Co-Determination Under Pressure: EU Company Law Plan Could Sideline 2.4 Million German Workers

A new analysis from the German Bundestag’s Scientific Services warns that the country’s system of worker representation on corporate boards faces mounting threats — and the biggest may come from Brussels.

More than 2.4 million employees are already affected by strategies designed to circumvent co-determination rules, the report finds. Of particular concern is a proposed European Union legal vehicle informally dubbed “EU Inc.” — a 28th regime that experts fear could be used by companies to sidestep Germany’s national standards on parity-based supervisory boards.

At the core of the current system is a tension between legal parity and practical power. In a board deadlock, the chairperson’s double vote tilts the decision toward shareholders, weakening the equal representation that German co-determination is supposed to guarantee. The rules themselves vary by company size and legal form — whether a stock corporation (AG), a limited liability company (GmbH), or a European cooperative — and are anchored in three laws: the 1976 Co-Determination Act, the One-Third Participation Act, and the Montan industry model.

Yet even as the system faces theoretical challenges from EU policymakers, real-world examples show co-determination still works in practice. At defense contractor Rheinmetall, a transitional collective agreement secured jobs and production sites for three years after the sale of its automotive components division. More dramatically, at supplier Mahle’s plant in Neustadt an der Donau, an eight-day strike forced management to agree to a social plan that includes severance packages of up to €250,000 and a transfer company — before the site shuts down in the first quarter of 2027.

The courts have reinforced the existing framework. The European Court of Justice, in rulings on the TUI-Erzberger case and an SAP matter, explicitly recognized dedicated seats for union representatives as a defining characteristic of the German model.

Alongside these structural debates, a separate set of reforms is reshaping workplace rights. In May, the federal cabinet approved changes to the General Equal Treatment Act (AGG), extending the period for filing discrimination complaints from two to four months and strengthening protections against sexual harassment. Meanwhile, the deadline to transpose the EU Pay Transparency Directive expires on June 7. The German government does not expect full implementation until early 2027. Surveys indicate that more than half of employees are willing to actively request salary information, though some politicians — citing bureaucratic burdens — are even calling for the directive to be repealed.

Back in domestic politics, the ruling coalition has agreed to shift from daily to weekly maximum working hours, a flexibility measure that labor representatives warn could shift the power balance further toward employers. The interplay between these changes, the looming EU company law proposal, and the erosion of parity co-determination will determine whether Germany’s celebrated Mitbestimmung remains a model — or becomes a relic.

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