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Legally compliant for the 2026 works council elections – with legal support in labor law

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Organizing a works council election requires careful preparation – ideally well in advance of the actual election date. The legal regulations of the Works Constitution Act (BetrVG) and the Election Regulations (WO) are extensive and often difficult to understand. For the election committee, this means that all requirements must be strictly adhered to. Even the smallest procedural errors can lead to the election being challenged or even declared invalid.

A clearly structured process and a solid legal foundation are therefore essential for conducting the election properly. Our specialized employment lawyers will support you from the very beginning – from planning and preparation to the legally compliant execution of the election. This way, you reduce liability risks and ensure that all formal requirements are met.

We have compiled a concise and easy-to-understand overview of the individual steps involved in the regular election process. Rely on our expertise in labor law – to ensure your 2026 works council election runs smoothly and legally.


What awaits you:

  1. Initiating a works council election – legally compliant with legal support in labor law
  2. Election notice for the works council election – this information is mandatory
  3. Submitting nominations – deadlines, requirements and legally compliant procedure
  4. Announcement of candidates – inform in a timely and legally compliant manner
  5. Conducting the works council election – legally compliant and well-organized
  6. Vote counting and announcement of the election result – transparent and comprehensible
  7. Inaugural meeting – handover of responsibility to the new works council

Initiating a works council election – legally compliant with legal support in labor law

The official start of a works council election is marked by the issuance of the election notice by the election committee. This document marks the beginning of the formal election process and must contain all legally required information. The workforce is then officially informed of the upcoming election through public posting within the company.

Before the election notice can be published, an important intermediate step is required: Together with the representatives of the senior management, it must be determined which employees actually belong to the group of senior management as defined in Section 18a of the Works Constitution Act (BetrVG). Only employees who not Those belonging to this group are eligible to participate in the election or to be elected themselves. The electoral register is then compiled based on this determination.

For this legal review and allocation, you should allow at least two weeks, as stipulated by law. Following this, the electoral roll, which includes all eligible and eligible employees, will be compiled. This roll, along with the election notice, must be posted in the workplace to ensure transparency and verifiability.

Our experienced employment lawyers support election committees in every phase of the works council election – from initiation to vote counting. This ensures that all steps are legally compliant. Request legally sound support for your works council election now!

Election notice for the works council election – this information is mandatory

The election notice is the core element of every works council election and establishes the legal framework for a proper election procedure. Section 3 of the election regulations precisely defines the minimum content. The election committee is obligated to record all required information completely and accurately; otherwise, the election can be challenged or even declared invalid.

The most important mandatory information in the election notice includes:

  • The number of works council members to be elected
  • The guidelines for election proposals and candidate lists
  • The specification of the gender quota (minority gender) and all relevant deadlines.
  • Election day, including the date of voting
  • Place, date and time of the public vote count
  • Information on the possibility of voting by mail

Only if all legally required information is correctly stated is the election notice valid – and the works council election legally secure.

Submitting nominations – deadlines, requirements and legally compliant procedure

The legally stipulated deadlines begin to run with the publication of the election notice. Within two weeks Employees can object to the electoral roll – and within the same period, the Election proposals must be submitted to the election committee.

No list submitted? Note the deadline!
If no valid nomination has been received after this two-week period, the election committee is obliged to... one-week grace period to grant. If no valid proposal is submitted even within this grace period, the works council election is considered to have failed – a special case that rarely occurs in practice.

Examination of nominations by the electoral board
After the submission deadline, the election committee carefully reviews all submitted nominations for formal and substantive validity. If any deficiencies are found, the respective list leader must be informed immediately. As long as the deadline is still open, incorrect nominations can be corrected or resubmitted to ensure validity.

Order on the ballot – the decision is made by drawing lots
After the submission deadline, the election committee invites the list leaders to determine the order of candidates on the ballot. If there are multiple valid lists, the order is determined by... by drawing lots determined. However, if there is only one valid nomination, this step is omitted – in this case, a Majority voting instead, where the votes are directly allocated to the candidates on that list.

Adherence to deadlines and formal requirements is crucial for the validity of the works council election. Our experienced employment lawyers support election committees in ensuring legally sound review and execution. Have your election documents reviewed now – for a legally valid election!

Announcement of candidates – inform in a timely and legally compliant manner

The valid nominations or candidate lists must be publicly announced within the company no later than one week before election day. This obligation is enshrined in law and serves the purpose of transparency – all employees should be informed in a timely manner which candidates are standing for election.

Especially in larger companies – particularly if postal voting is planned – it is advisable to announce the election results early. This is because the postal voting documents may only be sent out once the official nominations have been properly published within the company.

If the announcement is made late, this can delay the dispatch of postal voting documents – and in the worst case, lead to a challenge of the works council election. Correct and timely publication is therefore essential to ensure the smooth running of the election.

Conducting the works council election – legally compliant and well-organized

To ensure that election day runs smoothly and legally, the election must be properly prepared and designed to prevent manipulation. The election committee is responsible for complying with all organizational and legal requirements.

Key points include:

  • Setting up a suitable polling station or several polling stations, if necessary
  • Provision of a sealed and tamper-proof ballot box
  • Verification of eligibility to vote based on the current voter list
  • Organization of election materials and providing resources for barrier-free voting

Careful planning and clear responsibilities help to make the election process transparent, legally sound and comprehensible for all employees.

Vote counting and announcement of the election result – transparent and comprehensible

Immediately after the polling stations close, the public vote count is carried out by the election committee. Transparency is paramount – all persons present must be able to understand the counting process.

The preliminary election results will then be announced and carefully documented. This includes the preparation of an election record, in which all relevant data and findings are recorded. This record will be signed by the entire election committee and will form the basis for the subsequent announcement of the final election results.

Proper documentation protects against ambiguities and is crucial to ensuring the legality of the works council election.

Inaugural meeting – handover of responsibility to the new works council

Once the final election result is determined, the final phase of the election process begins. It is now the responsibility of the election committee to properly prepare the handover to the newly elected body.

  • Notify the selected employees immediately after their election.
  • Publish the names of the elected members operational.
  • Download no later than one week after election day. to the inaugural meeting of the new works council.
  • Hand over all election documents to the new committee – with this handover, the work of the election committee officially ends.

A clearly structured closing ensures a smooth transition and guarantees compliance with all legal requirements.

Especially in the final stages, formal errors can easily occur. Our experienced employment lawyers ensure that your works council election is completed correctly and on time. Request legally sound support until the handover now!






Part-time job at a pizza delivery service: No entitlement to late payment if the permitted working hours are exceeded.

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Many people with mini-jobs mistakenly assume that a 20-hour week automatically applies without an explicit agreement.

An employee who already held a full-time job with 38 hours per week demanded payment for hours not worked in his secondary job. The Berlin-Brandenburg Regional Labor Court (LAG) rejected this claim: The statutory maximum working time of 48 hours per week is the upper limit. Therefore, there is no entitlement to further back pay.


What awaits you:

  1. Late payment demanded: Dispute over unused working time in a mini-job
  2. Ruling on mini-jobs: No back payment for exceeding maximum working hours
  3. Important ruling: Risks for employers when working time regulations are lacking in mini-jobs
  4. Employers have a responsibility: Minijobs without clearly defined working hours pose legal risks.
  5. Lesson from the mini-job ruling: Why clear working time regulations are indispensable
  6. Proactive measures: Clear employment contracts protect against the risk of late payment penalties.

