A domestic base as an organisational unit eligible for a works council – no domestic main establishment required

Facts of the case

The employer – an airline based in Malta with its group headquarters in Ireland – operates flights to and from numerous European airports. At Berlin-Brandenburg Airport (BER), it maintains a base with around 320 flight and cabin crew members. There is no employee representation established by collective agreement within the meaning of Section 117(2), first sentence, of the BetrVG for these employees; previous negotiations with the trade union had failed. Due to aviation regulations, the employer maintains an airport office at BER. The flight and cabin crew begin and end their work on board the aircraft; briefings and debriefings also take place there. All key personnel decisions – recruitment and dismissals, disciplinary measures, duty rosters and changes thereto, as well as promotions and transfers – are taken by management based in Malta and Ireland. For the BER base, a so-called Base Captain (for flight crew) and a so-called Base Supervisor (for cabin crew) have been appointed; their roles, duties and powers are set out in an operations manual.

The decision

In the course of initiatives to elect a works council, the employer sought a court ruling that the BER base was not an organisational unit eligible for a works council. It took the view that a domestic part of an establishment could only be deemed an ‘establishment’ within the meaning of the BetrVG if the main establishment was also located in Germany. 

The employer’s appeal to the Federal Labour Court (BAG) was unsuccessful. The Senate clarified that parts of an establishment located a considerable distance from the main establishment may also be deemed independent establishments. Such a part of an establishment may exist even if the main establishment is situated abroad. This does not contravene the principle of territoriality, as the deemed establishment is situated within Germany.

The decisive connecting factor under the BetrVG is not the registered office of the company’s management, but the domestic organisational unit itself and the integration of the employees working there. Section 4(1), first sentence, of the BetrVG contains the legal fiction that a part of an establishment situated at a considerable distance is deemed to be an independent establishment; as this deemed establishment is situated within Germany, the BetrVG applies directly to it. 

Organisational autonomy does not depend on where the company’s management is based. Rather, the decisive factor is whether at least one person with the authority to issue instructions is institutionally established at the site and actually exercises those powers.

Consequences for practice

The Federal Labour Court (BAG) has thus clarified the contentious question of whether Section 4(1), first sentence, No. 1 of the BetrVG requires the main establishment to be situated in Germany. At the same time, the decision is consistent with the BAG’s established case law on works constitution in cross-border group structures, whilst correctly drawing distinctions. With regard to the formation of a group works council, the BAG has held that the controlling undertaking must be based in Germany. Section 4 of the BetrVG, by contrast, refers only to the establishment or part of an establishment located in Germany. 

However, the ruling is noteworthy in terms of the minimum requirements for the organisational autonomy of a part of an establishment within the meaning of Section 4 of the BetrVG. The mere actual exercise of authority to issue instructions by a single person on site is sufficient, regardless of whether that person has been entrusted with the full scope of the employer’s functions. 

The ruling has far-reaching consequences for internationally operating companies with staff in Germany. The key message is this: relocating organisational management authority abroad cannot prevent works council co-determination for domestic organisational units. Where a permanent organisational unit exists in Germany with a minimum level of local management and its own workforce, it is generally to be assumed that this constitutes an organisational unit eligible for a works council – regardless of where the group’s head office is located.

Practical tip

Companies with cross-border structures should promptly review their domestic sites to determine their classification under works constitution law. Bases, branch offices or other organisational units with a local workforce and even a minimal on-site chain of command pose a risk of being classified as organisational units eligible for a works council. It should also be examined whether a European Works Council structure or other forms of transnational employee representation would be more suitable for effectively establishing co-determination where decisions are actually made.