The facts: Works council elections in ‘remote cities’
The lawsuit was brought by an international food delivery service that divides its operational structure in Germany into two areas. On the one hand, there are so-called ‘hub cities’, which function as main transshipment bases with their own administration and management structure. On the other hand, there are numerous ‘remote cities’. These pure delivery locations exclusively employ drivers whose work assignments and communication with the company are almost entirely controlled via a smartphone app. There is no local management or administrative contact person on site.
Works councils were elected in several of these remote cities in 2022 and 2023. The company challenged these elections in court, arguing that the remote cities were not organisational units eligible for works councils within the meaning of the Works Constitution Act (BetrVG).
The BAG’s decision: a clear rejection of the fragmentation of co-determination
The Federal Labour Court followed the employer’s argument and upheld the decisions of the lower courts. The judges made it clear that the concepts of an establishment or an independent part of an establishment required for the formation of a works council also apply without restriction in the digital world of work.
An establishment within the meaning of Section 1 BetrVG requires an organisational unit within which an employer continuously pursues certain work-related objectives with its employees by means of material and immaterial resources. The decisive factor is the existence of a uniform management structure that can make independent decisions on essential personnel and social matters (e.g. hiring, dismissals, duty rosters).
An independent part of a business within the meaning of Section 4 (1) BetrVG does not have to have complete management autonomy, but it must have a minimum degree of organisational independence. The BAG ruled that the ‘remote cities’ lack precisely this characteristic. The mere grouping of employees in a geographical delivery area and management via a joint duty roster is not sufficient for this purpose. Nor does the fact that the drivers form a ‘community of interests’ constitute a unit eligible for a works council.
What does this mean for companies? Practical recommendations for action
The BAG’s decision is a welcome clarification for employers in the platform economy and provides certainty when designing operational structures in the gig economy and other decentralised business models.
This results in the following recommendations for HR work:
- Design your structure consciously: Review your organisational structure. If you want to avoid fragmentation of co-determination, you should leave decentralised units without their own management structure with authority to issue instructions and manage key personnel decisions centrally.
- Clearly define management responsibilities: Avoid establishing local management functions in purely operational units. Responsibility for personnel and social measures should clearly remain with a central office (e.g. in the ‘hubs’ or at headquarters).
- Document processes: Ensure that your organisational and decision-making structures are clearly documented.
This strengthens your position in the event of a legal dispute over the works council eligibility of a unit.
Conclusion
The Federal Labour Court has applied the established concept of a ‘business’ from the Works Constitution Act to the modern, platform-based world of work and put a stop to the atomisation of co-determination in the workplace. For companies, this means greater legal certainty when organising decentralised and digitally controlled work processes. This applies above all to the platform economy.
The most important points in brief:
- Pure delivery locations (‘remote cities’) without their own management are not units eligible for a works council.
- The principles of the BetrVG regarding the concept of a business also apply to app-controlled platform work.
- For the election of a works council, a uniform management or a minimum degree of organisational independence is mandatory.