Late payment demanded: Dispute over unused working time in a mini-job

A part-time worker, who worked as a pizza delivery driver alongside his 38-hour main job, demanded back pay for hours not worked. His contract did not stipulate a fixed weekly working time, but rather employment on an as-needed basis. The plaintiff invoked Section 12 Paragraph 1 Sentence 3 of the Part-Time and Fixed-Term Employment Act (TzBfG), according to which, in the absence of an agreement, a regular weekly working time of 20 hours is deemed to be agreed upon. Since he was actually deployed less frequently, he claimed back pay for a total of 316.6 unused hours.

Ruling on mini-jobs: No back payment for exceeding maximum working hours

The Berlin-Brandenburg Regional Labour Court (LAG) ruled that the minijobber is not entitled to back pay, as he was already fully occupied by the legally stipulated maximum working time of 48 hours per week (§ 3 ArbZG).

At the same time, the ruling makes it clear: If there is no clear contractual agreement on working hours, a weekly working time of 20 hours can be considered tacitly agreed in the event of a dispute, according to Section 12 of the Part-Time and Fixed-Term Employment Act (TzBfG) – with potential consequences for employers.

Important ruling: Risks for employers when working time regulations are lacking in mini-jobs

The ruling by the Berlin-Brandenburg Regional Labor Court highlights the risks for employers who employ part-time workers without clearly defined contractual working hours. If no working hours are agreed upon, there is a risk – especially after the termination of the employment relationship – of claims for back pay for allegedly unused hours.

Especially in industries with a high demand for flexible workers, such as catering or retail, such additional demands can pose financial risks – in extreme cases even threatening the existence of the business.

Employers have a responsibility: Minijobs without clearly defined working hours pose legal risks.

Many part-time workers are on call – often without a written agreement on their weekly working hours. A recent ruling by the Berlin-Brandenburg Regional Labor Court (LAG) demonstrates how risky this can be for employers: Without a clear contractual agreement, part-time workers can retroactively claim back pay for unused hours after termination of employment – for the entire duration of the employment relationship.

Especially in companies with call-off contracts, this can lead to substantial back payments, which in the worst case can jeopardize their economic existence.

Lesson from the mini-job ruling: Why clear working time regulations are indispensable

The ruling by the Berlin-Brandenburg Regional Labor Court makes it clear: Without clear contractual agreements regarding working hours, employers risk costly repayment claims – especially in the area of mini-jobs. Sectors such as the hospitality industry and retail, which rely on flexible working time models, are particularly affected.

A written agreement on weekly working hours effectively protects against subsequent claims and legal disputes.

The Federal Labour Court (BAG, 10.08.2022 – 5 AZR 154/22) had already clarified: If clear guidelines are lacking or instructions from the employer are unreasonable, this can lead to default of acceptance and claims for payment.

Companies should therefore urgently review their contract templates and adapt them if necessary to avoid legal pitfalls.

Proactive measures: Clear employment contracts protect against the risk of late payment penalties.

Employers should take action now: Clear and written working time regulations in mini-job contracts are essential to avoid legal pitfalls. Existing contracts should be reviewed and vague wording specifically revised.

The recent ruling by the Berlin-Brandenburg Regional Labor Court clearly demonstrates how quickly costly claims for late payment wages can arise from a lack of regulations.

Tip: Clearly define the weekly working hours in the contract – this creates legal certainty and protects against retroactive claims.

As an experienced law firm specializing in employment law, we support you in consistently minimizing legal risks associated with mini-jobs. We review your existing contracts, formulate legally sound working time regulations, and help you effectively prevent claims for back wages.

Trust in our expertise – for clear conditions and legally secure working relationships.
Would you like to design your stock option program professionally and legally? Our employment law firm will support you from planning to implementation – please contact us personally!






Stock option programs in employment law: Opportunities, obligations, and legal risks explained simply

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Stock option programs are a proven way to retain employees long-term and increase their motivation – especially in growth-oriented and innovative companies. However, anyone offering or accepting stock options as part of an employment relationship should thoroughly understand the applicable labor and tax law requirements.

In a globally connected world of work, more and more employers are turning to flexible compensation models to attract and retain qualified specialists. Stock option programs, in particular, have established themselves as an effective tool. But how exactly do these programs work? What rights and obligations do they entail for employees and employers? And what legal pitfalls should be avoided?

This article examines the most important employment law aspects of stock options – in an understandable, practical manner, and with the perspective of legal experience.


What awaits you:

  1. What is a stock option program? – Meaning and its assessment under labor law
  2. The advantages of a stock option program – opportunities for companies and employees at a glance
  3. Legal basis for stock option programs in Germany
  4. Rights and obligations of employees under stock option programs
  5. The process of a stock option program – legally explained in five phases
  6. Practical example: How a stock option program works in a company
  7. Checklist: 5 steps to a legally compliant stock option program

What is a stock option program? – Meaning and its assessment under labor law

A stock option plan is a compensation-based participation model in which employees are contractually guaranteed the right to purchase company shares at a predetermined price at a later date. This model is particularly popular in startups and technology-driven companies because it binds qualified employees to the company for the long term without causing immediate liquidity strains.

However, such programs raise numerous employment law issues – for example, regarding the specific design of the option contracts, the tax treatment upon acquisition, or the legal situation in the event of termination.

Would you like to introduce a stock option program or have existing agreements legally reviewed? Our employment law firm provides competent and practical support – book your free initial consultation now!

The advantages of a stock option program – opportunities for companies and employees at a glance

A carefully designed stock option program can bring significant benefits to both employer and employee. Properly implemented, it serves not only as an effective tool for employee retention but also as a strategic tool for recruiting talent:

Motivation and long-term commitment
Stock options provide employees with a direct financial incentive to contribute to the company's success. Employees who benefit from a rising share price identify more strongly with the company and tend to remain loyal for a longer period of time.

Financial flexibility for the company
Since stock options don't require immediate salary payments, they ease the company's liquidity burden. Especially during growth phases, this model offers financial flexibility to invest capital specifically in expansion and innovation.

Competitive advantage in recruiting skilled workers
In highly competitive labor markets – such as the IT or startup industries – employee participation programs can be a decisive factor in the recruiting process. They signal appreciation and enable employees to share in the company's success.

Possible tax advantages
In many countries, stock option programs are tax-advantaged – for both employers and employees. However, proper contractual and legal structuring is crucial to maximize the tax benefits.

Would you like to structure a stock option program in a legally compliant and tax-efficient manner? Our employment law firm will support you from planning to implementation – schedule a consultation now!

Legal basis for stock option programs in Germany

The introduction of stock option programs in Germany is complex and requires compliance with numerous labor, tax, and commercial law regulations. It is therefore crucial for companies to be familiar with the legal framework early on and implement it correctly – especially with regard to compliance, employee rights, and tax obligations.

Stock Corporation Act (AktG)
The Stock Corporation Act contains binding regulations on the issue of stock options in stock corporations.
A key point is the necessary approval of the Annual General Meeting before stock options may be issued to employees. Furthermore, there are transparency and disclosure requirements to ensure comprehensive information for shareholders and the capital markets.

Tax regulations
The tax treatment of stock options can be challenging for both employers and employees.
Depending on the arrangement, income tax and social security contributions may be incurred upon granting or exercising the option – especially if the option is considered a non-cash benefit. The distinction between remuneration and additional benefits plays a key role in tax matters.

Accounting according to HGB and IFRS
Proper accounting of stock options is required both under the German Commercial Code (HGB) and, where applicable, under International Financial Reporting Standards (IFRS).
The correct valuation and presentation in the annual financial statements not only influences the tax situation, but can also have relevance under capital market law – close coordination with experts is therefore essential.

Would you like to design and implement a stock option program in a legally compliant manner? Our employment law firm provides comprehensive support with the implementation of employment law, tax, and accounting requirements – request a free initial consultation now!

