German Co-Determination Law Turns 50, But Two in Five Large Firms Sidestep Rules
Published on 07/30/2026 at 22:21 | Redaktion boerse-global.de
More than 2.4 million employees in Germany are affected by companies that either ignore or exploit loopholes in the country’s landmark co-determination law, according to a study marking the legislation’s 50th anniversary. The Institute for Co-Determination and Corporate Governance (IMU) found that roughly 40 percent of large firms subject to the rules fail to comply with requirements for equal worker representation on supervisory boards.
The methods companies use to dodge the law vary widely. Some major corporations — including Rossmann, IKEA, Alnatura, Burger King, Ferrero and Microsoft Deutschland — largely disregard the regulations outright, the analysis shows. Others turn to specific legal structures to sidestep co-determination entirely.
Two vehicles are particularly popular: the European Company (SE) and foundation models. Firms such as Vonovia, Zalando, Tesla, Sixt, BioNTech, Aldi and Lidl have used these forms to avoid applying Germany’s Mitbestimmungsgesetz.
“These loopholes weaken industrial democracy in Germany,” said IMU Director Daniel Hay. He called on lawmakers to close the gaps.
The findings arrive as other pillars of Germany’s labor relations system show signs of strain. Collective bargaining coverage has been shrinking for years. The Institute for Employment Research (IAB) reported that just 49 percent of workers were covered by sector-wide agreements in 2024.
In response, the German cabinet approved a National Action Plan on July 22, 2026 aimed at promoting collective bargaining. Reactions have been divided. Employee representatives are pushing for stronger rights, while industry groups such as SĂĽdwesttextil warn against interfering with the autonomy of bargaining parties.
At the company level, legal requirements for works councils are also tightening. Germany’s Federal Labor Court (BAG) ruled on January 27, 2026 that works agreements are only valid if a formal resolution by the works council exists. A mere apparent authority of the chairperson is insufficient.
The case that prompted the ruling involved a procedural error that rendered an agreement void — allowing a plaintiff to claim a significantly higher company pension. Legal experts are now advising both employers and works councils to review existing agreements and replace them with formally correct new versions to avoid future disputes.
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