New Tariftreuegesetz Law Strengthens Workers' Rights and Business Compliance in Public Contracts

The recently enacted Tariftreuegesetz aims to bolster collective bargaining and fair competition in Germany by ensuring public contracts are awarded only to companies complying with collective agreement standards. This law specifically applies to public contracts exceeding €50,000, though supply contracts and startups benefit from an exemption threshold set at €100,000.

The law mandates that employers and their subcontractors guarantee adherence to tariff conditions, securing workers legal claims to improved pay and working conditions. This development seeks to reverse the decline in collective bargaining coverage, which has dropped from 73% in 1998 to 49% in 2024.

While labor unions have praised the law as a crucial win for employees, they criticized the €50,000 contract threshold and certain exemptions, warning these gaps might allow some public contracts to bypass regulation. Non-compliance risks include penalties such as contract termination and disqualification from future bidding.

To streamline enforcement, the law introduces a certification process intended to reduce bureaucratic burdens. By promoting tariff fidelity, the Tariftreuegesetz strengthens the collective agreement system, benefiting German workers and ensuring fair competition among businesses engaged in awarding public contracts.