Rights and obligations of employees under stock option programs

Participation in a stock option program offers employees attractive financial prospects, but also involves clearly defined rights and obligations. A legally sound arrangement therefore always requires precise contractual provisions and transparent communication.

Right of acquisition (purchase option)
Participating employees receive the contractually guaranteed right to purchase company shares at a predetermined price at a specified time. This option is usually tied to specific conditions or performance targets, as well as a time limit.

Vesting periods and holding periods
Many programs have vesting periods: employees may only exercise their options after a certain length of service. This provision strengthens long-term commitment to the company and plays an important role under labor law, particularly in the event of termination or dismissal of an employment relationship.

Regulations in the event of termination or cancellation
In the event of termination, the question often arises as to what happens to any unexercised options. These often expire in the event of voluntary resignation or dismissal without notice. Therefore, a clear contractual agreement is crucial to avoid future conflicts.

Employees' information obligations
Employees are generally required to inform the company of the exercise of their option within certain deadlines. Failure to meet this deadline may result in the option being forfeited – a point often overlooked in practice. We have years of experience in works council elections. Have your candidates screened now – get a legally secure start to the 2026 works council elections.

Are you an employer looking to create legally compliant stock option programs, or are you an employee looking to have your rights reviewed? Our employment law firm offers personalized, expert advice—scheduling an initial consultation now!

The process of a stock option program – legally explained in five phases

Implementing a stock option program requires a structured approach and careful legal planning. Only if all phases are implemented smoothly and accompanied by legal advice can labor, tax, and commercial law risks be avoided. Below is an overview of the typical five steps:

Phase 1: Planning and approval
The legal and organizational conception of the program begins.
Among other things, the number of options, the exercise price and the conditions of participation are determined here.
For stock corporations, the approval of the general meeting is also mandatory according to Section 192 AktG.

Phase 2: Allocation of options
After approval, the options are awarded to selected employees.
The allocation can be either immediate or linked to certain conditions – such as the achievement of project goals or a certain length of service.

Phase 3: Vesting period
During this phase, it is determined how long an employee must work for the company before he or she can actually exercise the options.
Typically, this period is between two and four years. The vesting period is a key element for long-term employee retention.

Phase 4: Exercise of options
After the vesting period has expired, participants can exercise their options, i.e. purchase shares at the previously determined price.
Since this creates taxable monetary benefits, wage tax and social security law aspects must also be taken into account during this phase.

Phase 5: Selling the shares
After the purchase, employees are free to sell the shares at a time of their choosing.
The resulting profit is subject to capital gains tax in Germany; further tax consequences depend on the individual case.

Would you like to implement a stock option program in a legally compliant manner or have existing structures reviewed? Our employment law firm will support you through every phase – request a free initial consultation now!

Practical example: How a stock option program works in a company

To illustrate the significance and functioning of a stock option program under employment law, let us consider an example from corporate practice:

The company “GreenVision Solutions”
GreenVision Solutions GmbH, a growth-oriented company in the field of renewable energies, seeks to retain qualified project managers and developers for the long term.
For this purpose, the Management decides to introduce a stock option program for selected key employees.

Initial situation
Under the participation model, a total of 2,000 stock options will be issued at an exercise price of EUR 40 per share.
Eight employees from the technical and management departments will each receive 250 options.
The vesting period is three years before the options may be fully exercised.

Allocation and vesting structure
The allocation will be staggered over three years:

  • After the first year: 33 % (83 options per person)
  • After the second year: another 33 %
  • After the third year: the remaining 34 %

Employees may only exercise the vested portion provided they continue to be employed by the company on the respective reporting date.

Exercise and taxable profit
Three years later, GreenVision Solutions shares are trading at 90 euros.
A project manager decides to exercise all 250 options.
He purchases the shares at the exercise price of 40 euros and then sells them at the market price of 90 euros.

Result:
Earnings per share: 50 euros
Total profit: 12,500 euros (before taxes)

This amount is subject to capital gains tax; in addition, income tax may be payable on the monetary benefit at the time of exercise.

Are you planning a participation model or would you like to have an existing program legally reviewed? Our employment law firm offers personalized, practical advice—arrange a free, no-obligation initial consultation now!

Checklist: 5 steps to a legally compliant stock option program

A carefully planned stock option program can be a powerful tool for motivating and retaining employees long-term. To ensure its successful implementation in a legally compliant, tax-compliant, and organizationally efficient manner, companies should consider the following steps:

1. Define goals and target groups
First, consider what goals you want to achieve with the stock option program:
Is it primarily about employee retention, performance incentives or the recruitment of new skilled workers?
Also determine which employee groups should be included in the program.

2. Obtain legal and tax advice
Before implementation, a comprehensive legal review by experienced labor lawyers is recommended. This should focus in particular on:

  • legally secure contract drafting,
  • the tax classification (e.g. monetary benefit, income tax liability),
  • and employment law protection in the event of dismissals or departure of employees.

3. Obtain approval from the general meeting
For stock corporations, the approval of the general meeting is mandatory according to Section 192 of the German Stock Corporation Act (AktG).
The stock option plan must be formally approved, documented and properly announced.

4. Clear communication with employees
A successful stock option program thrives on transparency. Inform your employees about:

  • Vesting rules and terms,
  • Deadlines for exercising options,
  • as well as tax and labor law implications.

5. Implementation and ongoing management
Use digital solutions to manage the program, such as tracking allocations, deadlines, and exercises.
This ensures transparency and avoids errors during ongoing operations.

Would you like to design your stock option program professionally and legally? Our employment law firm will support you from planning to implementation – please contact us personally!






Active and passive voting rights in the 2026 works council elections – who should be on the electoral roll?

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

The next works council elections will take place nationwide in spring 2026. However, before employees can cast their votes, the electoral board must compile the correct electoral roll. This raises the key question: Who is eligible to vote (active voting right) – and who is allowed to stand for election (passive voting right)?

A legally compliant election can only be guaranteed if the electoral roll is compiled in accordance with the law. Errors in the roll can lead to challenges and subsequently invalidate the election. As an electoral board, you bear a special responsibility in this regard.

In this article, we explain who is eligible to vote and stand for election, which legal criteria must be met, and what you as an election committee should pay attention to when compiling the electoral roll for the 2026 works council election.


What awaits you:

  1. Online Works Council Election 2026: The current status – what has happened so far
  2. New federal government – new opportunities for online works council elections?
  3. Conclusion: No law yet – but digital co-determination is gaining momentum
  4. The passive right to vote – who is eligible to stand for election to the works council?
  5. Special case in the works council election: Who counts as a senior employee?
  6. Conclusion: Clarifying the status before the works council election – for greater legal certainty

Of central importance: The electoral roll for the works council election

The voters' list is a crucial document in every works council election. It informs who is eligible to vote (active voting right) and who is eligible to stand as a candidate (passive voting right). As the election committee, you are obligated to publish a complete and accurate voters' list in the company along with the election announcement.

The electoral roll contains all eligible employees in the company. Only those on this roll may participate in the election. At the same time, all employees have the right to check whether their registration has been correct. Therefore, the electoral roll must be displayed for inspection in an accessible location in the company until voting is complete.

According to Section 2, Paragraph 2 of the Election Regulations (WO), the employer is legally obligated to provide the election committee with all necessary information and documents to correctly compile the electoral roll. As the election committee, you should specifically request the employer to provide you with the necessary information – ideally in writing and with specific details.

Errors in the electoral roll are one of the most common causes of challenges to works council elections. Our labor law experts will review your documents and guide you through every step – ensuring a legally compliant and contestable election. Request a free consultation now – so your electoral roll is legally sound!

Mistakes on the voter list? You can appeal!

