Compliance with collective bargaining agreements in federal procurement – the new draft law

When do the new rules come into effect? 

Due to the collapse of the Traffic-Light Coalition, the BTTG was never passed in the last legislative period. It was subsequently due to come into effect at the beginning of 2026. 

However, the coalition partners were unable to reach a final agreement, meaning that the BTTG was not submitted to the Bundesrat for a vote at its meeting on 19 December 2025. The law therefore will not be introduced on 1 January 2026 and it is currently unclear when it will ultimately come into effect. 

Who is covered by the new BTTG? 

The draft law covers the procurement and performance of public supply, construction, service and concession contracts by the federal government with a contract value of EUR 50,000 or more. In contrast to the earlier draft, it no longer privileges start-ups. 

The contracts affected are all those in which the principal is the federal government or a legal entity under public or private law in which the federal government has a majority interest or which are subsidised by the federal government by more than 50 %. The procurement procedures of the federal states and municipalities remain unaffected. 

Besides construction and delivery services, all types of services are generally covered. There are some exceptions, for example in the areas of defence and civil security. Accordingly the law will not apply to the infrastructure measures that the German armed forces (Bundeswehr) are expected to take in the coming years to increase its combat readiness. At the same time, all services in the field of digitalisation, for example, are also covered by the law. 

What is the promise to comply with collective bargaining agreements? 

Companies that want to perform federal contracts must contractually undertake to comply with collectively agreed terms of employment. They must also accept a contractual penalty and a right of termination without notice if the "inspection body for compliance with collective bargaining agreements" (Prüfstelle Tariftreue) finds that there has been a significant breach of duty. This inspection body at German Pension Insurance (DRV) will check on an ad hoc basis in the future, rather than using spot checks, that the terms of employment comply with the BTTG. 

Which provisions from collective bargaining agreements must be observed? 

The Federal Ministry of Labour and Social Affairs (BMAS) determines by statutory instrument which provisions from existing collective bargaining agreements contractors must comply with when performing contracts. 

They can include provisions on: 

• remuneration, 
• minimum annual leave, 
• maximum working hours, minimum rest periods and breaks. 

If the contract lasts less than two months, only remuneration provisions are mandatory. 

When performing contracts subject to the BTTG, contractors must grant their employees the collectively agreed conditions laid down by statutory instrument, even if they are not members of an employers' association or otherwise bound by collective bargaining agreements. This can lead to conflicts between collective bargaining agreements. It is currently unclear whether these are to be resolved by comparing the individual terms or by making an overall comparison. 

The same obligations apply to subcontractors engaged by the contractor. They are also required to comply with the terms of employment laid down by statutory instrument for the duration of the contract. 

Subcontractor liability 

Contractors are liable under the BTTG for their subcontractors and any temporary employment agencies they work with, which must also comply with the stipulated collectively agreed requirements when fulfilling the contract for the federal government. Liability arises regardless of fault. 

Documentation and information requirements 

The BTTG also provides for employees to directly demand that their employer comply with the collectively agreed working conditions. A waiver of this right is excluded. 

The employer must inform the employees of this demand in writing or in text form at the latest by the 15th of the month following the day on which the first work to perform the (concession) contract was done. BMAS will provide a template for this purpose. If the employer fails to provide this information, there is a risk of contractual penalties and, depending on the severity of the breach, termination of the contract. 

In addition, main contractors must document and prove compliance with the terms of employment. This obligation does not apply if the contractors are certified to comply with the working conditions set out in the statutory instrument (prequalification). 

Outlook 

The aim of the law is to strengthen (autonomous) collective bargaining and to avoid distortions of competition. However, employers' and trade associations are critical of the law: They argue it will cause additional bureaucracy and penalise small and medium-sized companies in particular. 

The impact will be most severe in sectors with low collective bargaining coverage and a lack of general applicability because in the future collective bargaining agreements will also extend to companies that are not bound by collective agreements. 

Furthermore, the effort required to adapt will be considerable above all for contractors who engage subcontractors for partial goods or services. These must also ensure that they comply with the terms of employment established in the BTTG and the statutory instrument. To this end, compliance systems must be set up not only to ensure that the company itself complies (temporarily) with collective bargaining agreements and that information is provided to employees, but also to establish ways of monitoring contractual partners' compliance. Contracts with subcontractors must also be adapted accordingly and oversight measures must be implemented. These compliance systems are already established in the construction industry – for all other sectors, this will be a new challenge. 

The requirements of the BTTG only apply to procurement procedures that begin after the law comes into effect. Companies covered by the law should, however, already be preparing appropriate model contracts and setting up compliance systems, as it is impossible to rule out the BTTG coming into effect in the coming year despite the initial failure of the coalition partners to reach an agreement. Otherwise, companies risk being excluded from federal procurement procedures. 

[Editor's note: This article was updated on 30 December 2025 after it became known that the final agreement between the CDU/CSU and SPD had failed. The original article assumed that the law would come into effect on 1 January 2026.]