Even if the main operation of a company is abroad, a German location can be eligible for a works council. With its decision of May 13, 2026, the Federal Labor Court (BAG) specified the requirements for this and strengthened the co-determination rights of employees in internationally active companies. Lena Grebe, lawyer in the labor law department, and Benedict Hinz, research assistant in the labor law department, analyze the decision and its consequences for company practice.
Executive Summary
Works council at a foreign main company: BAG strengthens co-determination at German locations
- The challenge: Many internationally active companies control personnel decisions centrally from abroad and assume that German locations are therefore not eligible for works councils. However, whether this assumption is legally valid depends not only on the location of the company management, but also on the organizational structure of the respective location.
- The decision: The Federal Labor Court clarifies that a domestic part of a foreign company can also be considered an independent business within the meaning of Section 4 BetrVG. What is crucial is that there is a minimum level of organizational independence locally and that authority to give instructions is actually exercised – even if essential personnel decisions are made abroad.
- Your benefit: Companies with cross-border organizational structures receive more legal certainty when assessing their German locations and can incorporate possible co-determination rights into their organizational and personnel planning at an early stage. At the same time, the resolution makes it clear that relocating management functions abroad does not automatically influence the classification under works constitution law.
- Focus: Works council at foreign main company, works council capacity, § 4 BetrVG, international companies, company co-determination, organizational independence, Federal Labor Court.
With its decision of May 13, 2026 (ref. 7 ABR 7/25), the BAG clarified that a domestic location of a foreign company can be eligible for a works council as an independent part of the company within the meaning of Section 4 BetrVG – even if the main company is located abroad and essential personnel decisions are made from there. The decision clarifies the conditions under which internationally positioned companies have to expect operational co-determination at their German locations.
1. Facts
The subject of the proceedings was the location of the Maltese airline Malta Air, which belongs to the Ryanair Group, at Berlin-Brandenburg Airport (BER). Around 320 employees worked there in cockpit and cabin service.
After collective bargaining between the airline and the staff failed at the end of 2022, a union invited people to elect an electoral committee for a works council election. The company then requested that the court declare the invalidity of this election. The reason given was that the Berlin location was not an organizational unit eligible for a works council within the meaning of the BetrVG. All key personnel decisions such as hiring, firing, disciplinary measures, promotions and deployment planning would be controlled centrally from Malta or Ireland.
The officers working on site, a so-called base captain and a base supervisor, only carry out coordinating and communicative tasks. An independent business or part of a business i. S.d. BetrVG is therefore not applicable.
2. Legal framework: The special position of flying personnel
Before Section 4 BetrVG could be taken into account, a preliminary question specific to flying personnel had to be clarified. According to Section 117 Paragraph 1 Sentence 2 BetrVG, the Works Constitution Act only applies to cockpit and cabin crew if no collective agreement representation within the meaning of Paragraph 2 Sentence 1 has been established. The collective agreement is therefore the primary form of representation for this group of people, although it is no longer absolutely necessary since the introduction of the Qualification Opportunities Act in 2019.
Only the failure of collective bargaining opened the way to general works constitution law. Only then does the question arise as to whether the Berlin location should be viewed as a unit eligible for a works council in accordance with Section 4 BetrVG.
3. The decision of the BAG
The BAG confirmed that the Berlin location was eligible for a works council. The exam is divided into three steps:
a. Fulfillment of the size threshold
Section 4 Paragraph 1 Sentence 1 BetrVG is not linked to the overall size of the company, but rather requires that the domestic entity itself reaches the minimum threshold of Section 1 Paragraph 1 Sentence 1 BetrVG of five permanent employees entitled to vote, three of whom are eligible to vote. With around 320 employees, this requirement was easily met.
b. Geographical distance from the main company and foreign reference
According to Section 4 Paragraph 1 Sentence 1 No. 1 BetrVG, a part of the business is considered an independent business if it is geographically far away from the main business. The dispute was whether this regulation also applies if the main company is located abroad rather than domestically.
The BAG decided: A domestic main operation is not a prerequisite for the application of Section 4 BetrVG. The only decisive factor is whether the domestic part of the business meets the legal requirements of the regulation. The principle of territoriality does not contradict this interpretation either. It only requires that the unit relevant to works constitution law be located in Germany, as is the case here.
The main point of reference for the BetrVG is not the headquarters of the company management, but rather the domestic organizational unit itself and the integration of the employees employed there. Section 4 Paragraph 1 Sentence 1 BetrVG contains the legal fiction that the geographically distant part of the business is considered an independent business. Since this fictitious company is located in Germany, the BetrVG is directly linked to it. The main foreign company steps down as a starting point.
c. Minimum level of organizational independence as a core question
The core of the decision is the question of organizational independence in contrast to the complete operation within the meaning of Section 1 BetrVG: While the latter requires a uniform management apparatus that comprehensively controls the essential personnel and social matters, a significantly lower degree of independence is sufficient for the part of the business in accordance with Section 4 BetrVG.
The BAG made it clear that when assessing organizational independence, it is not important where the business management lies. What is more important is whether at least one person with authority to give instructions is institutionalized at the location and actually exercises these powers. The minimum required is already achieved when a single person on site exercises the right to give instructions, regardless of whether the full scope of the employer function has been assigned to him.
In this specific case, Base Captain and Base Supervisor exercised such authority. The Senate emphasized that for the legal classification as an instruction, it is not the name that matters, but rather the function of the action. Despite their apparently coordinating nature, instructions on compliance with standards of conduct, checks on work processes and feedback on management deficits are legally qualified as instructions.
This confirmed a line already established in the Senate’s previous case law: management power that encompasses the full core of the employer’s function in personnel and social matters is not necessary – otherwise there would already be a company within the meaning of Section 1 BetrVG. The relocation of essential decisions abroad leaves the independence of the domestic unit unaffected as long as a real remainder of personnel management power remains locally.
d. Importance for practice
The decision has far-reaching consequences for internationally operating companies with staff in Germany. The BAG wants to draw a clear line under the strategy of circumventing company co-determination by formally shifting management power abroad.
Foreign companies that employ workers in Germany should subject their structures to a detailed examination on site and seek legal advice at an early stage on the question of whether and in what form a works council can be elected and what participation rights are associated with it.
4. Limits of co-determination despite formal reinforcement
The resolution formally significantly strengthens employee representation. Whether it strengthens their effectiveness in practice to the same extent is another question. A works council can only effectively exercise its participation rights where decisions are actually made. If the main personnel and business decisions continue to be made in Malta or Dublin, the rights to information, advice and co-determination will at least partially be ineffective. The resolution ensures the creation of the works council, but does not guarantee its operational effectiveness.
For companies with cross-border group structures, the resolution suggests proactively examining whether a European works council structure or other forms of transnational employee representation would be more suitable in order to anchor co-determination where it can be effective.
5. Signaling effect for cross-border business models
The standards set by the BAG are not limited to the aviation industry. The Seventh Senate made it clear in a parallel resolution of January 28, 2026 (ref. 7 ABR 23/24) that the same principles also apply to platform work structures. In that case, the Senate rejected the classification of the unit in question as an independent part of the company – but explicitly stated that the existence of a part of the company requires a minimum level of organizational independence from the main company and that this standard also applies if the employment relationship is essentially controlled digitally using an app.
6. Conclusion
The short-term success achieved for the employees at BER may remain a Pyrrhic victory in view of the announced closure of the base on October 24th. However, the dogmatic standards set by the Federal Labor Court have an impact far beyond this individual case.
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