The electoral roll forms the basis for the works council election, so its accuracy and timeliness are crucial. But what happens if an error is discovered?

Every employee has the right to lodge an objection to the electoral roll with the electoral board within two weeks of the election announcement being issued. If the objection is deemed justified, the roll must be corrected or supplemented accordingly.

After the two-week deadline has expired, no further changes are possible on the basis of objections – the electoral board must reject late objections.

Between the time the voter list is drawn up and election day, personnel changes may occur within the company—for example, through hiring, terminations, or transfers. Therefore, the electoral board is obligated to continuously update the list to ensure that all eligible voters are correctly recorded—and no one is unfairly excluded.

An incorrect or outdated voter list can jeopardize the entire works council election. Have your voter list legally reviewed by our employment law firm – and protect yourself against legal challenges. Request legal support now – we will reliably guide you through the entire election process.

The active right to vote in works council elections – who is allowed to vote?

A key question arises in the context of the 2026 works council elections: Who is eligible to vote? The so-called active right to vote regulates who is entitled to cast their vote in the election. The legal basis for this can be found in Section 7, Sentence 1 of the Works Constitution Act (BetrVG). Accordingly, only persons who meet all three requirements are entitled to vote:

  • Employee status
    All persons who are considered employees within the meaning of the law are entitled to vote – regardless of whether they are employed full-time, part-time, on a temporary basis, on a marginal basis or at home. 
    • Employees eligible to vote include:
      • Apprentices, provided they are at least 16 years old
      • Mini-jobbers
      • Part-time and temporary workers
      • Employees on parental leave, sick leave or vacation
      • Employees in active partial retirement
      • Working students and volunteers
      • Field service and teleworkers
      • Temporary workers, provided they are employed in the company for more than three months
      • ABM workers (since BAG decision 2004, 7 ABR 6/04)
      • Public service employees assigned to the company
    • However, the following are not eligible to vote:
      • Executive employees (Section 5 (3) BetrVG)
      • Employers, managing directors, board members
      • Self-employed and freelancers
      • 1-euro jobbers
      • Employees under 16 years of age
      • Employees in the passive phase of partial retirement
  • Length of service
    • Only those who belong to the specific company are entitled to vote – not all employees of the company or group.
    • Dependent business units participate in the election of the main business.
    • Independent company divisions can elect their own works council under certain conditions.
    • The distinction is often complex – we would be happy to advise you on this as part of our employment law election support.
  • Minimum age
    • Any employee who is at least 16 years old on election day may vote. 
    • The decisive factor is the day of voting, not the start of the election process. In elections lasting several days, the last day of voting counts.

Eligible voters must be carefully verified and documented. An inaccurate voter list can lead to a challenge to the election. Our employment law firm supports election boards in compiling legally compliant voter lists – nationwide and with decades of experience in employment law. Have your voter list reviewed now – for a legally compliant and uncontestable 2026 works council election!

The passive right to vote – who is eligible to stand for election to the works council?

Not everyone eligible to vote can also run for the works council. The so-called passive right to vote is regulated in Section 8 of the Works Constitution Act (BetrVG) and determines who is considered an eligible employee in the 2026 works council election.

  • Eligible to vote are those who:
    • is eligible to vote (see Section 7 of the Works Constitution Act),
    • has reached the age of 18 and
    • has been part of the company for at least six months without interruption.
  • Crucial moment: election day
    • The six-month period is determined by the day of voting. For elections lasting several days, the last day of voting applies. 
    • If an employee was previously employed in another company within the same company or group, these periods will be taken into account.
    • Note: Periods of service before the age of 18 also count. For example, anyone who turns 18 on election day and has already been working for the company for a year is eligible to run.
  • Who is eligible to vote?
    In addition to traditional employees, these include:
    • Trainees, provided they work in a “real” company
    • Part-time workers
    • Homeworkers if they work predominantly for the company
    • Employees on maternity or parental leave
  • Who is excluded from the right to vote?
    • Temporary workers are generally not eligible to vote – neither so-called real nor fake ones. 
    • The Federal Labor Court (BAG, 13.10.2004 – 7 ABR 6/04) made this clear. 
    • Even if temporary agency workers are allowed to vote, they cannot be elected to the works council of the hiring company.

Correctly verifying the right to stand for election is crucial for a non-contestable election. Our employment law firm reliably reviews your candidate lists nationwide and with years of experience in works council elections. Have your candidates reviewed now – get a legally secure start to the 2026 works council elections.

Special case in the works council election: Who counts as a senior employee?

When compiling the electoral roll for the 2026 works council elections, the correct classification of executive employees presents a particular challenge. While Section 5, Paragraphs 3 and 4 of the Works Constitution Act (BetrVG) provides legal criteria, there is no clear definition. In practice, the electoral board must carefully examine whether a person qualifies as a executive employee—because this group of employees is neither eligible to vote nor to be elected.

  • What distinguishes senior managers?
    Senior managers assume entrepreneurial-like tasks within the company with their own decision-making power – for example, by:
    • Hiring and firing of employees
    • Granting or use of power of attorney
    • Responsibility for key personnel or budget decisions
    • Due to their special status, they are closer to the employer than to the rest of the workforce. Therefore, they are excluded from works council elections.
  • Impact on the electoral roll and eligibility to vote
    Senior managers will:
    • not registered on the electoral roll,
    • not taken into account when calculating the size of the works council (Section 9 of the Works Constitution Act) and
    • not counted in the number of works council members to be released (Section 38 of the Works Constitution Act).
    • Please note: The election is not automatically invalidated if a senior employee votes by mistake – a challenge can only be successful if there is evidence of influence on the election result.
  • Alternative representation of interests: the Speakers’ Committee
    • Senior employees are not without rights – they elect their own representative body, the Speakers’ Committee. 
    • This is usually elected at the same time as the works council election. 
    • To avoid overlaps, close coordination between the electoral boards of both bodies is necessary. 
    • In case of doubt, who belongs to the group of senior employees must be clarified jointly – on the basis of Section 18a of the Works Constitution Act.

The incorrect assignment of senior employees can make the election contestable. Our employment law firm supports you in legally compliant demarcation – with clear review criteria, legal classification, and practical experience. Have your voter list reviewed now – and legally clarify any uncertainties regarding senior employees!

Conclusion: Clarifying the status before the works council election – for greater legal certainty

In cases of doubt, it may be extremely sensible for reasons of legal certainty to have the status of individual employees determined by the labor court before the works council election – especially if the allocation procedure pursuant to Section 18a of the Works Constitution Act (BetrVG) is not effective or does not lead to a clear result.

A judicial determination of status, for example on the question of whether an employee is to be classified as a managerial employee within the meaning of works constitution law, provides binding clarity – and prevents later challenges or costly disputes that can burden not only the election but also other operational processes.

Clarify any doubts early on – we'll assist you with legally compliant status checks and, if necessary, represent you in labor court proceedings. Contact us now – for legally compliant works council elections without any surprises.




Online works council elections from 2026? – What is currently legally possible

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Digital elections offer greater convenience, lower costs, and higher participation—a concept that is attracting considerable interest in an increasingly digitalized workplace. This raises the question: Will employees be allowed to elect their works council online in the future?

While electronic voting has long been a reality in many other areas, works council elections remain subject to strict legal requirements. Currently, digital voting is not yet legally permitted – unless the legislature creates the necessary legal framework by 2026.


