Monthly Dose Employment Law 02/2026

No enforceable right of co-determination for the works council regarding measures taken prior to its constituent meeting

Baden-Württemberg Regional Labour Court, decision of 30 September 2025, 2 TaBV 2/25

The Baden-Württemberg Regional Labour Court (LAG) ruled in its decision of 30 September 2025 (2 TaBV 2/25) that a works council in a company that previously had no works council is not entitled to negotiate and conclude a social plan if it was only formed after the implementation of a change in operations had begun.

Facts

• The employer, a parking management company, planned to relocate significant parts of the site’s operations.
• On 3 April 2025, as part of the planned relocation, the employer issued 32 redundancies for operational reasons and simultaneously offered the affected employees severance agreements with severance payments.
• In April 2025, works council elections were held for the first time at the employer’s premises; the constituent meeting of the works council took place on 23 April 2025.
• In its application, the newly formed works council sought the appointment of a conciliation committee to draw up a social plan for the relocation measure that had already begun. It argued that the operational change was subject to the requirement for a social plan. Furthermore, the employer misled the workforce at the staff meeting on 5 March 2025 regarding the actual planning status of the operational change, thereby preventing the timely election and establishment of the works council.
• The Stuttgart Labour Court dismissed the application. The works council lodged an appeal against this decision.

Reasons for the decision

• The Regional Labour Court dismissed the appeal on the grounds that the conciliation committee lacked jurisdiction; the works council was not entitled to a right of co-determination. 
• No right of co-determination regarding the conclusion of a social plan: According to established case law of the Federal Labour Court (BAG, most recently decision of 8 February 2022, 1 ABR 2/21), there is no entitlement to a social plan if a works council is only constituted after the implementation of a change in operations has begun. The implementation of the change in operations had already begun with the giving of notice of termination on 3 April 2025.
• No grounds for obstruction within the meaning of Section 20 BetrVG: The court clarifies that Section 20 BetrVG covers only actions that directly hinder or render impossible the conduct of the election (e.g. refusal to provide necessary information, premises or time off work). The works council had already failed to present such an obstruction in a conclusive manner. Deception regarding operational planning may be in breach of contract, but does not trigger a subsequent right to co-determination for a non-existent works council. From a legal perspective, the workforce’s decision to establish a works council is entirely independent of any specific co-determination issue. Deception regarding the status of planning would, at most, give rise to claims for damages.
• Independence of works council elections from operational plans: The employer may implement its measures at an accelerated pace, provided that it does not thereby directly obstruct the election. There is no obligation to wait until a works council has been established.

Implications for practice

The decision of the Baden-Württemberg Regional Labour Court (LAG) once again makes it clear that the works council has no enforceable right to co-determination if a works council is only formed after the implementation of a change in operations has begun. Employers are not obliged to postpone planned measures simply because the formation of a works council appears likely. They may also implement their operational decisions at an accelerated pace, provided they do not actively obstruct the election within the meaning of Section 20 of the Works Constitution Act (BetrVG). Whilst inaccurate statements regarding planned operational changes made to the workforce may, in principle, constitute a breach of contractual obligations and thus give rise to claims for damages under Section 280(1) of the German Civil Code (BGB), such statements do not lead to the retroactive creation of co-determination rights or an obligation to draw up a social plan. For employers, this means, on the one hand, legal certainty regarding the continuation of planned measures and, on the other hand, the need for truthful communication in order to minimise liability risks.

Determination of the applicable labour law in the event of a transfer of the habitual place of work

ECJ judgment of 11 December 2025, C-485/24

In its judgment in the Locatrans Sàrl case, the ECJ clarified that, in the context of conflict of laws, when determining the applicable labour law by weighing up the overall circumstances to establish whether the employment relationship has a closer connection to a particular state, account must be taken of whether the employee’s habitual place of work has shifted permanently during the course of the employment relationship.

