German Court Ruling Redefines Worker Counts for Board-Level Codetermination
Published on 07/31/2026 at 22:23 | Redaktion boerse-global.de
A recent decision from Germany's Federal Court of Justice is set to reshape how companies calculate their workforce for supervisory board participation, potentially easing the path for some firms to avoid mandatory employee representation.
The ruling, issued on June 23, 2026, clarifies that when determining whether a company crosses the 500-employee threshold under the Drittelbeteiligungsgesetz — the law requiring one-third employee representation on supervisory boards — only the workforce of the specific stock corporation or Societas Europaea itself counts. Employees working for other entities within the same corporate group are excluded from this calculation, even when those companies operate as a joint enterprise.
This distinction only collapses when an explicit legal provision, such as a domination agreement, mandates the consolidation of headcounts. The court's position underscores a firm separation between works council structures and the system of corporate codetermination that governs supervisory board composition.
Agency Rules and Their Limits
For those acting on behalf of others in legal transactions, the principles of representation under §§ 164 ff. of the German Civil Code remain strict. An agent's actions only bind the principal when acting under the principal's name, and this must be apparent to the counterparty. This transparency requirement — known as the Offenkundigkeitsprinzip — means anyone conducting business in their own name cannot simultaneously represent someone else.
The authority to represent exists independently of any internal arrangements between the agent and the principal. The Federal Court of Justice has repeatedly affirmed this separation between internal agreements and external legal effect. However, representation is categorically excluded for matters of a highly personal nature, including marriage ceremonies and the drafting of wills.
Shifts on Termination Protection
July 2026 brought word of a planned easing of dismissal protections for high earners. The coalition committee reached an agreement in early July that would grant employees earning at least 177,450 euros annually the option of receiving a severance package instead of pursuing traditional protection against termination. Labor market researchers have voiced concerns about how this might affect career mobility, though the change would touch only about 0.27 percent of the workforce.
Earlier in the year, the Federal Labor Court struck down standard release clauses commonly embedded in employment contracts. In a March 2026 decision, the court determined that placing an employee on leave is only permissible in specific cases where the employer can demonstrate a predominant interest in doing so.
Employers also face new clarity around communication duties. The Regional Church Court in Cologne ruled in October 2025 that when implementing measures such as the Betriebliches Eingliederungsmanagement — the company-level reintegration management process for employees returning from illness — employers must provide information in a way that is genuinely understandable. Any misunderstandings that arise from unclear communication will be attributed to the employer's disadvantage.
Keeping up with shifting employment rules is only part of the compliance picture — workplace safety obligations carry their own legal weight. Many UK companies risk significant fines simply because essential safety documents are missing or outdated. A free toolkit provides ready-to-use risk assessments and checklists you can put to work immediately. Download the free Health & Safety Toolkit
What Job Applicants Don't Have to Say
Candidates interviewing for positions are under no obligation to disclose a severe disability. The Regional Labor Court in Cologne decided on April 16, 2026, that even providing incorrect answers to prohibited questions does not constitute fraudulent misrepresentation.
Online review platforms have also received judicial guidance. The Higher Regional Court in Hamburg ruled that operators must remove negative reviews when an employer cannot verify whether the criticism genuinely originated from a current or former employee. Platforms are not required to disclose reviewers' real names, provided the business relationship can be confirmed through other means.
Digital Termination Hurdles Head to Court
The autumn calendar features a significant hearing: the Federal Court of Justice is expected to consider on November 5, 2026 whether requiring customers to log in before cancelling online contracts is permissible. Lower courts have previously deemed such authentication steps a violation of statutory requirements, holding that a cancellation button must lead directly to confirmation without additional security checks like password entry.
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