Employment law is the tool to implement,
control and execute Compliance rules.
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Implementation of compliance regulations

The implementation of compliance regulations depends on their intended content. The pure repetition of legal obligations, especially those coming from mandatory laws do not need a specific legal document. This is – however – only true for an abstract reference to all relevant laws, which will neither be sufficient nor particularly useful to demonstrate an efficient compliance organisation. Regularly, laws need to be explained and their relevance for daily practice needs to be addressed. Normally, this can be done by way of a unilateral instruction issued the employer.

Whenever the employer intends to create new or additional obligations for his employees, he needs a binding document. In such a document, the employees’rights have to be observed, thus it is not permitted to regulate an employees’behaviour in his private life. Depending on the availability of a works council or, in rare cases, a union, it might be optional or obligatory to introduce binding rules in collective agreements.

Unilateral policy or collective agreement

The easiest way to implement compliance regulations is to simply issue a policy, which upon communication to each and every employee, becomes a binding rule. However, this is only possible for those areas of law which detail and explain the already existing obligations. Examples of such obligations are employee’s duties to carefully handle company equipment or rules about the acceptance of gifts and invitations. Further ethical guidelines include the obligation to due diligence in business matters, integrity and fairness towards customers and colleagues, which can be introduced unilaterally. Apart from being useful to demonstrate the true intent of the management, such regulations are especially important to explain complicated legal obligation. Although it is common knowledge that corruption is a crime, the details of laws are often not known and need further explanation.

A legal document is needed when new or additional obligations are created. The obvious document is the employment contract, which may contain clauses relating to corporate compliance. Due to the sheer number of applicable company regulations and considering that German labour courts are entitled to invalidate “unfair” or “non-transparent” contract clauses, German employers usually only make reference to applicable policies in a general clause. However, the problem with reference clauses is they need to be dynamic in order to enable the employer to constantly update them. This practice can lead to problems if the content of the future policy creates new or wider employee obligations. Therefore, careful contract wording is required to avoid invalid or unenforceable policies.

An alternative is a collective agreement when dealing with inflexible contract clauses and referred policies, although there are  natural limits. The first limit being that the contract needs a works council to conclude with a collective agreement. Another limitation is the fact that collective agreements do not have a binding effect on members of management.
Although any later changes are preceded by negotiations with the works council, a new agreement will have a binding effect. This agreement will effect all regular, non-management employees regardless of their consent, which would be needed for changes of individual employment contracts.

As far as co-determination rights are concerned, these are limited to certain topics. For example, the non-work related behaviour of employees and private use of company IT, are not subject to any co-determination rights.

Since typical compliance regulations contain a mix of subjects which are only partly covered by co-determination rights, it is theoretically possible to unilaterally change those parts of a handbook. However, negotiations with the works council are rarely avoidable even in the case of minor adjustments.

CONCLUSION

Single issue policies are preferable over a handbook and, if no works council exists, compliance regulations are ideal.

Additionally, shop agreements that refer to policies in co-determination issues are preferable over individual contract clauses, when there is a works council.