international employment law firm alliance L&E Global

Germany: No group works council if dominating parent entity has its registered office outside of Germany

The underlying scenario featured a globally active group based in Switzerland that fully owns a subsidiary in Germany. The German subsidiary is a pure holding company without any own operating business activity and as such holds four German subsidiaries itself. The holding company does not exercise any management functions towards its subsidiaries.

After the works councils of the German subsidiaries resolved to establish a group works council, one of the works councils called for an inaugural meeting. In the course of the meeting a chairman and a deputy chairman for the group works council were elected.

In response to that the German entities requested the Labour Court to declare that the group works council was not validly established for their entities, which was successful throughout all instances.

The Federal Labour Law Court illustrates in its ruling from 23 May 2018 that the participation rights of a group works council have to be linked to the level of the group in which the major business decisions are made. That requires a contact and negotiating partner with whom obligatory agreements concerning the subsidiaries can be entered into. A pure holding company does not meet that criterion because it cannot assert the necessary influence on its operating subsidiaries.