No Joint Establishment as a Basis for Attribution in One-Third Participation Law

With two decisions issued on the same day, 23 June 2026 (II ZB 11/25 and II ZB 12/25), the Federal Court of Justice (BGH) has resolved a question that had been fiercely debated in case law and legal literature for years: the existence of a joint establishment of several companies within the meaning of § 1(1) sentence 2 BetrVG does not lead to a mutual attribution of employees for the purposes of the threshold calculation under § 1(1) no. 1 sentence 1 DrittelbG. The decisions are of considerable significance for the structuring of group company arrangements in practice.

The Facts: Two Sides of the Same Corporate Coin

Both decisions arise from the same group structure, referred to as the "N. Group". The two proceedings differ only in the perspective from which the threshold question is raised: once from the perspective of the ultimate parent company (II ZB 11/25), and once from the perspective of an intermediate holding company within the same group (II ZB 12/25).

In proceedings II ZB 11/25, the respondent is the ultimate parent company, which was initially incorporated as a German Aktiengesellschaft (AG) and was converted into a Societas Europaea (SE) during the course of the appeal proceedings. It employs approximately 290 employees of its own. Directly subordinated to it by way of a domination agreement is N. B. SE, with approximately 80 employees. The group also includes profit transfer agreements with a further subsidiary (approximately 400 employees) and a sub-subsidiary (also approximately 400 employees), with neither being subject to a domination agreement. Even including the 80 employees of N. B. SE, which are unquestionably attributable under § 2(2) DrittelbG, the total headcount of 370 remains below the relevant threshold of 500, based on which a one-third participation had to be implemented in terms of a supervisory board at the level of the ultimate parent company.

In the parallel proceedings II ZB 12/25, the respondent is the intermediate holding company itself, N. B. SE. In that case, the 290 employees of the parent company were attributed to it pursuant to § 2(2) DrittelbG on the basis of the domination agreement running the other way, yielding a combined total of 370 employees. The 400 employees of the subsidiary N. O. GmbH were disregarded, as no domination agreement existed in respect of that entity.

In both cases, the respective applicants — the works councils — sought to rely on the existence of a joint establishment within the meaning of § 1(1) sentence 2 BetrVG between the group companies in order to aggregate all employees across the group and thereby reach the 500-employee threshold. In both cases, they failed before the Regional Court Berlin II, the Court of Appeal, and ultimately before the BGH.

The Legal Debate: A Long-Simmering Controversy

The question decided by the BGH was by no means new. It had given rise to a complex and contested body of opinion in employment and company law scholarship, as well as in lower court decisions, for decades - a state of affairs that the BGH has now, one might say at last, brought to an end.Three schools of thought had emerged:

A prominent strand of academic opinion favoured a full mutual attribution of all employees working in the joint establishment to each of the participating companies, irrespective of their contractual employment relationship.

A middle-ground view would permit attribution at least where the right to give instructions to employees is exercised on a unified basis and all companies hold a right of management over all employees within the establishment.

The third view - ultimately confirmed by the BGH - categorically rejected any such attribution and pointed to the exhaustive character of § 2(2) DrittelbG.

The fact that the BGH admitted the appeal on points of law only on the limited question of mutual attribution in the context of a joint establishment, and not on the question of the applicability of § 2(2) DrittelbG in a de facto group, makes clear that the Senate regarded the latter question as already settled law. The sole focus was the unresolved attribution ground of the “joint establishment”.

The BGH’s Decision

The BGH aligns itself with the restrictive view and supports its decision with a fourfold chain of reasoning, progressing methodically from the wording through the legislative history to the structure and purpose of the provision.

Wording: § 1(1) no. 1 sentence 1 DrittelbG ties the right to co-determination to the number of employees of the Aktiengesellschaft, not to the employees of a joint establishment. Unlike § 5(2) sentence 1 DrittelbG - which refers to the concept of the "company" and to which the Federal Labour Court (BAG) has applied an expansive purposive interpretation in the context of active voting rights - the wording of § 1(1) DrittelbG affords no basis for an establishment-related approach.

