The Volkswagen works council has filed a complaint against Porsche with the Stuttgart labour court.

According to dpa-AFX news, the complaint was filed on Monday, ahead of a regular works council meeting today. The head of the Volkswagen works council, Bernd Osterloh, has written to all 324,000 Volkswagen employees at 44 sites to explain just what the works council is objecting to.

Under German law, workers are entitled to be represented on a company supervisory board. The Volkswagen AG supervisory board has 20 members, 10 of which represent shareholders, and 10 representing employees. One of these 10 is from management and the other nine are from the regular workforce.

The Porsche and Piech families are planning to set up a European holding company (SE) to house their Porsche and Volkswagen shareholdings.

European companies generally have smaller supervisory boards. In this case Porsche is proposing a board consisting of 12 people, six to represent the shareholders and six representing employees. These employees would primarily be from Porsche, not necessarily Volkswagen. It is likely there would be some Volkswagen employee representation, but it appears there would probably be no more than three.

In his letter to Volkswagen employees, Osterloh complained that Porsche employees would be over-represented on the Porsche Holding SE board. Porsche has just 12,000 workers, compared to Volkswagen, which has 324,000. This would mean that Volkswagen employees would have virtually no say over future strategic decisions made by Porsche Holding that would affect Volkswagen AG.

According to dpa-AFX, Osterloh also pointed out that it would be very difficult to change the supervisory board structure once it was put into force, so the issue needs to be resolved now, before the new company is registered.

Towards the end of the letter Osterloh explained that the works council does not have a major problem with the Porsche ownership - just that it wants to clarify workers rights. He said that the works council is convinced that the partnership with Porsche can have advantages for both sides, and that the involvement of the Piech and Porsche families is good protection against private equity investors.

Unions also want to clarify what would happen if Porsche did raise its shareholding in Volkswagen AG to more than 50% from the current 31%, a Volkswagen spokesman said.

Volkswagen representatives have some justification for concerns that their rights will be diminished under Porsche's influence. Porsche CEO, Wendelin Wiedeking, recently referred to the tradition of co-determination at Volkswagen as a 'holy cow'.

Although Porsche owns around 31% of the shares, its voting rights are limited to 20% by the so-called VW Law. But the law has been challenged by the European Commission as an obstacle to the free flow of capital and a ruling from the European Court of Justice is due later this year.