A domestic place of posting as an organisational unit eligible for a works council – no domestic main establishment required

A domestic part of an undertaking may be regarded as an independent undertaking within the meaning of section 4(1), first sentence, no. 1 of the Works Constitution Act (BetrVG) even if the main establishment is located abroad. The principle of territoriality does not preclude this. For a part of an undertaking to be eligible for a works council, a minimum degree of organisational autonomy at the domestic location is sufficient, even if key personnel decisions are taken from abroad.

Facts of the case

The employer – an airline based in Malta with its group headquarters in Ireland – operates flights to and from numerous European airports. At Berlin-Brandenburg Airport (BER), it maintains a base with around 320 cockpit and cabin crew members. There is no collective agreement-based employee representation within the meaning of Section 117(2), first sentence, of the Works Constitution Act (BetrVG) for these employees; previous negotiations with the trade union had failed. Due to aviation regulations, the employer maintains an ‘airport office’ at BER. The flight and cabin crew begin and end their work on board the aircraft; briefings and debriefings also take place there. All key personnel decisions – recruitment and dismissals, disciplinary measures, duty rosters and changes thereto, as well as promotions and transfers – are taken by management based in Malta and Ireland. A so-called ‘Base Captain’ (for flight crew) and a so-called ‘Base Supervisor’ (for cabin crew) have been appointed for the BER base; their roles, duties and powers are set out in an operations manual.

Decision

Following initiatives to elect a works council, the employer initiated a decision-making procedure and sought a ruling that the BER base was not an organisational unit eligible for a works council. It took the view that a domestic part of the business could only be regarded as an ‘establishment’ within the meaning of the Works Constitution Act (BetrVG) if the main establishment was also located in Germany. The Labour Court (ArbG) and the Regional Labour Court (LAG) of Berlin-Brandenburg (decision of 15 October 2024 – 11 TaBV 295/24) dismissed the application.

The employer’s appeal to the 7th Senate of the Federal Labour Court (BAG) was unsuccessful. The Senate clarified that, under Section 4(1), first sentence, No. 1 of the BetrVG, parts of an undertaking that are geographically distant from the main undertaking may also be regarded as independent undertakings. Such a part of an undertaking may exist even if the main undertaking is located abroad. This does not contravene the principle of territoriality, as the deemed undertaking is situated within Germany.

The decisive connecting factor under the BetrVG is not the registered office of the company’s management, but the domestic organisational unit itself and the integration of the employees working there. Section 4(1), first sentence, of the BetrVG contains the legal fiction that a part of the undertaking situated at a considerable geographical distance is deemed to be an independent undertaking; as this fictitious undertaking is situated within Germany, the BetrVG applies directly to it. The foreign main establishment takes a back seat as the connecting factor.

Organisational autonomy does not depend on where the corporate management is based. Rather, the decisive factor is whether at least one person with the authority to issue instructions is institutionally established at the site and actually exercises those powers.

Classification

The Federal Labour Court (BAG) thus clarifies the contentious question of whether Section 4(1), first sentence, No. 1 of the Works Constitution Act (BetrVG) requires a main establishment to be situated in Germany.

Secondly, the decision is consistent with the BAG’s line of case law on works constitution in cross-border group structures, whilst making an appropriate distinction. With regard to the formation of a group works council, it was ruled that the group’s top management must be based in Germany. Section 4 of the Works Constitution Act (BetrVG), by contrast, refers only to the establishment or part of an establishment located in Germany.

However, the decision is noteworthy in terms of the minimal requirements for the organisational autonomy of a part of an establishment within the meaning of Section 4 of the BetrVG. The Senate confirms that the exercise of actual authority to issue instructions by a single person on site is sufficient, regardless of whether that person has been entrusted with the full scope of the employer’s functions.

Implications for practice

The ruling has far-reaching consequences for internationally operating companies with staff in Germany. The key message is: the relocation of organisational management authority abroad cannot prevent works council co-determination for domestic organisational units. Where a permanent organisational unit exists in Germany with a minimum level of local management and its own workforce, it is generally to be assumed that this constitutes an organisational unit eligible for a works council – regardless of the location of the group’s head office.

Practical advice

Companies with cross-border structures should promptly review their domestic sites to determine their classification under works constitution law. Locations, regional offices or other organisational units with a local workforce and even a minimal on-site chain of command pose a risk of being classified as business units eligible for a works council. It should also be examined whether a European Works Council structure or other forms of transnational employee representation would be more suitable for effectively embedding co-determination where decisions are actually taken.