The definition of "establishment" for the 2026 works council elections – business as usual?

With a view to the 2026 works council elections, an old key question is once again taking centre stage: where can elections actually be held? The answer depends on the definition of "establishment" under works constitution law – and thus on the actual management and decision-making structure. In its rulings of 28 January 2026 (7 ABR 23/24, 7 ABR 26/24 and 7 ABR 40/24), the Federal Labour Court (BAG) confirmed that an election requires a business or an independent part of a business within the meaning of the Works Constitution Act (BetrVG).

Platform work as a touchstone

In the case in question, the employer operated a nationwide delivery service with hub cities (management/administration) and remote cities (pure delivery areas without local management). The BAG confirmed that the remote cities are not units eligible for a works council because they lack organisational independence and management authority. The decisive factor is not the place of work, but the question of where personnel and social decisions are made.

Case law instead of legal definition

As there is no legal definition of a "business", companies must align their organisation with the guidelines of case law. These are:

• Uniform management in essential personnel and social matters
• organisationally independent structure for independent parts of the business
• Spatial separation is not sufficient
• Digital control does not replace management

The following also applies to matrix structures: According to the Federal Labour Court (BAG) (of 22 May 2025 – 7 ABR 28/24, see Julia Certa's article on this subject), employees can be assigned to several establishments.

This illustrates how complex the question of the definition of a company, i.e. the "constituency" of local works council committees, can be.

Since the last election was in 2022 and many companies have undergone changes since then, the companies may also have changed. Below are a few practical examples that can regularly influence the definition of the term "company" under works constitution law:

• s/joint ventures: Although the principle applies that corporate and works constitution law connections must be assessed separately from each other, experience shows that corporate connections between companies often also lead to downstream or directly related changes in the operational and organisational units.
• Centralisation of HR/management: In view of the aforementioned BAG ruling on platform work, it is clear how strongly case law evaluates the physical location of a management and instruction centre. If there have been physical changes to management centres in recent years, a review of the concept of a business is urgently required.
• Home office-first structures: These have become a proven way of working at numerous companies. However, there is also a growing call to return to the workplace. Here, too, the crucial question is which company remote workers should be primarily assigned to, i.e. where the management unit with authority to manage and instruct these employees is located.
• Global business units: It is not uncommon for management units to be located abroad. However, this does not protect against an establishment within Germany in the sense of works constitution law.
• Outsourcing/near/offshoring: The relocation or changed allocation of orders or order volumes can result in business units in Germany being enlarged or reduced in size or completely dissolved. This can result in plant closures, partial plant closures or plant relocations, as well as transfers of operations. These processes also trigger changes in the definition of a business.
• Reorganisations: In recent years, there have been numerous restructurings and reorganisations with and without staff reductions. Any company that has implemented or is currently implementing operational changes as part of a reconciliation of interests procedure will have to clarify the definition of "establishment" for the upcoming election with the election committee.
• AI-based resource planning: How the term "establishment" would be assessed if AI technology were used to select, assign and instruct the workforce for shifts and work tasks has not yet been conclusively clarified. Here, too, it is to be expected that the search for the physical location of a central management unit will have to be carried out. Merely limiting the area of operation in geographical terms is unlikely to trigger the application of the Works Constitution Act. Rather, the question arises as to where the company's human decision-makers are located and where the responsibility for commissioning or using AI technology ultimately lies.

The numerous factors influencing the definition of a business will continue to cause legal uncertainty for election committees and companies in the 2026 election year. This is because an unclear definition of a business triggers the risk of a subsequent legal challenge to the works council election.

There are numerous examples of works council elections being contested in the press and in our practice:

1. Incorrect assignment of employees to a company

In one case, approximately 40 employees were incorrectly classified as senior executives in the works council election and were therefore not administratively assigned to a company, even though they were functionally integrated there. As these employees were not included on the electoral roll, this led to a successful election challenge.

2. Incorrect joint operation

Similarly, misidentifying a cross-company joint operation can lead to an election challenge. Since joint operations under works constitution law cannot always be clearly defined, this type of company structure is a frequent source of errors that lead to subsequent election challenges. 

3. Technically controlled units without management

A new addition is the possibility of contesting elections based on the aforementioned Federal Labour Court ruling on platform work. New technologies are used to manage groups of employees, teams or individual employees in certain regions or geographical areas. However, the decisive factor is where the human management level is located. If this is not present in the areas of operation, there is no business and no works council election can take place for this business.

Risks of misclassification

According to the BAG, errors in the definition of a business generally lead to contestability, not nullity. The elected works council members remain formally in office during the contestation, while a lengthy labour court contestation procedure runs in parallel. In some cases, these contestation proceedings drag on for years and are only decided   with legal effect by the regional labour court or the BAG. In some cases, the elected works council committees resign and early elections are held. Ultimately, election contestations cause considerable tension between the parties within the company, which should be avoided.

Conclusion

Business as usual? Only partially. Modern forms of work, matrix structures and the use of new technologies are changing the way workforces are managed and deployed. This increases the risk of incorrect assignment to a works constitution-regulated company and the contestability of an election in 2026. Companies should review their actual management and decision-making structures at an early stage and coordinate this with the election committee in good time.