AI-Driven Restructuring – Cologne Regional Labour Court Limits the Scope of Conciliation Committee Proceedings

In its decision dated August 31^st, 2026 (Case No. 9 TaBV 38/26), the Cologne Regional Labour Court (Landesarbeitsgericht, LAG Cologne) ruled that a conciliation committee (so-called “Einigungsstelle”) established to attempt to reach a reconciliation of interests (so-called “Interessenausgleich”) in an AI-driven restructuring cannot – against the will of one of the parties – simultaneously be tasked with matters concerning the introduction and use of the underlying AI and IT systems themselves. The decision is relevant to companies that combine the implementation of new technologies with organisational changes and workforce measures. In particular, it illustrates how negotiations on an operational change must be distinguished from co-determination rights concerning the specific introduction of AI and IT systems.

1. Legal Background: Operational Changes and Co-Determination Rights of the Works Council

The implementation of AI and IT systems may constitute an operational change within the meaning of Section 111 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) – for example, where it fundamentally alters the organisation of the business or introduces fundamentally new working methods. Where the employer plans such an operational change, it must negotiate with the works council on a reconciliation of interests, addressing whether, when and how the operational change is to be carried out.  In addition, a social plan (so-called “Sozialplan”) under Section 112 BetrVG serves to offset or mitigate the economic disadvantages that the operational change causes for the employees concerned.

Where the employer and the works council cannot agree on a reconciliation of interests or a social plan, either party may refer the matter to a conciliation committee. In the context of a reconciliation of interests, the conciliation committee mediates between the parties to reach an agreement on whether, when and how the operational change is to be carried out, but it cannot replace an agreement by issuing a binding award.  Its powers are broader in respect of a social plan: where the parties fail to agree, the conciliation committee may, in principle, determine by binding award how the economic disadvantages for the employees concerned are to be offset or mitigated.

2. Background: Restructuring Driven by AI and IT Systems

The employers operate a private rail transport company with approximately 1,250 employees in a joint establishment (so-called “Gemeinschaftsbetrieb”). Under their “Fit for Purpose” project, they planned to dissolve and merge organisational units, change the scope of roles and deploy new AI and IT systems. These measures were expected to lead to numerous workforce actions, including transfers, variation dismissals, terminations, and the elimination and creation of positions.

After more than six months of in-house negotiations, the employers declared the negotiations with the works council to have failed and applied to the court to appoint a conciliation committee.

The works council sought to extend the conciliation committee’s remit to cover the introduction and use of the AI and IT systems, data protection matters and the associated co-determination rights of the works council. The works council argued that, because the “Fit for Purpose” project partially involved the introduction of AI-based IT systems, those measures gave rise to additional co-determination rights that also had to form part of the conciliation committee proceedings. The works council took the view that its application was well-founded because it merely specified the subject matter of the conciliation committee by reference to those technical and organisational measures that formed an integral part of the planned operational change.

The Labour Court appointed the conciliation committee with a chair of its choosing and three assessors on each side, but rejected the works council’s application to extend the conciliation committee’s remit.

3. Two Reasons the Works Council’s Application Failed

The works council’s appeal to LAG Cologne was unsuccessful. The court rejected the works council’s applications on two grounds:

• To the extent that the works council’s application concerned measures that were already part of, or a prerequisite for, the planned operational change, those measures were already covered by the employers’ own application – the same subject matter cannot be the subject of two simultaneous sets of proceedings (so-called “doppelte Rechtshängigkeit”).

• To the extent that the works council additionally sought to have the conciliation committee negotiate co-determination over the introduction and use of AI and IT systems, and the associated training measures, that claim could not be pursued in the expedited appointment proceedings and was, in any event, unfounded in the view of LAG Cologne.

4. Where the Conciliation Committee’s Remit Ends

LAG Cologne draws a distinction between the technical basis of the operational change and the specific arrangements governing the subsequent use of AI and IT systems.

Where organisational, technical and workforce measures form part of, or are a prerequisite for, the operational change, or are designed to implement it, they are already subject to the reconciliation of interests negotiations. The works council may therefore require the employer to disclose the planned AI and IT systems and consult with it on those systems, provided they themselves form part of the operational change.

However, those consultations and negotiations – unlike co-determination under Section 87 (1) No. 6 BetrVG, for example – do not address the specific implementation of those AI and IT systems as such, but rather the underlying business planning. Binding rules on the specific introduction and use of the AI and IT systems are a separate matter according to the LAG Cologne.

The court emphasised that a conciliation committee must not be tasked – against the will of one of the parties – with the specific introduction and use of AI or IT systems at the same time as they form the subject matter of the operational change itself. Were this otherwise, the conciliation committee’s power to issue binding awards in matters of mandatory co-determination could pre-empt or prevent the operational change and thereby undermine the mediating function of the reconciliation of interests process. Only once the reconciliation of interests negotiations have either succeeded or definitively failed does it become sufficiently clear whether and which AI or IT systems will be introduced and whether a specific need for regulation exists.

At the same time, LAG Cologne highlights a central challenge that distinguishes AI-driven operational changes from conventional restructurings: the productivity effects that the planned implementation of AI and IT systems is intended to achieve are frequently not yet fully established. They depend, among other things, on learning curves, data availability, technical implementation issues and acceptance within the business. For the conciliation committee, this means that a reconciliation of interests and a social plan must take such dynamic developments into account to a greater degree than is typical in conventional operational changes.

5. The Decision’s Limit: AI Does Not Override Co-Determination The decision of LAG Cologne does not restrict the works council’s co-determination rights in respect of the introduction and use of AI and IT systems – in particular those under Section 87 (1) No. 6 BetrVG. It merely limits the ability to extend the remit of a conciliation committee dealing with the reconciliation of interests and social plan – against the will of one of the parties, here the employers – to include those co-determination matters, for as long as no specific need for regulation concerning the introduction and use of the systems has yet arisen.