When is the works council’s consent required for the engagement of managers in matrix organizations?

Where managers are employed by one group company but perform their duties in the organization of another group company, their engagement in the receiving organization may be subject to co-determination under section 99(1) sentence 1 of the German Works Constitution Act (Betriebsverfassungsgesetz – “BetrVG”). In a decision dated January 27, 2026 (Federal Labor Court, 27.01.2026 – 1 ABR 18/25), the Federal Labor Court (Bundesarbeitsgericht – “BAG”) clarified the conditions for such a co-determination requirement. The decisive factors are integration into the operational organization of the German entity and the existence of at least a partial right of direction (Weisungsrecht) typical of an employment relationship with respect to the content, place and time of the activity. A mere functional or disciplinary authority of the manager over the establishment’s employees is not sufficient.

Facts of the case

The Federal Labor Court’s decision is based on the following facts: The employer operates an establishment in Germany with around 230 to 270 employees and is part of an internationally active group organized in matrix structures. Dr K performs her work within this establishment, although she is employed by a different group company based in Austria. She performs her duties for the establishment remotely from abroad using telecommunication technology. She supervises field staff who are employees of the German employer. The right to give instructions to Dr K is exercised by another group employee from a company in the United Kingdom who is not subject to the German employer’s instructions.

The works council considered Dr K’s engagement to be a recruitment subject to co-determination and applied under section 101 sentence 1 BetrVG for the annulment of this personnel measure on the grounds that its consent had not been obtained. The local labor court rejected the application, whereas the regional labor court (Landesarbeitsgericht) granted it. The employer lodged a legal complaint against this decision before the BAG.

Reasons for the decision

The BAG set aside the decision of the state labor court and referred the case back for a new decision. It held that there is a recruitment within the meaning of section 99(1) sentence 1 BetrVG if the person concerned is integrated into the operational organization of the establishment by carrying out activities subject to instructions. In this context, the owner of the operational organization must have, at least in part, a right to give instructions typical of an employment relationship regarding the content, place and time of the work to be performed. This also applies to managers who are employed by another group company. The key element is therefore the concept of recruitment, which presupposes a minimum level of managerial authority on the part of the owner of the operational organization.

A mere functional or disciplinary authority is not sufficient if it has not been established that the manager, together with the establishment’s employees, contributes to achieving the establishment’s operational purpose. The powers conferred must also actually be exercised in practice. For integration into the establishment’s organization, it is not necessary that the work is performed on the establishment’s premises, that the employment relationship is governed by German law, or that the person is assigned exclusively to a single establishment. A limited amount of working time devoted to the establishment does not rule out integration.

Practical guidance

The decision makes clear that the works council’s co-determination rights regarding appointments under section 99(1) sentence 1 BetrVG may also apply in group-wide matrix structures where managers employed by another group company are in fact integrated into the operational organization of a German establishment and the establishment owner exercises at least a partial right of direction over them. Companies should therefore carefully assess, when deploying managers across group companies, whether their engagement constitutes an appointment requiring works council consent.