Facts

• The claimant had been employed as a driver by the Luxembourg-based company Locatrans Sàrl since 2002. Under the employment contract agreed between the parties, the claimant was to work in various European countries. Furthermore, the contract provided for the application of Luxembourg law to the employment relationship.
• In March 2014, the defendant informed the claimant that it was required to register him with the French social security system, as an assessment had revealed that he spent more than 50% of his working time in France. 
• In April 2014, the defendant terminated the employment relationship with the claimant after he had objected to a reduction in his working hours. The claimant brought an action against this decision before the French Labour Court in Dijon.
• The Labour Court in Dijon ruled that the employment relationship was governed by Luxembourg law. The Court of Appeal in Dijon overturned this decision on the grounds that, pursuant to Article 6 of the Rome Convention (of 19 June 1980, ‘EVÜ’), the choice of Luxembourg law in the employment contract could not deprive him of the protection afforded to him by the mandatory provisions of French law, and that the termination of the employment relationship was not justified under French law and therefore compensation was payable to the claimant. The defendant lodged an appeal in cassation against the decision of the Court of Appeal.
• The French Court of Cassation stayed the proceedings and referred the case to the ECJ with the question: in the case of employees who carry out their work for the same employer in several Contracting States, for the purpose of determining the law applicable in the absence of a choice of law under Article 6 of the Brussels Convention, the entire duration of the employment relationship should be taken into account to determine the habitual place of work, or whether the place of employment established on a permanent basis most recently should be taken as the basis, provided that this was intended by the parties to constitute the new habitual place of work.

Reasons for the decision

• Principles for determining the applicable law: In the present case, the ECJ had to determine the applicable law in accordance with Articles 3 and 6 of the Brussels I Regulation and not in accordance with Article 8 of the Rome I Regulation (Regulation 593/2008) – which is substantively identical in the issues at stake here – since Article 8 of the Rome I Regulation applies (only) to employment contracts concluded after 17 December 2009. In substance, the ECJ first confirmed in its judgment that the choice of law is, in principle, determined in accordance with Article 3 of the Brussels I Regulation by the law chosen by the parties in the contract. The applicability of Article 3 of the Brussels I Regulation is limited by Article 6(1) of the Brussels I Regulation, according to which the employee must not be deprived of any protection afforded to him by the mandatory provisions of the law that would be applicable under Article 6(2) of the Brussels I Regulation if no choice of law had been made.
• Under Article 6(2)(a) of the Brussels Convention, the decisive factor is where the employee habitually performs his work. Article 6(2)(b) of the Brussels Convention provides that, where it is not possible to determine such a habitual place of work, the applicable law is determined by the location of the employer’s place of business. Furthermore, according to the final clause of Article 6 of the Brussels Convention, these two rules do not apply if the circumstances as a whole indicate that there is a closer connection to another State; in that case, the law of that State applies.
• ECJ ruling: The provision in Article 6(2) of the Brussels Convention does not specify a required period for determining the choice of law, so that, in principle, the duration of the entire employment relationship must be taken into account. If, as in the present case, the place of work is permanently relocated and a new place thereby becomes the habitual place of work, this is not, in itself, decisive for determining the applicable law under Article 6(2)(a) of the Brussels Convention; however, it must be taken into account in each individual case when determining the applicable law under Article 6(2) of the Brussels Convention, by assessing the overall circumstances to establish whether the activity has a closer connection to a particular state.
• Divergence in the interpretation of the place of work: For the sake of completeness, the ECJ clarifies that the interpretation of the ‘habitual place of work’ under the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 27 September 1968, which expressly distinguishes between the place where the employee habitually carries out his work and the place where he last habitually worked, cannot be transposed to Article 6(2) of the Brussels Convention due to the differing objectives of the two legal bases.

Implications for practice

The ECJ’s decision makes it clear that changes to the habitual place of work during a long-term employment relationship can significantly influence the applicable employment law. Employers should therefore be aware that the habitual place of work – and thus a connecting factor under conflict of laws – may shift in the course of employment. This may apply even where a choice of law has been made in the employment contract, provided that this deprives the employee of protection which would otherwise be granted to them under mandatory provisions of the law applicable pursuant to Article 6(2) of the Brussels I Regulation (or Article 8(1) of the Rome I Regulation, which has the same content). The employer should monitor whether the habitual place of work shifts during the course of the employment relationship so as to be able to intervene proactively if necessary.

Works council remuneration: Revocation of pay increases

Lower Saxony Regional Labour Court, judgment of 7 October 2025, 10 Sa 821/23

In its judgment of 7 October 2025 (10 Sa 821/23), the Lower Saxony Regional Labour Court ruled that, in the event of a retroactive correction of a pay rise previously expressly communicated and paid as an adjustment under Section 37 (4) of the Works Constitution Act (BetrVG), the employer must demonstrate and prove the objective incorrectness of the decision, and the works council member may, in principle, rely on its lawfulness. 