What awaits you:

  1. Online Works Council Election 2026: The current status – what has happened so far
  2. New federal government – new opportunities for online works council elections?
  3. Conclusion: No law yet – but digital co-determination is gaining momentum

Online Works Council Election 2026: The current status – what has happened so far

The draft bill presented by the traffic light coalition in November 2024 to introduce online works council elections as part of a pilot project was not pursued further after the early end of the legislative period. This is due to the so-called discontinuity principle: All legislative initiatives that are not adopted by the end of the legislative period automatically lose their validity and must be reintroduced by a new federal government.

New federal government – new opportunities for online works council elections?

The coalition agreement between the CDU/CSU and SPD contains a clear commitment to the digitalization of employee participation in company processes—including the possibility of electing works councils online. It states:
"We will further develop co-determination. We will also enable online works council meetings and online staff assemblies as equivalent alternatives to in-person formats. In addition, the option to vote online will be enshrined in the Works Constitution Act."

This confirms that the political will is there. However, when and in what specific form online voting will be introduced in works council elections remains to be seen.

Conclusion: No law yet – but digital co-determination is gaining momentum

  • The introduction of online voting is set out as a goal in the coalition agreement, but has not yet been implemented by law.
  • An amendment to the Works Constitution Act would be necessary – a corresponding legislative procedure is still pending.
  • It remains to be seen whether the 2026 works council elections can be held digitally or whether implementation will be postponed to a later election period.

Companies and election boards should continue to plan for in-person and postal voting, but at the same time, closely monitor legal developments. We will inform you about new legal steps. Get legal advice now – and stay well prepared for the digital future of works council elections!




Designing Virtual Employee Participation Plans (VSOP) in a legally secure manner – Your employment law firm

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Virtual employee share ownership plans, also known as VSOPs (Virtual Stock Option Plans), are becoming increasingly relevant for startups and medium-sized companies in Germany. Especially when financial resources are limited and skilled workers are in short supply, growing companies are relying on clever compensation models to retain key employees in the long term.

As a law firm specializing in employment law with extensive experience in startup and investment law, we provide comprehensive support in the legally compliant design, introduction, and implementation of virtual participation programs. These models enable employees to participate in your company's economic success – without the actual transfer of shares.


What awaits you:

  1. What is a virtual participation plan (VSOP)? – Labor law classification for employers
  2. Virtual participation (VSOP) vs. real participation (ESOP)
  3. Virtual Participation (VSOP): Advantages and disadvantages at a glance
  4. Virtual participation in the GmbH – legally secure structuring of VSOP models
  5. Typical contractual mechanisms for virtual participations (VSOP)
  6. Risks of virtual shareholdings (VSOP) – What employers and employees should know
  7. Tax treatment of virtual shareholdings (VSOP) – What employers need to consider

What is a virtual participation plan (VSOP)? – Labor law classification for employers

Virtual Stock Option Plan (VSOP) is a modern tool for motivating employees and retaining them in the long term in growth-oriented companies, especially startups.

A virtual shareholder ownership plan (VSOP) is a contractual agreement that places employees in the same financial position as if they were shareholders in the company—without actually transferring any shares. This "virtual shareholder status" simulates proportional ownership rights, often with a view to a later company sale (exit). The goal is to attractively supplement a comparatively low fixed salary with performance-based share ownership opportunities. This can be a significant financial incentive for employees, especially in a "build-to-sell" strategy.

Although VSOPs are widespread in practice, their legal implementation is complex. Many standard contracts are not clearly protected in the context of employment law. Important questions for employers include:

  • How should VSOPs be correctly classified in employment contracts?
  • What rights arise when an employee is terminated or leaves the company?
  • How should the participation be treated under employment and tax law?

Case law has so far provided only sporadic guidance on the specific design of VSOP models. Therefore, employers need significant advice to establish legally sound arrangements and avoid future disputes.

As experienced employment law attorneys, we support you in the legally compliant design, review, and implementation of virtual employee participation programs. Protect your company from legal pitfalls – we draft contracts tailored to your individual needs.

Virtual participation (VSOP) vs. real participation (ESOP)

The difference between a virtual participation (VSOP) and a real participation through shares (ESOP) is significant both legally and economically – with direct implications for the classification under employment law and contractual security.

With genuine participation, such as through an Employee Stock Ownership Program (ESOP), employees receive actual shares in the company. This entails comprehensive participation rights under corporate law, in particular:

  • Information and voting rights in shareholders' meetings
  • Right to profit participation in accordance with the provisions of the partnership agreement
  • Share-based participation in the exit proceeds, i.e. in the proceeds from the sale of the company

For genuine shareholders, withdrawal of shares is only possible under strict legal conditions – usually in return for appropriate compensation.

In contrast, a virtual participation (VSOP) only grants a contractual right to profit participation, typically in the context of a company sale (exit) or upon reaching certain milestones. not about real company shares, with the following differences relevant to employment law:

  • No voting or information rights as with shareholders
  • No fixed profit share, but only payouts upon exit or defined bonus conditions
  • No statutory protection against dismissal for VSOP entitlements – many regulations are legally controversial
  • High degree of contractual freedom, but also potential legal uncertainty in unclearly formulated programs

The employment law classification of those entitled to VSOP benefits has not yet been conclusively clarified by case law. Clauses that allow unilateral withdrawal without adequate severance pay or that provide for unclear payout mechanisms are particularly critical.

As an experienced employment law firm, we provide comprehensive advice on the legally compliant design and review of your VSOP programs. Protect your company from future disputes – schedule an initial consultation now!

Virtual Participation (VSOP): Advantages and disadvantages at a glance

Benefits for startups and founders

  • Capital-saving remuneration: VSOP programs enable startups to attract and retain qualified specialists and managers without having to pay high salaries or transfer actual company shares.
  • Long-term employee retention: The prospect of participating in the exit proceeds motivates employees and fosters identification with the company. This strengthens team spirit and a focus on long-term corporate success.
  • Flexible contract design: Virtual participation programs can be individually tailored to the company's strategy, allowing specific key personnel or strategically important employees to benefit.

Benefits for employees

  • Tax advantages when starting out: VSOP models generally avoid direct taxation as with real shares and often offer more favorable taxation moments, for example, only upon exit.
  • Less bureaucratic effort: Unlike real GmbH shares, virtual shareholdings do not require notarization. Contract processing is straightforward and allows for rapid implementation within the company.

Disadvantages and risks

  • No co-determination rights: VSOP beneficiaries are not legally shareholders and therefore have neither voting rights nor access to company information.
  • No guaranteed profit sharing: In most VSOP programs, compensation is paid only upon exit; ongoing profit sharing is rare.
  • Legal uncertainties: Many clauses in virtual shareholding agreements are controversial under labor law and have not yet been clarified by the highest courts. Particularly sensitive are provisions regarding forfeiture, termination, or withdrawal of virtual shares without clear severance pay.
  • Speculation on the exit: The actual value of a VSOP depends on the sale of the company. Whether and to what extent employees will benefit is uncertain.

As an experienced employment law firm, we review your VSOP contracts for legal certainty and design individual solutions that are transparent and fair for both employers and employees.

Virtual participation in the GmbH – legally secure structuring of VSOP models

With virtual participation, the employee does not receive any actual company rights, but rather a contractually guaranteed bonus entitlement, which is paid out upon success. Typical scenarios for such a payout are:

  • Share sale (share deal)
  • Conversion or merger of the company
  • Sale of company assets (asset deal)
  • Initial public offering (IPO)

The participation agreement stipulates that the employee participates financially in the company's increased value. Virtual shares are typically allocated in so-called book units. These are often based on the nominal value of the GmbH's share capital and serve as the basis for the subsequent calculation of the performance bonus.

Have your VSOP contracts reviewed for legal compliance – we support you in the professional structuring of virtual shareholdings in the GmbH. Request advice now!

