Works Council Elections 2026: The Definition of an Establishment in Digital Platform Businesses

As already discussed in our November 2025 newsletter, the definition of an establishment (Betrieb) plays a crucial role in determining whether a works council election has been conducted correctly or is subject to challenge.

In several joined decisions issued on January 28, 2026, including case no. 7 ABR 23/24, the German Federal Labour Court (Bundesarbeitsgericht – BAG) further clarified the concept of an establishment for digitally managed companies and platform businesses.

Food Delivery Platform Challenged Works Council Elections in Delivery Areas

The employer operates a nationwide food delivery service in Germany. The company’s HR function is located at its headquarters. In addition, the company operates so-called “hub cities” (main distribution hubs) and “remote cities” (delivery areas). Only delivery drivers are employed in the remote cities. Their work and all communication are managed exclusively through an app. There is no local management structure in the remote cities. In addition to delivery drivers, the hub cities employ staff responsible for administrative functions.

In 2022 and 2023, works councils were elected among the drivers in several remote cities. The employer challenged these elections, arguing that the remote-city delivery areas did not constitute independent establishments or establishment units. The competent Higher Labour Courts agreed with the employer and declared the elections invalid.

BAG Confirms: A Mere Grouping of Drivers into a Delivery Zone Does Not Constitute an “Establishment”

The Federal Labour Court dismissed the appeals and upheld the decisions of the Higher Labour Courts. According to the Court, an establishment or establishment unit within the meaning of the German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) requires an organizational unit in which personnel and operating resources are combined to pursue a common operational purpose, and where key personnel and social matters are administered under a unified management structure. In the case of an establishment unit, there must also be a minimum degree of organizational independence.

The mere grouping of drivers into a delivery zone does not satisfy these requirements. The remote cities lack administrative functions, local management, and organizational independence from the main operation. Management via an app cannot replace these characteristics. The decisive factor is who issues instructions and who makes the key personnel decisions, such as approving vacation requests, hiring employees, terminating employment, and similar matters. Consequently, the works council elections conducted in the individual remote cities were invalid.

BAG Decision Provides Clarity for Digital Business Models

With this decision, delivered in advance of the upcoming works council elections, the Federal Labour Court has provided important guidance for digital business models and has consistently applied the traditional concept of an establishment to modern, digitally organized forms of work.

As in its earlier decision of May 22, 2025 (7 ABR 28/24) concerning the definition of an establishment in matrix organizations - which we discussed in our November 2025 newsletter - the Court emphasized that the key question is where the management and decision-making structures are located. The location of these management structures remains the decisive factor in determining whether a separate establishment or establishment unit exists for the purposes of works constitution law.