Facts

• The claimant, who has been employed by the defendant’s company since 1998, has been a full-time works council member since May 2006; prior to this, he was classified as a design engineer in pay grade (ES) 17 of the collective agreement applicable to his employment relationship.
• During his release from work, the claimant, amongst other things, successfully participated in a Management Assessment Centre and received several pay rises. From 2012, the defendant remunerated the claimant at pay grade ES29; from 2015, remuneration was at pay grade ES30.
• Against the backdrop of a criminal investigation, the defendant reduced the pay scale level from December 2017; an arbitration report agreed upon subsequently deemed pay scale level 30 to be in compliance with the law. The parties subsequently settled pending legal proceedings by way of a settlement, following which the claimant was to remain classified at pay scale level 30.
• In 2021, the defendant informed the claimant, as it had done following previous pay rises, that the pay rise granted had been in line with standard company practice, in accordance with the company’s regulations in conjunction with Section 37 of the Works Constitution Act (BetrVG) and the arbitration proceedings, and taking into account the pay trends of comparable employees.
• Following the judgment of the Federal Court of Justice (BGH) of 10 January 2023 (6 StR 133/22), the defendant reviewed its works council remuneration system, reduced the claimant’s remuneration to ES 24 from February 2023 as a result of the review, and demanded the repayment of EUR 75,441.59 in salary paid between February 2022 and January 2023. Subsequently, it withheld EUR 42,994.65.
• In his claim, the claimant sought, amongst other things, the repayment of the withheld salary and a declaration that he was to be remunerated at ES29 since 2012 and at ES30 since 2015.

Reasons for the decision

• Regional Labour Court upholds the claimant’s claim: The Regional Labour Court ruled that the claimant is entitled to classification in ES29 or ES30 for the period in dispute pursuant to Section 611a(2) of the German Civil Code (BGB) in conjunction with Section 37(4) sentence 1 of the Works Constitution Act (BetrVG).
• Standard under Section 37 (4) BetrVG (comparative group and customary career progression within the undertaking): Under Section 37(4) of the Works Constitution Act (BetrVG), the remuneration of works council members must not be lower than that of comparable employees with a standard career progression within the company; however, this does not mean that remuneration of the same amount is owed, but rather that the decisive factor is whether the salary progression has lagged behind that of comparable employees in relative terms. Comparable persons are those who, upon taking office, performed essentially equally qualified tasks and were equally qualified for these in both professional and personal terms. A standard development is one that occurs in the context of normal operational and personnel development.
• Burden of proof and presentation of evidence in the event of a retroactive correction of granted increases: If the works council member seeks higher remuneration pursuant to Section 37(4) of the Works Constitution Act (BetrVG), they generally bear the burden of proof in this regard. If, on the other hand, the employer corrects an increase that was previously expressly communicated and paid as an adjustment pursuant to Section 37(4) BetrVG, the employer bears the burden of proof and presentation regarding its objective incorrectness. The situation is different only if the works council member must have been aware of the incorrectness of the decision. 
• Demonstration of the incorrectness of the pay adjustment: The defendant did not sufficiently fulfil the burden of proof incumbent upon it. It failed to demonstrate to what extent the adjustment decision it had made was incorrect. The claimant was entitled to rely on the legality of the increases. It should also have been taken into account here that the defendant, as the employer, has a greater familiarity with the facts regarding the correct determination of the reference group and remuneration. The defendant did not put forward any circumstances on the basis of which the incorrectness of the pay increases should have been obvious to the claimant. Rather, the arbitration report, the fact that the defendant had concluded a corresponding court settlement, and the notifications that the increases had been made on the basis of Section 37(4) of the Works Constitution Act (BetrVG) had served as indications to the claimant of the correctness of the defendant’s decision. A general reference to ‘stricter case law’ alone cannot justify the reduction.

Implications for practice

For employers, the decision makes it clear that even following the Federal Court of Justice (BGH) judgment of 10 January 2023 (6 StR 133/22), the burden of proof for a claim to a pay rise under Section 37(4) of the Works Constitution Act (BetrVG), which generally lies with the works council member, is reversed if a pay rise that has already been communicated and paid as an adjustment under Section 37(4) of the Works Constitution Act (BetrVG) is subsequently adjusted downwards. These legal principles will continue to apply even after the statutory provisions of the BetrVG regarding the remuneration of (full-time) works council members are updated in 2024. Companies should therefore determine comparison groups at an early stage, using a methodologically sound and documented approach, and record the underlying criteria transparently. A retrospective “recalculation” using stricter filters is risky and only materially tenable if it is conclusively demonstrated why the previous practice was objectively flawed.

BAG: Classifying an employment relationship following a fixed-term contract as a new employment relationship, and the associated lower remuneration, constitutes indirect discrimination.

