German Federal Labour Court: A works council can only be formed where the relevant personnel and social decisions are made.

In connection with election challenges, the Federal Labor Court had to deal with the question of whether employees in a delivery area of a platform-based service provider could establish a works council in their delivery area.

Summary of the proceedings

The current decisions were based on the following facts of the case:

The employer offers platform-based services in the area of food ordering and delivery. In addition to the human resources department located at the company headquarters, there are so-called “hub cities” (main distribution centers) and “remote cities” (delivery areas) throughout the country. The remote cities exclusively employ delivery drivers who communicate with the employer primarily via an app. The hub cities also have employees who perform administrative and back-office tasks. In 2022 and 2023, a works council was elected in several remote cities, including Braunschweig, Kiel, and Bremen. The employer contested these elections in three proceedings, arguing that they were invalid due to a misinterpretation of the term “Betrieb”, namely that the remote cities were neither establishments nor independent parts of an establishment because they lacked the necessary organizational independence.

Both the labor courts of first instance and the respective regional labor courts upheld the employer’s appeal and declared the works council elections invalid on the grounds that the remote cities were neither establishments nor independent parts of establishments within the meaning of the Works Constitution Act (Betriebsverfassungsgesetz = BetrVG). The respective works councils lodged an appeal and submitted the decisions to the Federal Labor Court for review. They took the view that the delivery areas were an independent establishment, or at least an independent part of an establishment within the meaning of § 4 I BetrVG (independent part of an establishment). The employer had created a uniform organization in this respect. With regard to the issue of independence, it must be noted that the introduction of modern means of communication could be a decisive criterion for an operational organizational unit. However, it was not necessary for a person to be on site to perform the relevant tasks.

Judgment

The Federal Labour Court did not follow the works councils’ argumentation, but upheld the lower court’s decisions, thereby confirming and clarifying its case law on the concept of a “Betrieb” as the decisive criterion for establishing a works council.

The Federal Labor Court stated in this regard: Works councils are elected in establishments in accordance with § 1 of the Works Constitution Act (BetrVG). Independent parts of an establishment are also considered establishments under the conditions of § 4 I, 1 BetrVG. An organizational unit is an establishment if it is managed in essential personnel and social matters by a uniform management existing for this unit. A minimum degree of organizational independence from the main company is sufficient for a part of a company to exist. These requirements also apply if the employment relationships are essentially controlled “digitally” with the help of an app. According to this, the regional labor courts correctly assumed that the individual remote cities were not organizational units eligible for a works council. The fact that they are grouped together into a delivery area with their own duty roster is not sufficient for this. The remote cities already lack a minimum degree of organizational independence, which is not conveyed solely by the delivery drivers employed there as a community of interests.

Practical relevance

The decision provides further clarity for companies and works councils or employees who wish to establish a works council. Even new forms of employment and digital communication structures do not lead to any change in the definition of the term “Betrieb”.

The decisive factor remains that a “Betrieb” only exists where there is an organizational unit in which the essential personnel and social matters are managed by a uniform management. In the present case, either the hub cities, provided that the personnel management is located there, or the location where the human resources department/company management is based would have been the correct point of reference for the definition of “Betrieb” and thus for the works council election.