Update on Employee Participation in Management: No Cross-Counting of Employees of a Joint Enterprise for the Threshold Under the One-Third Participation Act, Federal Court of Justice 06/2026

Federal Court of Justice (BGH), Decisions of June 23, 2026 – II ZB 11/25 and II ZB 12/25

The Second Civil Senate of the Federal Court of Justice ruled in its decisions of June 23, 2026 (II ZB 11/25 and II ZB 12/25), that when determining the threshold of 500 employees under Section 1(1)(1) of the One-Third Participation Act (DrittelbG), the employees of a joint venture may not be counted toward each other’s totals. The sole determining factor is the number of employees of the stock corporation itself, not the number of employees of a joint operation within the corporate group.

The decision was based on the following facts: A parent company in the form of an SE employs approximately 290 employees; another SE employs approximately 80 employees; while two other subsidiaries in the form of GmbHs each employ approximately 400 employees. Control and profit-transfer agreements exist between the companies. The works councils requested that one-third of the supervisory boards of the SEs be composed of employees in accordance with the provisions of the One-Third Participation Act. They argued that, due to the existence of a joint enterprise, the employees of the subsidiaries should be counted toward the thresholds of the parent companies.

The Federal Court of Justice upheld the lower courts’ rejection of the motions. In its reasoning, the Senate stated that the wording of Section 1(1)(1) of the One-Third Participation Act (Drittelbeteiligungsgesetz) refers to the number of employees of the stock corporation, not to that of a joint operation. The legislature has regulated the issue of counting employees differently in the One-Third Participation Act and in the Works Constitution Act. An explicit provision for taking into account employees of a joint operation exists only for the establishment of a works council under Section 1(1), second sentence, of the Works Constitution Act (BetrVG), but not for the One-Third Participation Act. This interpretation is supported by the systematic context of Section 2(2) of the One-Third Participation Act (DrittelbG), which provides for the inclusion of employees from outside the company for the purpose of meeting the threshold only in exceptional cases where a control agreement or an integration exists. Furthermore, § 3(1) of the One-Third Participation Act (DrittelbG) refers to § 5(1) of the Works Constitution Act (BetrVG) for the definition of “employee,” but contains no reference to § 1(1), second sentence, of the Works Constitution Act (BetrVG) and the inclusion of employees of a joint enterprise contained therein.

I. Substantive Classification of the Federal Court of Justice’s Decisions

The Federal Court of Justice’s decision clarifies a previously controversial legal issue in the area of corporate co-determination and thus aligns with a critical school of thought in the legal literature that had argued against the reciprocal allocation of employees in joint ventures for the purpose of calculating the threshold.

1. The Previous Discussion in Legal Literature and Case Law

The question of attributing employees of a joint venture toward the thresholds under the One-Third Participation Act had long been a subject of controversy in the legal literature. The prevailing opinion favored the full attribution of employees of a joint enterprise to all parent companies, regardless of any employment contract. This view was based primarily on teleological considerations. Since the employees of a joint enterprise are subject to the unified management of all parent companies, they must also be taken into account in co-determination with respect to all matters affecting them.

In contrast, another view held that employees should be attributed only to the parent company with which they had entered into an employment contract. Proponents of this view argued that mere affiliation with the joint enterprise could not justify the participation of “third parties not bound by contract” in corporate co-determination. Unlike works-level co-determination, corporate co-determination does not cover the actual day-to-day work routine but rather “overall corporate policy,” which is why the impact is not mediated by the specific works environment. It was also pointed out that reciprocal attribution is methodologically problematic, since the legislature created a narrow special provision for the attribution of employees from outside the company in § 2(2) of the Third Co-Determination Act (DrittelbG). The restrictive requirement of a contractual group of companies set forth therein would be circumvented by reciprocal attribution in joint enterprises. An analogy to Section 2(2) of the Third Act (DrittelbG) also fails due to the lack of comparable interests.

2. The Federal Court of Justice’s Rationale

The Federal Court of Justice’s reasoning takes up key arguments from this critical literature and systematizes them. The Senate bases its decision on four pillars:

a. Wording: Section 1(1)(1) of the Third Act (DrittelbG) is based on the number of employees of the stock corporation, not on that of a joint enterprise.

b. Systematic Structure: Section 2(2) of the Third-Party Participation Act contains an exhaustive special provision for the attribution of employees from outside the enterprise, which applies only in the presence of a control agreement or an integration. This narrow provision would be undermined by reciprocal attribution within a joint operation.

c. Legal Structure: The legislature has regulated the issue of the attribution of employees differently in the One-Third Participation Act and the Works Constitution Act. The explicit provision regarding the inclusion of employees of a joint enterprise in Section 1(1), second sentence, of the Works Constitution Act is not found in the One-Third Participation Act.

d. Legislative History and Intent: The provisions of the One-Third Participation Act and the Works Constitution Act reveal the legislature’s intent to address the issue of the attribution of employees differently within their respective normative contexts.

3. Assessment and Classification

This previously controversial legal issue has now been clarified by the highest court. This provides legal certainty for companies and works councils when structuring corporate groups and joint ventures.

The decision preserves the systematic distinction between works-level and corporate-level co-determination. While Section 1(1), second sentence, of the Works Constitution Act (BetrVG) provides an explicit attribution rule for joint ventures in the context of works-level co-determination, the One-Third Participation Act does not contain such a provision. This reflects the different legislative purposes: Works-level co-determination governs day-to-day work, while corporate-level co-determination governs “overall corporate policy.”

Mutual attribution could have invited abuse. Companies could have influenced the size of their supervisory boards by forming joint operations, which would have contradicted the concept enshrined in the Basic Law. Furthermore, a company with few employees could have had more employee representatives on the supervisory board than it had employees of its own through a joint operation with a much larger company.

The decision avoids an impermissible analogy to § 2(2) of the One-Third Act (DrittelbG) and upholds the limits of statutory interpretation. If even a de facto corporate group does not lead to attribution, this applies all the more to a joint venture.

II. Practical Consequences

The Federal Court of Justice’s decision has significant practical implications for corporate practice. Companies can now form joint operations without having to fear that they will thereby exceed the thresholds set forth in the One-Third Participation Act. This is particularly important for corporate group structures and joint ventures. At the same time, it remains possible to achieve the attribution of employees from dependent companies through control agreements or incorporations pursuant to Section 2(2) of the One-Third Participation Act.

The decision does not affect the case law of the Federal Labor Court regarding the active voting rights of employees of a joint venture. The Federal Labor Court has ruled that employees of a joint venture have the right to vote in the election of employee representatives to the supervisory board under the One-Third Participation Act at each parent company. The Federal Court of Justice rightly emphasizes that the question of the right to vote must be distinguished from the question of calculating the thresholds.

The Federal Court of Justice’s decision provides important clarification regarding corporate co-determination law. The decision preserves the distinction between workplace and corporate co-determination, prevents abuse, and creates legal certainty for corporate practice.