German Top Court Closes Loophole on Mass Dismissals, Threatens VW’s Restructuring Plans

Two rulings from Germany’s Federal Labor Court this spring have tightened the screws on employers attempting large-scale layoffs, throwing a procedural obstacle in front of Volkswagen’s controversial factory-closure agenda. On April 1, 2026, the BAG (docket numbers 6 AZR 152/22 and 6 AZR 157/22) and a March 19 decision (2 AS 22/23) established that the mandatory mass-dismissal notice to the Federal Employment Agency is a non-negotiable prerequisite. Any termination issued before that notice is completed — or without it entirely — becomes void, and the court made clear that retroactive filing cannot fix the error.

The ruling underscores the rigid sequence companies must follow: conclude the consultation process with the works council, then file the notice with the employment agency, and only then send out termination letters. For a firm like Volkswagen, which has announced plans to shut four plants by 2035 — in Zwickau, Emden, Hanover, and Neckarsulm — and put more than 100,000 positions at risk, even a minor procedural slip could unravel the entire restructuring.

VW’s supervisory board is scheduled to deliberate the proposal on July 9, 2026, but the company’s management faces a formidable counterforce. The works council and the state of Lower Saxony together hold 12 of the 20 board seats, making a blockade highly likely. In response, the executive board has threatened to convene an extraordinary general meeting and is exploring the possibility of spinning off the core VW brand and its components division — a move designed to sidestep the constraints of the Volkswagen Law, which grants the state and unions special veto powers. The works council fired a sharp critique in late June, noting that despite widespread reports of impending job losses, the board had still not presented any concrete headcount targets.

While structural battles rage in Wolfsburg, a subtler workplace dispute is brewing around software. Since the end of June, Microsoft has been rolling out a Teams feature that automatically detects employees’ work location by pinging the company’s Wi-Fi network. In Germany, that raises red flags under Section 87, Paragraph 1, Number 6 of the Works Constitution Act (Betriebsverfassungsgesetz), which gives works councils a co-determination right over any technical system that can monitor employee behavior or performance. Microsoft says the function is switched off by default and that location data is deleted daily, but labor law experts warn that activation without the works council’s involvement is a clear violation.

Parallel to these company-level conflicts, a political debate is heating up over Germany’s core labor protections. At the end of June 2026, news broke that the federal government is examining whether to relax dismissal protection, especially for high earners, in an effort to boost economic dynamism. At the same time, the 35-hour week — long a pillar of industrial employment — is under assault. Germany’s unit labor costs in 2024 significantly exceeded those of comparable economies, prompting a growing number of managers to call for a return to the 40-hour week without wage compensation. The tension is already spilling into negotiations: fashion retailer Zalando is currently in talks with works councils about possible site closures, including its location in Erfurt.

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