German Works Councils and Digital Platform Work

Digital labor platforms, app-based work models, and remote workforces are shaping employment structures far beyond Europe. A recent decision by Germany’s highest labor court clarifies how traditional employee representation rules apply even in highly digitalized environments. For U.S.-based platform companies operating internationally, this ruling offers valuable insights into how local labor law concepts may continue to apply despite centralized, tech-driven management structures.

In its decision dated 28 January 2026 (reference no. 7 ABR 23/24), the Federal Labor Court (“BAG”) clarified that the fundamental principles of German works constitution law continue to apply unchanged even to digitally managed working relationships – particularly within the platform economy. Specifically, this means that even where so-called platform work is largely organized and carried out via an app, a separate works council may be elected for a spatially delineated unit only if that unit qualifies as an establishment or an autonomous establishment section within the meaning of the Works Constitution Act (“BetrVG”). This requires the existence of an independent organizational management function or at least a sufficient degree of organizational autonomy.

Background

The employer, an internationally operating delivery service active throughout Germany that runs a platform connecting restaurants with potential customers and enabling customers to order food from those restaurants, maintains central locations (“hub cities”) with administrative management structures, as well as delivery-only areas (“remote cities”) in which only drivers work and primarily communicate with the employer via an app. In several of these “remote cities” in Lower Saxony, Schleswig-Holstein and Hamburg, works councils were elected in 2022 and 2023. The employer challenged these elections by invoking the statutory concept of an establishment under the BetrVG.

Understandings of the Regional Labor Courts of Lower Saxony, Schleswig-Holstein and Hamburg

All three Regional Labor Courts unanimously held that the “remote cities” in question constitute neither establishments within the meaning of Section 1 of the BetrVG nor autonomous establishment sections within the meaning of Section 4 of the BetrVG. In each case, the decisive factor was the absence of any institutionalized management structures, as all personnel-related and social decisions were taken centrally in the “hub cities” or at corporate headquarters. The courts made clear that the mere digital management of work via an app does not establish the minimum level of organizational autonomy required.

Legal Assessment by the BAG

The BAG fully confirmed this approach. Consequently, the works councils’ appeals on points of law were unsuccessful. The BAG held that the Regional Labor Courts were correct in finding that the individual “remote cities” do not constitute organizational units capable of forming a works council. The BAG emphasized that the age of platform work does not give rise to an independent or modified concept of an establishment. The decisive factor remains where the institutionalized management function is located. Drivers in a purely operational delivery area without on-site decision-makers – or decision-makers clearly allocated to that area – who perform the employer-side functions (such as HR management) cannot elect their own works council. Comprehensive digital control mechanisms likewise do not replace a management structure, because they do not independently make decisions relevant to co-determination. According to the BAG, the grouping into a delivery area with its own duty roster is also insufficient. The “remote cities” already lack the required minimum level of organizational autonomy, which cannot be derived solely from the community of interests among the delivery drivers deployed there.

Trade Union Criticism and Political Dimension

The decision drew criticism from trade unions. In their view, the BAG fails to reflect modern working realities, as employers that manage, monitor and sanction via apps do in fact perform management functions – irrespective of any physical presence. According to the trade unions, the ruling continues to afford platform companies significant leeway to make it more difficult, or even to prevent, the establishment of effective works council structures. They also point to a considerable legislative gap and call for a swift reform of the BetrVG in order to ensure legally certain co-determination rights in sectors with digitally managed work processes.

Outlook

In the short term, the BAG’s decision provides legal certainty and is to be welcomed. For employers using decentralized or digital working structures, it primarily brings clarity: works council elections may take place only where a management level is institutionalized. At the same time, the decision shows that – despite the effort involved and potential internal disputes – it may be advisable to have works council elections reviewed, including in order to create legal clarity between the parties to the works constitution. Simply accepting elections without review can otherwise lead to complex and unsuitable structures which may later be very difficult to reorganize.