Typical contractual mechanisms for virtual participations (VSOP)

Virtual participation programs often contain complex contractual mechanisms that precisely regulate when and to what extent employees benefit from the company's value. Typically, the full amount of the participation is not paid immediately, but rather subject to certain conditions and time constraints. Important regulatory instruments include:

  • Vesting clauses:
    The investment is earned over a defined vesting period, usually up to five years. No entitlement exists before the end of a waiting period (cliff). If an exit occurs during the vesting period, accelerated vesting may apply.
  • Good and bad leaver regulations:
    Upon leaving the company, the status of "good leaver" or "bad leaver" determines the extent to which an employee retains their shares. Failure to comply with the contract can lead to the complete loss of the shareholding. Unilateral clauses to the detriment of employees can be challenged under labor law.
  • Anti-dilution clauses:
    VSOP agreements often do not contain anti-dilution protection to avoid blocking future capital increases in favor of new investors. This can result in a shrinking virtual shareholding, which represents a financial disadvantage for employees.
  • Down rounds:
    In weaker financing rounds, investors sometimes receive shares at a discount (e.g., full ratchet or weighted average). This can lead to further dilution of the virtual shares.
  • Exit mechanisms and severance pay:
    If an exit occurs, employees receive a contractually agreed bonus payment – often based on the net proceeds after deducting transaction costs and liquidation preferences in favor of investors. In the case of partial sales, the virtual participation is taken into account pro rata. Some programs allow the company to repurchase vested shares before the exit – subject to predefined severance conditions.

Risks of virtual shareholdings (VSOP) – What employers and employees should know

Virtual employee participation programs (VSOPs) offer attractive opportunities for employee retention, but they are legally complex and many aspects have not yet been clarified by the highest courts. This poses significant risks – both for employees and company management.

The 10 most common risks of VSOP contracts:

  1. Tax burdens due to unrealistic company valuations
  2. Ineffective or disadvantageous leaver clauses
  3. Opaque preferential rights in favor of investors
  4. Increase in social security contributions
  5. Invalidity of individual clauses due to violation of general terms and conditions
  6. Dilution of the shareholding due to lack of anti-dilution provisions
  7. Expiry of participation rights after expiry of certain periods
  8. Failure to exit – the investment loses its value
  9. Unfavorable calculation of exit proceeds
  10. One-sided or unfair severance clauses

Our law firm supports you in legally compliant drafting and review of VSOP contracts – labor law, tax and strategic. Contact us now without obligation!

Tax treatment of virtual shareholdings (VSOP) – What employers need to consider

VSOP remuneration can generally be allocated to different types of income for tax purposes:

  • Income from employment
  • Income from commercial operations
  • Capital income

In practice, the Taxation as wages relevant because:

  • As a rule, there is no partnership – commercial income is excluded.
  • Capital income is not taken into account because employees do not receive any real capital shares.

Standard case: income from employment
Since VSOPs are typically granted in return for work performed, they are generally considered wages. This becomes problematic if the taxable receipt date is already at the grant date or during the vesting period—i.e., long before a potential exit.

This means that employees could pay income tax on a fictitious investment even though they have not yet received any cash. Such a pre-tax burden without an actual cash inflow represents a significant risk.

Differentiation from genuine participation
In the case of genuine GmbH investments, the transfer already creates a taxable asset advantage – regardless of the exit. To avoid an unwanted advance of tax liability, VSOP models should not too closely based on real investments be.

Conclusion: To ensure that virtual participations do not become an unwanted tax trap, VSOP contracts should:

  • clearly distinguish between granting and payment
  • be clearly separated from the employment relationship for tax purposes
  • not trigger a taxable event without a cash inflow

Let your VSOP programs check tax and labor law – we design your investment models to be legally secure and tax-optimized. Get a free, no-obligation consultation now!




€8,000 in compensation for data protection violation – clinic responsible

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Data protection violations can lead to significant claims for damages under Art. 82 GDPR – even for intangible, non-pecuniary damages. More and more courts are awarding substantial amounts: In one recent case, a hospital was awarded €8,000. Legal expenses insurance often covers these costs – it is important that the coverage confirmation is obtained from a specialized lawyer. Our employment law firm is available to assist you nationwide.


What awaits you:

  1. What happened?
  2. Groundbreaking ruling in data protection law: €8,000 in damages awarded
  3. Conclusion: Do not ignore compensation for data protection violations

What happened?

An HIV-positive patient was hired as an employee by the clinic after treatment. The clinic made a serious mistake: The new employee's sensitive health data was not adequately protected. For several weeks, various clinic employees had access to the so-called "patient cover sheet," which, among other things, included the diagnosis "HIV"—albeit in a difficult-to-read format.

Even if only the name, address, health insurance provider, and the three-letter abbreviation "HIV" were visible, this sensitive data set should have been blocked. The clinic downplayed the incident, pointing out that only a few people had access and that they were sworn to confidentiality. But that doesn't change the fact: an employee's HIV diagnosis is not intended for colleagues to know. Even in the medical field, the right to informational self-determination applies without restriction – especially with highly stigmatizing diagnoses like HIV.

The disclosure had consequences: The behavior of colleagues changed noticeably, underscoring the severity of the data protection violation. The €8,000 compensation awarded under Art. 82 GDPR could have been even higher under certain circumstances – for example, if additional health data had been affected.

Our law firm is at your side
In the event of data protection violations in the workplace, we provide expert support in enforcing your claims – including compensation. Rely on our experience in employment law and let us work together to protect your sensitive data.

Groundbreaking ruling in data protection law: €8,000 in damages awarded

For a long time, German courts were reluctant to award compensation for non-pecuniary damages caused by data protection violations. Such cases were often considered trivial, and only in exceptional cases were a claim for compensation recognized. However, this restrictive stance contradicts the clear intention of the EU legislature.

The Federal Constitutional Court already made it unequivocally clear in its ruling of January 14, 2021 (case no. 1 BvR 28531/19): Courts may not categorically reject claims under Art. 82 GDPR on the grounds of allegedly unprovable damage. Even abstract, non-material damage can lead to a claim for compensation for pain and suffering – serious damage is not required.

The ruling, in which a victim was awarded €8,000, is among the highest amounts of compensation for a data protection violation in Germany to date. It marks an important turning point in the handling of violations of personal rights caused by the improper handling of sensitive data.

Article 82 (1) of the GDPR requires compensation for violations of data protection regulations – regardless of whether the damage is material or immaterial. Since the GDPR came into force on May 25, 2018, data protection has thus acquired a new, legally enforceable protective function.

Has your data protection been violated? We enforce your rights.
Whether you need compensation, revocation, deletion, or blocking of your data: Our experienced employment law attorneys are at your side – with commitment and legal expertise.

Conclusion: Do not ignore compensation for data protection violations

Anyone affected by a data protection breach should not only insist on the correction or deletion of their data, but also consider possible claims for compensation. According to Art. 82 GDPR, even non-material damages are eligible for compensation.

Legal expenses insurance often covers the costs incurred – provided the insurance coverage was already in place at the time of the violation and the waiting period has expired. To increase the chances of success in obtaining reimbursement, the coverage request should be submitted through an experienced law firm.

Our law firm, which specializes in labor law, supports you nationwide in enforcing your claims—from blocking or deleting your data to claiming compensation for pain and suffering.

Has your data been misused at work?
We enforce your rights – competently, with commitment, and nationwide. Trust our experience in labor law and receive professional advice.




Employee share purchase plans (ESPP): Creating participation – legally secure and motivating

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Employee Share Purchase Plans (ESPPs) are an effective tool for both strengthening employee loyalty and encouraging financial participation. Through discounted share purchases—often through salary deferred compensation or special discounts—employees can directly participate in the company's success.

