The Works Council in Germany

What is a works council, and must our German subsidiary have one?

The works council represents the employees of an establishment vis-à-vis the employer. It monitors compliance with the laws, collective agreements and works agreements that operate in the employees' favour, and it participates in a range of operational decisions. Unlike a trade union it stands not outside but inside the company and is bound to no industrial dispute. It is obliged to cooperate with the employer in a spirit of trust, which does not stop it from enforcing its rights consistently.

A works council is not automatically mandatory in Germany. No law compels an establishment to set up a works council, and no employer has to bring one into being on its own initiative. Under section 1 BetrVG, a works council can be elected in any establishment that, as a rule, has at least five permanent employees entitled to vote, three of whom are eligible for election. Whether an election actually takes place is decided by the workforce alone. For this reason very many small and medium-sized sites in Germany have no works council at all.

For foreign parent companies this leads to an often overlooked point. The employer may neither order nor prevent the formation of a works council. It may not promote it in order to obtain a compliant works council, and still less may it obstruct it. The decision lies with the workforce. As soon as the workforce exercises this right, the employer must enable the election and bear its costs.

From how many employees, and how large does the works council become?

The size of the works council depends on the number of employees entitled to vote in the establishment and is graded by law in section 9 BetrVG. It is not negotiable.

With 5 to 20 employees entitled to vote the works council consists of one person, with 21 to 50 of three and with 51 to 100 of five members. From 101 employees the body grows to seven members, from 201 to nine, from 401 to eleven and from 701 to 13; beyond 1,000 employees the statutory scale continues.

Above a certain size the employer must fully release works council members from their professional duties so that they can devote themselves to committee work. Under section 38 BetrVG, from 200 employees at least one member must be released, from 501 two, from 901 three, with further gradations above that. These releases are paid. For the German subsidiary's workforce planning, this means that from this threshold on, working capacity is permanently tied up in works council activity.

If a company has several establishments in Germany, a separate works council is elected for each. At company level these local works councils form a general (central) works council, which is responsible for matters that affect several establishments and cannot be settled at establishment level. Where there are several group companies, a group works council can additionally be formed. This tiered structure matters for a foreign parent company because a group-wide measure must then be agreed not with a single site but with the general or group works council.

How does a works council come about, and what may we not do?

The question of how a works council is founded is one foreign employers usually ask the other way round: they want to know what is coming their way and where the red lines lie. The procedure is laid down by law.

The initiative comes from the workforce. Three employees entitled to vote, or a trade union represented in the establishment, invite the workforce to a works meeting (section 17 (3) BetrVG). At this meeting the works council is not yet elected; first an electoral board is chosen. This electoral board then organises and conducts the actual works council election. If no meeting takes place, or it elects no electoral board, the labour court can appoint one on the application of three employees or a trade union.

The regular works council elections take place nationwide every four years between 1 March and 31 May, most recently in 2026 and next in 2030. An establishment in which the wish for representation arises can, however, also hold a first election outside this cycle.

The decisive point for the parent company is the prohibition on obstructing the works council. Under section 20 BetrVG no one may obstruct the election or influence it by inflicting or threatening disadvantages or by granting or promising advantages. Anyone who breaches this does not merely act unlawfully; they commit a criminal offence: section 119 BetrVG threatens the obstruction or improper influencing of the election and the obstruction of works council activity with imprisonment of up to one year or a fine. The addressee is the natural person acting, that is, typically the management of the German subsidiary or an instruction-giving management of the parent, not an abstract company.

This means that the toolkit familiar from the Anglo-American world is largely prohibited in Germany. Election campaigns against the formation, keeping employees away from the election meeting, threatening initiators or candidates with transfer or dismissal, and deliberately obstructing the later committee work are not hard but permissible negotiating positions but criminally sanctioned obstruction.

Employees who convene the election meeting or apply for the judicial appointment of an electoral board also enjoy special protection against dismissal (section 15 (3a) of the German Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG)). The right response to a nascent works council formation is therefore not defence but correct, documented neutrality and preparation for the future cooperation.

Which co-determination rights can block HQ decisions?

