German Works Councils Get New Powers as Coalition Overhauls Labour Law
Published on 07/26/2026 at 04:02 | Redaktion boerse-global.de
A wave of legislative changes set to take effect from 2027 will significantly expand the co-determination rights of works councils in Germany, particularly around fixed-term contracts and employee health management. The reforms, part of the coalition’s “Aufschwung und Beschäftigung” (Upswing and Employment) package passed on July 2, 2026, mark one of the most substantial shifts in workplace governance in recent years.
Under the new rules, companies will be able to offer fixed-term contracts without a specific reason for up to 48 months — a temporary measure running until the end of 2030. Currently, such contracts are limited to 24 months. From January 1, 2027, the written form requirement for these contracts may also be dropped, a move that legal experts say will reduce administrative burdens but could increase disputes over contract validity.
Works councils gain new leverage through a separate law passed on July 10, 2026, which stabilises statutory health insurance (GKV) contribution rates. Starting January 1, 2028, doctors will be able to certify partial incapacity for work in stages of 25, 50 or 75 percent for illnesses lasting more than four weeks. This creates fresh co-determination rights under Section 87 of the Works Constitution Act (BetrVG), particularly affecting working-time arrangements and occupational health measures.
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External Data Becomes a Strategic Tool for Economic Committees
A recommendation published on July 20, 2026, advises economic committees — which monitor a company’s financial health — to systematically tap external information sources rather than relying solely on internal documents. The goal is to enable committees to critically assess management reports and better evaluate a business’s long-term viability.
The guidance suggests using daily briefings such as the Handelsblatt Morning Briefing, which takes about ten minutes to read, alongside quarterly ifo business-cycle forecasts, the semi-annual Joint Economic Forecast, and the German government’s annual economic report. Employers must cover the costs of these external sources, with lawyers citing an analogous application of Section 40 BetrVG.
Court Rulings Tighten Transparency Rules
The Federal Labour Court (BAG) has been refining employer obligations. In a ruling on June 25, 2026, the court clarified that minor errors in a mass-dismissal notification do not automatically invalidate terminations — as long as the protective purpose of the procedure remains intact. However, employers must ensure the notification is filed only after consultations with the works council have concluded.
Earlier, in September 2025, the BAG tightened requirements for internal job postings. These must now explicitly state the working-time volume. If that information is missing, the works council can refuse to consent to a personnel measure.
A 2016 ruling remains relevant for joint operations (Gemeinschaftsbetriebe), governing how economic committees are structurally embedded in such multi-company setups. Another decision clarified that dual-study students during their practical phases do not enter a training relationship under Section 78a BetrVG — affecting their claims for permanent employment after graduation.
Tariff Reform and Transparency Debate
On July 22, 2026, the federal cabinet adopted a National Action Plan to promote collective bargaining. It includes a digital access right for trade unions to company premises and tax incentives for union members. Critics note that many measures already exist under the Federal Tariff Compliance Act (Bundestariftreuegesetz) from May 2026.
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Separately, a proposed reform of the Freedom of Information Act (IFG) is stirring controversy. A draft would require applicants to demonstrate a legitimate interest before accessing official information, and restrict eligibility to natural persons holding German or EU citizenship. SPD state parliament member Carolin Kirsch spoke out on July 20, 2026, against reducing transparency levels. The federal government remains divided on the reform’s final shape.
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