Legislative Materials: The reference in the explanatory memorandum to the Second Simplification Act to a company-based rather than establishment-based approach is explained, on the BGH's correct analysis, solely by the fact that the DrittelbG exclusively governs company-level co-determination. No deliberate legislative decision on the question of attribution in the context of a joint establishment can be derived from the materials.

Systematic Structure and Legislative Intent: The most compelling systematic argument lies in the structure of the DrittelbG itself. The legislature created an express provision for the inclusion of employees of a joint establishment only in the context of the establishment of a works council (§ 1(1) sentence 2 BetrVG). A corresponding cross-reference is conspicuously absent from the DrittelbG. Whilst § 3(1) DrittelbG refers to § 5(1) BetrVG for the definition of "employee", it expressly does not refer to § 1(1) sentence 2 BetrVG. This reflects a deliberate distinction between workplace-level and company-level co-determination. The special provision in § 14(2) sentences 5 and 6 AÜG, to which the appellants sought to resort, is also incapable of supporting any general principle: it is rooted in the split employer structure inherent in temporary agency work and cannot be transposed to the present context.

Blocking Effect of § 2(2) DrittelbG: Perhaps the strongest argument arises from the interaction between § 1(1) and § 2(2) DrittelbG. The latter provision permits the attribution of employees from outside the company for threshold purposes only under narrowly defined conditions: a domination agreement or organisational integration is invariably required. This legislative choice - deliberately excluding the de facto group and thus remaining narrower in scope than § 5(1) MitbestG - would be entirely undermined if the joint establishment could be invoked as an alternative attribution ground. § 2(2) DrittelbG therefore has a blocking effect (Sperrwirkung) against any other conceivable basis for attribution.

Practical Implications

The practical significance of the decisions is considerable. Companies that structure their group arrangements so that no single entity - whether alone or together with contractually dominated subsidiaries - reaches the threshold of 500 employees may, following this jurisprudence, claim exemption from co-determination under the DrittelbG, even where the combined group in fact operates a joint establishment employing far more than 500 people.

This is not a surprising conclusion. Corresponding structuring advice had already been given in practice prior to the BGH's decisions. The BGH has now confirmed this structuring option at the highest judicial level, thereby creating legal certainty. Whether the underlying rationale for a particular group structure is economic, regulatory, or otherwise is irrelevant to the legal assessment. What matters exclusively are the corporate law links within the meaning of § 2(2) DrittelbG.

For companies seeking to avoid co-determination obligations under the DrittelbG, the message is clear: employees should be distributed across several entities such that none of them exceeds the threshold under the attribution rules of § 2(2) DrittelbG. Joint establishments are harmless from a co-determination perspective, provided the corporate links between the entities are not established by way of a domination agreement or organisational integration.

Critical Assessment

The BGH's decisions are methodologically sound. The Senate applies the classical methods of statutory interpretation with care, and in particular the reference to the blocking effect of § 2(2) DrittelbG is doctrinally compelling: it would be incongruous if the legislature had deliberately created a narrow attribution rule in § 2(2) DrittelbG, only for that rule to be circumvented with ease through a works constitution law construction. The BGH closes this gap consistently.

From an employer's perspective, the decisions provide a reliable structuring tool: provided the corporate structure remains within the parameters of § 2(2) DrittelbG, the group's organisation cannot be successfully challenged on co-determination grounds. This creates planning certainty and rewards careful corporate structuring.

It cannot, however, be ruled out that employee representatives and trade unions will use the decisions as an occasion to press for legislative reform.

Indeed, it is not entirely clear whether the outcome fully accords with the original regulatory intention of the legislature. As the BGH itself acknowledges, the legislative materials on the DrittelbG do not reveal a deliberate decision on the question of attribution in the context of a joint establishment. This gap could be invoked as an argument for statutory amendment - for instance, by aligning the attribution rules with those in § 5(1) MitbestG.

Whether and when the legislature will take such a step remains to be seen. For advisory practice, however, the decisions provide a solid foundation upon which companies can reliably rely when structuring their group arrangements.