The rights of the works council are graduated. On some matters it has only a right to information or consultation, on others a genuine right of co-determination. It is precisely this second category that is critical for the parent company, because there the works council can prevent a measure until agreement is reached. This is called enforceable co-determination.

The core is section 87 BetrVG. In the social matters listed there, the works council has a right of co-determination, in so far as there is no statutory or collective-agreement rule. In practice the following points are the most important for foreign groups:

A classic field is working time under section 87(1) nos. 2 and 3 BetrVG. The start and end of the working day, its distribution across the week, breaks and any temporary reduction or extension of working time cannot be imposed unilaterally. A shift model developed at head office, ordered overtime or short-time work must therefore be agreed with the works council before implementation.

For international companies, technical monitoring devices under section 87(1) no. 6 BetrVG are even more consequential. Under the case law, it is sufficient that a system is objectively capable of monitoring employee conduct or performance; the employer need not actually intend to analyse the data. Co-determination therefore covers not only traditional time-recording systems but also many HR, ERP and CRM systems, collaboration tools with activity logs, ticketing systems and, in principle, AI-supported analysis. A group-wide software rollout cannot simply be switched on at the German site.

Depending on the design, further co-determination rights may arise in relation to workplace conduct, remuneration principles and operational data protection. Conduct rules, a code of conduct with a regulatory character, bonus schemes or policies on the use of IT and email may likewise require a works agreement.

If no agreement is reached between employer and works council, then in matters of enforceable co-determination the decision lies neither with the employer nor with the labour court but with the conciliation committee (Einigungsstelle). It is a body composed on equal terms under an impartial chair, whose award replaces the missing agreement and is binding on both sides.

This explains why a measure in an establishment subject to co-determination does not become faster if the works council is bypassed: a system introduced without involvement is contrary to co-determination, the works council can demand its removal, and in the end the conciliation committee stands there all the same. The reliably faster route runs through early negotiation and a clean works agreement.

What applies to hiring and dismissals?

Alongside social matters, the works council also participates in individual staffing measures. The two most important cases for foreign employers are hiring and dismissal, and they work differently.

For hiring, grading and transfers in establishments with more than 20 employees entitled to vote, the employer needs the consent of the works council under section 99 BetrVG. The works council can refuse consent only on the grounds named in the statute, for example where there is a breach of a law or of a selection guideline. If it refuses, the employer may not simply carry out the measure but must have the consent replaced by the labour court. For urgent cases the statute permits provisional implementation, which then has to be secured through the court. A hiring freeze steered from abroad or a short-notice transfer can thereby be noticeably delayed.

For dismissals the construction is different and is often misunderstood. Under section 102 BetrVG the works council must be consulted before every dismissal. A dismissal issued without this consultation is void, regardless of whether it would have been justified on the merits. This is the real trap for international employers who schedule a separation from head office: without a correct, complete consultation of the works council, the dismissal is open to challenge on formal grounds alone.

The works council, however, has no right of veto. It can raise concerns or object to an ordinary dismissal in due time and with reasons, which can give the dismissed employee a claim to continued employment until an unfair-dismissal action concludes. The employer can issue the dismissal despite the objection; the labour court then decides on its validity.

What happens with restructuring, site closure or carve-out?

For parent companies, co-determination becomes most expensive when they want to reorganise, relocate, downsize or, in the context of an M&A transaction, carve out the German site. Such projects, once they change the establishment organisationally, are regularly operational changes within the meaning of section 111 BetrVG; a mere share sale without organisational consequences for the establishment, by contrast, does not count. These include, among others, the reduction or closure of the whole establishment or of substantial parts, its relocation, its merger with other establishments, fundamental changes to the organisation, and the introduction of fundamentally new working methods.

In companies that, as a rule, have more than 20 employees entitled to vote, the entrepreneur must inform the works council of such a planned change in good time and in full and consult with it. From this follow two separate instruments. The reconciliation of interests (section 112 BetrVG) governs the whether, when and how of the measure itself. It is not enforceable, but the employer must have made a genuine attempt to reach it, and that includes the route through the conciliation committee.