As a law firm specializing in employment law, we provide comprehensive advice on the implementation, legal design, and ongoing administration of stock purchase plans. We take your company size, industry, and individual employee structure into account, ensuring the plan and implementation are optimally tailored to your needs.


What awaits you:

  1. What is an ESPP?
  2. Benefits of an ESPP for companies and employees
  3. Possible disadvantages and employment law challenges
  4. Use ESPPs in a targeted and legally compliant manner

What is an ESPP?

An Employee Share Purchase Plan (ESPP) is a stock purchase program for employees. It allows employees to purchase company shares through payroll deductions or separate contributions—often at a discounted price or with other benefits. Participation is generally voluntary and takes place within specified purchase periods.

Would you like to introduce a participation model for your employees? We'll assess whether an ESPP is a good fit for your company structure.

Benefits of an ESPP for companies and employees

  • Stronger employee loyalty
    Direct ownership of the company increases employees' sense of ownership. Those who hold company shares pursue the same goals as management—a clear advantage for corporate culture and long-term employee retention.
  • Attractiveness as an employer
    An ESPP makes your company particularly competitive in the job market. Employees value such plans as a valuable additional benefit – similar to bonuses or employer-sponsored pension plans.
  • Tax advantages for the company
    Non-qualified ESPPs can provide tax relief under certain conditions, making compensation strategies more efficient and creating incentives for employees.
  • Simple implementation
    Compared to stock options or restricted stock units (RSUs), ESPPs are generally easier to implement, especially when they are implemented through existing shares or stock market purchases and no new shares need to be issued.

Possible disadvantages and employment law challenges

Regulatory burden on listed companies
For listed companies, an ESPP must be designed in strict compliance with regulations. This particularly applies to insider trading laws, disclosure requirements, and restrictions under corporate law.

Limited flexibility in the event of termination or departure
The question often arises as to how previously acquired shares will be handled when an employee leaves the company. Clear employment law regulations are necessary to avoid future conflicts.

Social security and tax obligations for employees
Depending on the terms and conditions, the discounted share purchase may be subject to tax, which can have disadvantages for employees. A legally sound contract is particularly important in this case.

Administrative costs for international deployment
If companies offer an ESPP across borders, different national labor and tax law requirements must be taken into account – a complex effort that is difficult to manage without specialist support.

Use ESPPs in a targeted and legally compliant manner

An Employee Share Purchase Plan can be an effective tool for increasing employee retention and motivation – provided it is designed with legal clarity, integrated into tax regulations, and strategically aligned with the company's needs. Our employment law firm supports you in the legally compliant implementation, ongoing administration, and optimization of share purchase plans – both nationally and internationally.

Would you like to introduce an ESPP or have existing models reviewed? Our employment law experts will provide you with personalized, practical, and legally sound advice. Schedule your initial consultation now!




Alcohol ban at sea – but no entitlement to standby pay

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

A captain demanded more than €100,000 for alleged standby time – arguing that he was prohibited from consuming alcohol during his off-duty time on board. However, both the Hamburg Labor Court and the Hamburg Regional Labor Court rejected his claim. The judges reasoned that a ban on alcohol does not constitute a sufficient restriction to legally classify off-duty time as compensated on-call duty. This clear ruling sends a clear message – because not every private restriction automatically leads to a claim for compensation under labor law.


What awaits you:

  1. LAG Hamburg: Alcohol ban on board is not a basis for standby pay
  2. LAG Hamburg: No entitlement to compensation for alcohol-free leisure time on board
  3. LAG Hamburg: Alcohol ban is not an order for on-call duty
  4. Seafarers as a special case under labor law: No entitlement to remuneration for standby time
  5. European Working Time Directive: No advantage for seafarers on call
  6. Hamburg Labor Court: EU Working Time Directive does not apply to seafarers – no obligation to pay if alcohol is prohibited

LAG Hamburg: Alcohol ban on board is not a basis for standby pay

In its ruling of November 13, 2024 (case no. 7 SLa 16/24), the Hamburg Regional Labor Court ruled: A blanket alcohol ban on ships does not justify a claim to compensation for alleged standby time. According to the court, a shipping company's safety-related zero-alcohol policy does not constitute such a significant restriction that leisure time would legally be considered working time.

The court also emphasized that European case law on the Working Time Directive is not directly applicable to seafarers.

The ruling provides clarity in maritime labor law – and offers important guidance for shipping companies, human resources departments, and labor law advisors.

Do you need legally sound assessments regarding working time arrangements or on-call duties? Our employment law firm supports you with sound advice and proven solutions.

LAG Hamburg: No entitlement to compensation for alcohol-free leisure time on board

A captain employed since 2007 demanded over €108,000 from his shipping company, arguing that his alcohol-free leisure time on board was considered paid standby duty. The reason for this was an internal memo from 2022 in which the international shipping company reiterated its alcohol ban on board. This ban was intended to ensure the crew's operational readiness in an emergency and was permissible under labor law, even without a legal basis.

The captain then demanded the statutory minimum wage for more than 11,000 hours of on-call time. The Hamburg Labor Court rejected the claim – as did the Hamburg Regional Labor Court in the second instance. Both courts made it clear that a general ban on alcohol consumption during off-call time does not constitute such a significant restriction that it justifies a claim to compensation for on-call duty.

Do you need legal clarity regarding working hours, on-call models, or industry-specific regulations? Our employment law firm is available to provide you with in-depth advice—please contact us.

LAG Hamburg: Alcohol ban is not an order for on-call duty

The Hamburg Regional Labor Court made it unequivocally clear in its ruling: The reference to the existing alcohol ban on board does not constitute a new labor law instruction, but merely the confirmation of an existing internal company policy. The human resources department had merely suggested to the captain that the zero alcohol limit be explicitly incorporated into his employment contract in the future. The judges did not consider this a new labor law order. While the court acknowledged that an alcohol ban can certainly influence leisure activities on board, this restriction does not constitute a claim to remuneration in the sense of on-call duty.

Permanent presence on board is a typical aspect of a seafaring job. Furthermore, the alcohol ban primarily serves general safety on board—not the captain's constant availability.

Are you wondering when free time becomes payable on-call time? Our employment law firm can support you with in-depth expertise on working time models, employer obligations, and employee rights—contact us!

Seafarers as a special case under labor law: No entitlement to remuneration for standby time

According to the Hamburg Regional Labor Court, even an explicit order for on-call duty by the human resources department would not have given rise to any entitlement to compensation. Neither the individual employment contract nor the relevant collective wage agreement (HTV-See) contain corresponding provisions regarding remunerated on-call time.

The court also points out that the collective agreement already takes into account the fact that seafarers typically spend their leisure time on board. This special feature of the maritime employment relationship is taken into account in the collective agreement and does not automatically lead to a claim for additional remuneration.

Whether you're a shipping company, captain, or crew member – we'll examine your employment law claims at sea with expertise and a solution-oriented approach. Schedule a consultation now!

European Working Time Directive: No advantage for seafarers on call

The Hamburg Regional Labor Court clarified that the European Working Time Directive (Directive 2003/88/EC) also does not establish a captain's right to compensation for alleged standby time. The directive does explicitly distinguish between genuine rest time and standby duty, during which employees must be available to the employer at the workplace.

The European Court of Justice (ECJ) has ruled several times that on-call duty is generally to be classified as working time – especially when employees are outside their usual living environment and have only limited access to leisure time.

However, this case law does not apply in this specific case. Seafarers are expressly excluded from the scope of the Directive, according to Article 1(3).

Are you looking for legally sound advice on working time regulations, on-call duty, or industry-specific exceptions? Our employment law firm supports you nationwide – competently, experienced, and solution-oriented.