Federal Labour Court (BAG), judgment of 13 November 2025, 6 AZR 131/25 

In its judgment of 13 November 2025 (6 AZR 131/25), the Federal Labour Court (BAG) ruled that collective agreement provisions which treat a permanent employment relationship following a fixed-term one as a new employment relationship, thereby indirectly disadvantaging fixed-term employees compared to permanent employees, thus contravene Section 4 ( 2) of the Fixed-Term Employment Act (TzBfG) and, due to the associated discrimination, are partially void in this respect pursuant to Section 134 of the German Civil Code (BGB). 

Facts

• The claimant had been employed by Deutsche Post AG (DP AG) as a combined delivery worker since 4 June 2019; initially on a fixed-term contract and, following several extensions, on a permanent contract since 1 June 2020.
• As both parties were bound by collective agreements, the Deutsche Post AG Collective Wage Agreement (ETV) applied to the employment relationship; the claimant is classified in pay group 3/group level 1.
• Section 4 of the ETV regulates the allocation to the relevant group level as follows, amongst other things:
  • - Employees who were already in an employment relationship with DP AG on 30 June 2019 (‘reference date’) are classified in pay grade 0 in the first and second years of employment, in pay grade 1 from the third year onwards, and in pay grade 2 from the fifth year onwards.
  • For new employment relationships established after 30 June 2019, Group Level 1 applies only from the fifth year of employment onwards under the ETV, and Group Level 2 from the ninth year onwards. Section 4(1)(b) Paragraphs 2 and 3 of the ETV contain a special provision for employees returning to work within 24 months, who retain their previous group level if they remain in the same pay group.
  • The parties to the collective agreement also agreed that a further fixed-term or permanent employment relationship following a fixed-term contract is to be regarded as a new employment relationship within the meaning of Section 4(1)(b) of the ETV.
• The claimant demanded that the respondent classify him under Section 4(1)(a) of the ETV (grandfathering) rather than Section 4(1)(b) of the ETV (new employment relationship) and asserted the relevant pay difference in his claim.
• The Federal Labour Court (BAG) recognised the claimant’s entitlement to the earlier classification in the higher pay group. 

Reasons for the decision

• Scope of application of Section 4 (1) b) ETV: Section 4(1)(b) ETV applies to the employment relationship with the claimant. Any other interpretation is out of the question due to the unambiguous wording and the clarification; the grandfathering provision of Section 4(1)(a) ETV does not apply in the event of any legal interruption.
• Indirect discrimination on the grounds of a fixed-term contract (Section 4 (2) TzBfG): Section 4(1)(b) ETV indirectly discriminates against fixed-term employees insofar as the provision stipulates that periods of fixed-term employment are not taken into account in the event of subsequent (permanent or fixed-term) re-employment. Admittedly, Section 4(1)(b) of the ETV is not directly linked to the characteristic of fixed-term employment. However, the provision has the effect that the periods of service of employees who were employed on the reference date and were subsequently re-employed after a legal interruption no longer carry the same weight for the purpose of group-level classification as identical periods of service of employees who have been employed by the defendant beyond the reference date without a legal interruption.
• The provision results in fixed-term employees advancing to higher pay grades at a later stage and, in this respect, contravenes Section 4(2) of the TzBfG, which prohibits treating fixed-term employees less favourably than comparable permanent employees without objective justification.
• Standard of review and lack of justification: The unequal treatment is also not justified under Section 4(2) sentence 3 of the TzBfG. The prohibition of discrimination under Section 4(2) of the TzBfG is not subject to collective bargaining under Section 22(1) of the TzBfG; the collective agreement provision is subject to full equality/discrimination review.
• Partial nullity and “upward adjustment”: Section 4(1)(b) of the ETV is partially null and void under Section 134 of the BGB insofar as it applies to fixed-term employees on the reference date who were re-employed after 1 July 2019. Section 4(2) of the TzBfG is a prohibitive provision within the meaning of Section 134 of the BGB. Pursuant to Section 134 of the BGB in conjunction with Section 612(2) of the BGB, the favourable grandfathering provision of Section 4(1)(a) of the ETV must also be extended to this group (‘upward adjustment’). The parties to the collective agreement do not have primary corrective powers in the event of breaches of prohibitions on discrimination shaped by EU law; a suspension to allow for self-correction is ruled out, as sanctions that are effective and dissuasive under EU law must be ensured. 

Implications for practice

The judgment makes it clear that collective agreement provisions constituting discrimination against fixed-term employees are invalid. If such a discriminatory provision exists in the collective agreement, it is void insofar as it constitutes less favourable treatment of fixed-term employees, and the employer is obliged to grant fixed-term employees the same benefits as those granted to permanent employees. The parties to the collective agreement are not granted any independent power to rectify the situation in this respect; the courts may determine the legal consequences of the breach directly themselves.

