Forced to Act: German Works Councils Gear Up for EU Pay Audits Amid Political Shifts

Germany’s works councils are confronting a fresh set of obligations, driven by a late-June deadline for the EU Pay Transparency Directive and a landmark labour court ruling that extends their reach into foreign-owned operations.

The directive’s implementation deadline passed on 7 June 2026 without Germany transposing it into national law. That means domestic courts and employers must now interpret existing statutes in a “directive-conforming” way — a shift that puts works committees under pressure to scrutinise gender-neutral pay criteria far more rigorously. Blanket confidentiality clauses in employment contracts, long a standard tool, are expected to become much harder to defend.

At the same time, the Federal Labour Court (Bundesarbeitsgericht) clarified mid-May (case reference 7 ABR 7/25) that works councils can be formed in independent business units even when the group’s corporate headquarters is based abroad. The test case involved an airline registered in Malta but operating out of Berlin Brandenburg Airport. The court found that the local supervisors’ authority over day-to-day instructions was sufficient to legitimise the election. Such scenarios force works committees to dissect complex international corporate structures, a task many are ill-prepared for.

The Committee as a Strategic Engine

Under German law, any works council with nine or more members must establish a works committee (Betriebsausschuss), as set out in § 27 of the Works Constitution Act. The body consists of the council chair, the deputy chair, and additional members proportionate to the council’s size. Elections are secret and held under proportional representation to keep minority factions represented.

The committee’s core job is to handle day-to-day business: reviewing documents, preparing council decisions, and coordinating communication with management. The full works council can delegate further tasks by majority vote, but it cannot hand over core competencies such as negotiating works agreements or calling strikes. Labour law specialists recommend clear delegation rules in the council’s standing orders to avoid legal uncertainty.

Today’s Summit Signals Reform Waves

On Wednesday, Chancellor Friedrich Merz convenes a meeting of the federal government with employers and unions. The stated aim is an open exchange; the social partners are asked to present joint proposals. Several reform topics sit on the table.

Working time: The coalition is considering a switch from a daily to a weekly maximum working hours standard. DGB president Yasmin Fahimi flatly opposes any dilution of the eight-hour day.

Occupational pensions: The DGB demands a mandatory company pension scheme for all employees. Finance Minister Lars Klingbeil supports the idea, but business representatives warn about rising non-wage labour costs.

Tax relief: Labour Minister Bärbel Bas is pushing a tax reform designed to give citizens around €500 in relief, a response to higher food and energy prices.

For works committees on the ground, translating these emerging legal frameworks into company-level agreements is the next challenge. Whether it is about binding heat-protection thresholds, which unions are demanding, or the transformation of industrial sites such as the Opel plant in Rüsselsheim, the committees’ qualified preparatory work remains the bedrock of effective employee representation.

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