The social plan compensates the economic disadvantages for the affected employees, for example through severance payments, and it is in principle enforceable: if no agreement is reached, the conciliation committee sets it in a binding manner.

The sanction for mistakes is concrete. If the employer carries out an operational change without having sufficiently attempted a reconciliation of interests, the affected employees can claim compensation for disadvantage under section 113 BetrVG, which amounts to severance payments. For the scheduling of a carve-out or a site consolidation, this means that involving the works council is not a downstream formality but a distinct procedural step, sometimes lasting several months, that belongs in the transaction or restructuring roadmap from the outset. If it is overlooked, delay, compensation for disadvantage and, in the worst case, an interim injunction against implementation loom.

What does the works council cost, and who bears the cost?

Works council activity is free of charge for the employees but not for the employer. The office of works council member is, under section 37 BetrVG, an honorary office that members exercise, in principle, during their working time and without any reduction in their pay. Necessary works council activity is therefore paid working time, and members have a claim to the training necessary for their tasks, the cost of which the employer likewise bears.

In addition, section 40 BetrVG obliges the employer to bear all costs arising from the works council's activity and to provide it, to the necessary extent, with rooms, material resources, information and communication technology, and office staff. This can also include the costs of a lawyer or expert engaged by the works council, in so far as their involvement is necessary. These costs cannot be passed on to the works council and cannot be excluded by contract.

For the parent company it is therefore more realistic to treat the works council as a fixed, plannable cost block rather than as avoidable expense. A good works agreement that clearly regulates responsibilities, releases and resources ultimately reduces the friction costs far more than the attempt to keep claims small.

Works council or trade union, and what is a European Works Council?

Foreign parent companies regularly confuse the works council with a trade union, because in their own country the trade union is often the only form of employee representation. In Germany these are two separate systems. The trade union is a cross-company, voluntary membership organisation that negotiates collective agreements and can call industrial action, for example a strike.

The works council is the statutory representation of the entire workforce of an establishment, independent of individual membership of a trade union, and it precisely may not call a strike; it is obliged to cooperate in a spirit of trust. Both can exist alongside each other; an establishment can have a works council but no trade union anchored in the establishment, and vice versa.

To be distinguished from both is the European Works Council (EWC). It concerns Community-scale undertakings and groups of undertakings with at least 1,000 employees in the EU and the EEA and at least 150 employees in each of two member states.

Its purpose is the cross-border information and consultation of employees on transnational matters, that is, at a level at which the national works council has no competence. Its rights are weaker than those of the German works council and are essentially limited to information and consultation, not genuine co-determination.

The legal basis was revised with the recast of the EU Directive on European Works Councils (Directive (EU) 2025/2450); the member states must implement the new requirements by 1 January 2028, which tends to strengthen the establishment and the consultation rights. Groups with a German subsidiary should factor this level in early, because transnational restructurings can trigger both the European Works Council and the national works councils.

What mistakes do foreign parent companies typically make?

The recurring mistakes almost always follow the same pattern: a management practice that is permissible and customary in the home country is transferred unchanged to the German establishment. Four constellations occur particularly often.

First, the attempt to prevent or steer the formation of a works council. Union busting methods imported from the United States are in Germany not merely bad style but a criminal offence under section 119 BetrVG, and they hit the acting managers personally. Second, the unilateral rollout of group-wide software. A new HR, time-recording or monitoring system at the German site without a works agreement is contrary to co-determination and open to challenge, with the additional data-protection dimension.

Third, dismissals without or with incomplete consultation of the works council, which fail on formal grounds alone even though the ground for dismissal would have held up. Fourth, restructurings and carve-outs in which the involvement of the works council is considered only at the end and thereby blows up the whole timetable.

The common lesson is unspectacular but effective. Those who accept the works council as a fixed part of German governance, inform it early and fully, and settle the critical topics in dependable works agreements lose less time and money than those who try to circumvent co-determination. Co-determination cannot be negotiated away, but it can be shaped. It is precisely here, between the expectations of the foreign parent and the mandatory requirements of German law, that legal support comes in.