Rising Litigation and Labor Law Changes Shape German Business Landscape in 2026

German businesses face evolving legal challenges in 2026 with compliance becoming increasingly litigation-relevant and new labor law debates stirring. Compliance, once mainly preventive, is now a critical legal battleground due to expanded regulatory requirements and a rise in disputes. Laws like the Lieferkettensorgfaltspflichtengesetz (LkSG) and Hinweisgeberschutzgesetz (HinSchG) impose specific liabilities and reporting duties, prompting more scrutiny from authorities and shareholders. This has led to the phenomenon called "Weaponizing Compliance," where companies use compliance rules strategically in lawsuits rather than just for prevention. Effective compliance management now demands thorough documentation and litigation readiness, reflecting a company’s maturity and integrity.

At the same time, labor law discussions are intensifying. Over 40% of German employees work part-time, valued by many for balancing life and work. However, the CDU’s Mittelstands- und Wirtschaftsunion recommends restricting legal rights to part-time work to cases of significant need like childcare or education, aiming to optimize a limited skilled workforce. Entrepreneurs argue part-time roles are key to modern personnel management, while critics warn that restricting part-time work would limit business flexibility and complicate operations. They instead call for less bureaucracy and tax reductions to boost full-time job attractiveness and employees’ purchasing power.

These legal and regulatory shifts highlight the complex environment German businesses must navigate, balancing increased compliance litigation risks with transformative labor policies.