Germany Marks 50 Years of Co-Determination While Works Councils Fade and EU Pay Rules Go Unmet

Germany missed EU pay transparency deadline, faces infringement; courts may enforce directive, raising lawsuit risk.

Berlin has failed to meet the June 7 transposition deadline for the EU Pay Transparency Directive, exposing the country to a looming infringement procedure. Family Minister Karin Prien has labelled parts of the directive overly bureaucratic and aims for implementation by early 2027, but in the meantime German courts must interpret existing law in line with the directive — raising the risk of pay?equity lawsuits. The directive requires companies with 100 or more employees to report their pay structures, targeting a gender pay gap that currently stands at 15.6 percent. Austria, by contrast, tabled a draft for income reports in early June.

The missed deadline comes as Germany’s landmark Co?Determination Act turns 50 — an anniversary overshadowed by a steep decline in worker representation. According to surveys from May, only 7 percent of eligible workplaces still have a works council, down from nearly 50 percent in the 1990s. A DGB study also found that roughly 20 percent of companies actively block the creation of new employee bodies.

Pressure is also building from Brussels. In March, the European Commission proposed a new legal form, the “EU Inc.” or “28th regime,” intended to simplify cross?border start?ups and cut red tape. Bundesbank board member Fritzi Köhler?Geib stressed the need for better financing access in the global tech race. But critics warn the vehicle could be used to sidestep national co?determination rules — just as the Societas Europaea (SE) has been. Data from the Institute for Co?Determination and Corporate Governance (IMU) shows that 84 percent of the 122 large SE?domiciled companies in Germany had bypassed parity co?determination by the end of 2022. A conference in mid?June in Berlin will examine the implications of the “EU Inc.” for Germany’s corporate governance system.

Case law is tightening the screws, too. The Federal Labor Court ruled in June 2025 that a fixed?term employment contract ends normally even if the employee has been elected to the works council. Nonetheless, there have been union victories: at Amazon in Frankenthal, ver.di won an absolute majority of works council seats for the first time in May.

Meanwhile, digitalisation is reshaping the labour market. A Bundesbank study found that the digital sector’s productivity grew seven times faster than the rest of the economy between 1996 and 2020. The share of companies using or planning to use generative AI rose from 26 percent in 2024 to 56 percent in 2026. The consequences for jobs are already visible: a DGB spring survey reported that 60 percent of companies had cut positions in anticipation of greater automation through AI. Trade union leadership is calling for a mandatory employer?financed occupational pension scheme as social protection. A report from a government pension commission is due by the end of June.