to have contributed to negative impacts in the absence of adequate due diligence measures in relation to the US subsidiary and to have failed to carry out due diligence to ensure that no further negative employment and human rights impacts occurred.

Natixis initially agreed to meet with the NCP and expressed its commitment to compliance with the Guidelines. In addition, Natixis offered to send 'a general message' to its US subsidiary. The NCP welcomed the high level of willingness of Natixis and NGAM to participate in the dialogue and the positive development of the companies during the preliminary first assessment. In the outcome, the hotel was sold and unionised. In its report, the NCP found that Natixis and NGAM had undertaken appropriate due diligence measures with their US subsidiary to integrate the OECD Guidelines into their activities. The NCP believes that this case demonstrates the essential role of the OECD Guidelines.

2. International Union of Food (IUF) v Accor

The International Union of Food (IUF) v Accor case involved employment disputes in Canada and Benin.

The complaint was filed in November 2010. The final report of the NCP was published on 11 December 2012. After a follow-up was conducted, the NCP issued its follow-up report on 2 April 2015.

The complaint dealt with an allegation about violations of the workers' freedom of association in hotels in Canada and Benin. The NCP found that the Accor Group had failed to comply with Chapter V of the OECD Guidelines on workers' freedom of association in three hotels in Canada and that workers in Benin were unable to exercise the right to negotiate constructively to reach an agreement on terms and conditions of employment.

3. CGT v Sodexo

The CGT v Sodexo case involved employment disputes in the US and Colombia. It was filed on 4 August 2010. The NCP published its final report on 20 September 2012. The complaint in this case also alleged Sodexo's failure to respect freedom of association.

The proceedings resulted in an agreement between a US subsidiary of Sodexo and Service Employees International Union (SEIU), which set out the rights of Sodexo employees to make free and informed decisions about unionisation. In addition, an international framework agreement was reached between Sodexo and the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Allied Workers (IUF) to ensure a continuous and progressive dialogue between Sodexo management, employee representatives and the IUF. Topics of discussion include the commitment to respect fundamental rights at work, the right to freedom of association and collective bargaining, and the right of workers to form and join workers' organisations of their own free will and choice.

The NCP will continue to ensure that Sodexo's commitment is fully in compliance with the OECD Labour Relations Guidelines. Respecting the agreement that was reached, the NCP also promotes Sodexo's willingness to engage in dialogue between employee representatives and management in all other countries where the Sodexo Group operates.

Conclusions and practical advice

Some questions and comments around the practical consequences of the disputes described above and the OECD Guidelines are set out below.

The OECD Guidelines are a valuable tool for implementing sustainability in the supply chain. They cover both the treatment of employees and their representatives, including the establishment and protection of trade unions and their members.

NCPs are a forum which, through the complaint procedure and the non-public final report, provide for a public-facing form of jurisdiction which gives the companies concerned a right to comment, but no effective legal protection. The possibility of administrative proceedings following a final report does not change the PR and personnel consequences that have occurred in the meantime. With the publication of the final report, the companies concerned may face a considerable loss of reputation.

The cases that have been decided so far show the tendency of future political direction: interest groups and networks can represent their interests much more effectively through the OECD 'soft law' than they could under national law and in compliance with international jurisdiction issues.

This has consequences for discussions on supply chain legislation, because the question of jurisdiction may almost seem secondary given this option already exists.

The place given to the OECD Guidelines in the hierarchy of ESG measures will be of crucial importance for 'S' matters, as the potential for risk and damage may still be largely underestimated.

Implementing the Guidelines in a company's own regulation (for example by supplementing the ethics into company rules) makes it necessary to also document responsibility and the basis for claims in the company visibly and effectively .

Legal departments will have to give careful thought to the question of legal representation in proceedings, but also to the communication around the proceedings both in advance and while they are ongoing.

From the perspective of supervisory boards and their duties, it will also be necessary to scrutinise and query the mechanisms for safeguarding the company's interests with regards to this 'soft' international law.

Attention will also need to be paid to these possible issues when preparing for general meetings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.