Hamburg Labor Court: EU Working Time Directive does not apply to seafarers – no obligation to pay if alcohol is prohibited

The Hamburg Regional Labor Court clarified: According to Article 1, paragraph 3, the European Working Time Directive (Directive 2003/88/EC) expressly does not apply to seafarers. Instead, a special agreement between the European Community Shipowners' Associations (ECSA) and the Federation of Transport Workers' Unions in the EU (FST) from 1998 applies in the maritime sector, which has determined working time regulations for seafarers at the European level since 1999.

This so-called social partner agreement does not contain any general provisions regarding the remuneration of standby time. Only in the event that a seafarer is called to work during their rest period—for example, because the engine room is unoccupied—does the agreement provide for a right to appropriate compensatory rest periods.

A general claim to compensation for mere restrictions on leisure time – such as a ban on alcohol on board – cannot be derived from this.

Our employment law firm provides sound, practical advice to shipping companies, crew members, and human resources managers—arrange a non-binding initial consultation now.




Stock-based compensation in employment relationships: What needs to be considered under employment law for stock grants

Raphael Lugowski,
If you have any questions about this topic, please contact me by phone at 040 524 717 830 or by email to lugowski@smart-arbeitsrecht.de

Stock grants are a modern compensation instrument in which employers provide their employees with company shares as part of a participation or stock plan. This model is also gaining increasing importance in Germany – particularly in the design of bonus agreements, holding periods, and the tax treatment of such benefits.


What awaits you:

  1. Stock Grants as Part of Employee Compensation: Potential and Legal Aspects
  2. Stock Grants vs. Stock Options: Differences and Employment Law Relevance for Employers and Employees
  3. Example of a Stock Grant: How stock compensation works in practice
  4. What are the benefits of stock grants? – Stock-based compensation in employment relationships
  5. Are stock grants considered income? – Tax treatment in employment relationships
  6. How are stock grants taxed? – Tax obligations for employees and employers
  7. Stock Grants for international employees – legally compliant in a global context

Stock Grants as Part of Employee Compensation: Potential and Legal Aspects

More and more companies are turning to stock grants – share-based compensation models – to retain their employees long-term. In this model, employees receive company shares not as direct compensation, but rather in return for past or future service. The goal is to more closely align the interests of the company and employees: If the share price rises, both sides benefit, which is intended to increase motivation and commitment.

Stock grants also act as an incentive for long-term employment, as the shares are often tied to vesting periods. Only after these vesting periods have expired do the shares actually become transferable. This regularly leads to employment law and tax issues – for example, regarding terminations, contract design, or social security obligations.

Stock Grants vs. Stock Options: Differences and Employment Law Relevance for Employers and Employees

Modern compensation models increasingly include participation programs to retain employees long-term and reward them based on performance. Two common forms are stock grants and stock options – both pursue similar goals but differ significantly in their legal implementation.

At Stock Grants Employees receive company shares as a direct benefit. The employer usually transfers the share value through a vesting plan, so that after the vesting period, the shares become the property of the employees without any additional consideration.

Stock Options In contrast, options only grant the right to purchase shares at a predetermined price within a specified period of time. Exercise is subject to certain conditions, and the purchase is made against payment of the agreed price. Depending on the contract, the option right may remain (partially) in effect even if the employee leaves the company early.

Both models entail complex employment law and tax issues – for example, regarding terminations, contractual arrangements, or tax obligations.

Example of a Stock Grant: How stock compensation works in practice

Stock grants are a proven tool for long-term employee retention, often linked to vesting periods. This means that the granted shares are only fully transferred to employees if they remain with the company for a certain period of time. In the event of early departure, the entitlements may be forfeited in whole or in part.

Practical example: Stock Grant for promotion
An employee is promoted to team leader. As part of his new compensation package, he receives a stock grant of 250 company shares. The agreement provides for a four-year vesting period with annual staggering: For each full year of service, 25% of the shares are transferred. After two years, the employee thus owns 50% of the granted shares. If he leaves the company before the end of the four years, the unvested shares are forfeited.

Such models place special employment law requirements on both employers and employees – for example, in terms of contract drafting, terminations or tax aspects.

What are the benefits of stock grants? – Stock-based compensation in employment relationships

Stock grants, the free allocation of company shares to employees, are an established means of promoting motivation and retention. Both employers and employees benefit from this compensation model. The key advantages at a glance:

Employee retention and recruitment of skilled workers
Companies that use stock grants strengthen their attractiveness as an employer. Highly qualified professionals value modern compensation models with long-term prospects. Existing employees have a clear incentive to remain loyal to the company – especially during the vesting period until the shares are finally transferred.

Motivation and willingness to perform
The value of shares is directly linked to the company's success. Employees who hold shares or work toward acquiring them develop a stronger interest in economic growth and the quality of their work. This increases personal responsibility, team spirit, and commitment.

Real asset from the start
Unlike stock options, stock grants have real value from the outset. Even with fluctuating stock prices, their intrinsic value remains. Employees don't have to purchase shares; they receive them as property—a particularly stable model in economically uncertain times.

Liquidity-saving and flexible remuneration
For employers, stock grants offer the opportunity to conserve cash, as a portion of compensation is paid in shares. The financial burden often only arises later, for example, after the vesting period. Employees do not have to make any upfront payments and benefit directly from the company's success.

Are stock grants considered income? – Tax treatment in employment relationships

Yes – Stock Grants are treated as income for tax purposes once they are vested, meaning employees have a legal right to the shares. From that point on, the market value of the shares counts as taxable income and is subject to income tax and, if applicable, social security contributions.

In practice, the employer often retains a portion of the shares to directly deduct the applicable taxes and duties. The remaining shares are then transferred to the employees.

The specific tax assessment depends, among other things, on:

  • the date of the vesting period,
  • the current market value of the shares,
  • the contractual arrangement of the program,
  • the tax framework at home and abroad.

How are stock grants taxed? – Tax obligations for employees and employers

Stock grants, i.e., the free allocation of company shares, are treated as wages for tax purposes once the shares vest. From that point on, the monetary benefit—that is, the market value of the shares at the vesting date—is considered taxable income.

Taxation for employees:

  • Time: At the end of the vesting period.
  • Assessment basis: Market value of the shares on the date of acquisition.
  • Types of taxes: Income tax, wage tax, social security contributions if applicable, and local taxes (depending on the country or region).
  • Procedure: The employer often retains a portion of the shares to pay the taxes directly (“sell-to-cover” model).

Tax advantages for the employer:
In many countries, such as the USA, the value of issued shares can be claimed as a business expense, thus reducing the company's tax burden. This also makes share-based compensation models attractive from a business perspective.

Stock Grants for international employees – legally compliant in a global context

More and more companies are using stock grants to attract and retain qualified specialists long-term – even across national borders. A global stock ownership program can offer decisive advantages, especially in the international competition for talent.

However, the legal and tax frameworks vary considerably around the world. Employers should therefore carefully examine how stock grants can be implemented in a legally compliant and tax-compliant manner in the respective target country.

Important aspects of international stock grants:

  • Different tax obligations: Different income, wage and withholding tax regulations apply depending on the country.
  • Employment law consequences: The design of shareholdings can affect the status of employees as employees or self-employed persons.
  • Registration and reporting obligations: In some countries, participation plans must be registered or approved by the authorities.

Recommendation:
Companies planning to award international stock grants should seek legal and tax advice early on to avoid risks such as incorrect employee classification, tax assessments, or incorrect payroll.

Our employment law firm supports you in the legally compliant design of cross-border remuneration models – from tax audits to the implementation of employment contracts. Schedule a non-binding consultation now!