A collective agreement is principally binding only to signatories of the contract, including specific employers and employers’ associations and their members and trade unions and their members. However, under section 5 of the Collective Agreements Act (Tarifvertragsgesetz), the Federal Ministry of Labour and Social Affairs is able to declare a collective agreement obligatory as an extension (Allgemeinverbindlicherklärung) under certain conditions and at the request of the contract parties. This extension is enacted trough agreement within a bargaining committee (Tarifausschuss) consisting of three representatives from the BDA and Deutscher Gewerkschaftsbund. The same procedure does exist on the level of the federal states as well. Alternatively, through enlargement by statutory order, the Federal Ministry can, at its own discretion, extend collective agreements within the framework provided by the Posted Worker Act (Arbeitnehmer-Entsendegesetz).
Through extension or enlargement, the collective agreement can become universally binding to all employers and employees within the scope of the collective agreement. The BDA seeks to ensure a responsible and careful handling with these generally binding declarations. Collective bargaining policy must first lead to broad acceptance of collective agreements, a process which requires balanced, productivity-oriented, differentiated and flexible collective agreement provisions. Collective agreements should therefore describe minimum conditions to secure intra-sectoral competitiveness and employment.