Precautionary application to the Integration Office does not protect against the expiry of the time limit in the case of extraordinary dismissal

Baden-Württemberg Regional Labour Court, judgment of 19 December 2025, 4 Sa 56/23

The Baden-Württemberg Regional Labour Court ruled in its judgment of 19 December 2025 (4 Sa 56/23) that the two-week limitation period under Section 626(2) of the German Civil Code (BGB) in cases of extraordinary dismissal cannot be replaced by the application deadline under Section 174(2) of the German Social Code IX (SGB IX) if the employee is not (recognised as) severely disabled.

Facts

• The claimant had been employed by the defendant as a production specialist since August 2000; the defendant has a works council and a representative body for severely disabled employees. 
• On 8 March 2023, the defendant terminated the employment relationship summarily without notice. It justified the dismissal on the grounds of an alleged attempt at litigation fraud by the claimant – of which the defendant became aware on 17 February 2023 – in parallel proceedings for protection against unfair dismissal relating to a further termination of the employment relationship by the defendant.
• In July 2022, the claimant had submitted an application for recognition as a person with a severe disability to the competent authority. The authority rejected this application, against which the claimant brought proceedings before the Social Court. At the time the dismissal was issued, a decision by the Social Court had not yet been made.
• As a precautionary measure, on 21 February 2023, the defendant applied to the Integration Office for approval of the extraordinary termination due to the pending proceedings regarding the status of severely disabled person. The Integration Office granted its approval by notice dated 7 March 2023, subject to the condition that the status of severely disabled person had in fact been established at the time the notice of dismissal was served.
• Before the Regional Labour Court (LAG), the parties disputed solely the validity of the extraordinary dismissal. The claimant argues that the two-week notice period for giving notice of extraordinary dismissal had already expired.

Reasons for the decision

• Invalidity of the extraordinary dismissal due to the expiry of the two-week limitation period under Section 626(2) of the German Civil Code (BGB): The Regional Labour Court ruled that the employment relationship had not been terminated by the extraordinary dismissal, as the notice of dismissal had not been given within the limitation period.
• Commencement of the limitation period under Section 626(2) of the German Civil Code (BGB): The commencement of the limitation period requires reliable and sufficiently complete positive knowledge of the facts relevant to the decision to dismiss; a level of knowledge is required that enables a sound decision to be made. Relevant facts are not only incriminating circumstances, but also those that may argue against dismissal, as the employer must be in a position to make a comprehensive, balanced decision. The employer must carry out the necessary investigations with due diligence.
• Non-applicability of Section 174(2) and (5) of SGB IX: The applicability of the time limit under Section 626(2) of the BGB is also not precluded by the requirement to obtain prior consent from the Integration Office. The dismissal of a severely disabled person requires the consent of the Integration Office pursuant to Section 168 of SGB IX. Under Section 174(2) of SGB IX, consent to extraordinary dismissal may only be granted within two weeks of the employer becoming aware of the matter. Dismissal may then be effected even after the expiry of the time limit under Section 626(2) of the BGB, provided it takes place immediately after the Integration Office has granted its consent.
• Although the defendant had complied with the time limit set out in Section 174(2) of SGB IX in this case, the claimant did not have a severe disability, meaning that the consent of the Integration Office was not required.
  
  

Implications for practice

Where the status of a person with a severe disability is unclear at the time of termination, a consent procedure initiated (as a precautionary measure) with the Integration Office cannot ‘cure’ or replace the substantive limitation period under Section 626(2) of the German Civil Code (BGB) if the specific requirements of SGB IX are not met. This legal position, as accepted by the Regional Labour Court, is extremely unfavourable for the employer in such a legal situation, as, upon giving the then-required notice of extraordinary dismissal before the conclusion of the social court proceedings concerning the status of a severely disabled person under social security law, the employer runs the risk of the dismissal being invalid if the social court subsequently recognises the status of a severely disabled person, due to the failure to obtain the then-required consent of the Integration Office for the dismissal. The decision of the Federal Labour Court (BAG) on the appeal lodged by the defendant against the LAG’s judgment (2 AZR 6/26) remains to be seen. Until then, the ‘two-track’ approach proposed in practice may represent the next-best solution, whereby the employer first issues an extraordinary termination without notice within the time limit set out in Section 626(2) of the German Civil Code (BGB) and, at the same time, applies for the consent of the Integration Office as a precautionary measure, and, once the Integration Office has granted its consent, declares a further precautionary termination; the works council must then be involved in advance in both dismissals, and the elected representative for severely disabled employees in addition to the precautionary dismissal.