News from the ECJ on employee directors

The European Court of Justice recently ruled on the issue of whether a member state is allowed to have ‎national provisions which mean that employees of a subsidiary based in a member state other than the ‎parent company are not eligible for election to the board of directors of the parent company.‎

nvi_portraetter_done_014_web.jpg

Member states are required under the Treaty on the Functioning of the European Union to contribute to ‎safeguarding the free movement of labour within the Union.‎

The case concerned the issue of whether it is incompatible with the TFEU that Germany – like Denmark – ‎has national provisions which mean that employees of a subsidiary based on a member state other than ‎the parent company cannot be elected to the board of directors of the national parent.‎

The issue to be considered by the ECJ was, among other things, whether the provisions meant that the ‎German employees who were eligible for election would not accept a transfer of employment to a ‎subsidiary in another member state if they would then be required to leave the board of directors.‎

The German court decided to submit the question to the ECJ.‎

Interpretation of Treaty
The ECJ said that since there is no harmonisation requirement from the EU in this area, the member ‎states are free to lay down criteria for the selection of employee representatives for the boards of ‎directors of companies so long as the criteria are objective and do not result in unfair discrimination.‎

Accordingly, the German provisions on employee directors were not incompatible with Germany’s ‎obligations under EU law.

Norrbom Vinding notes

  • that the ruling confirms that the Danish provisions on employee directors, which contain a similar ‎restriction, will not be incompatible with EU law, either.

The content of the above is not, and should not be a substitute for legal advice.

More about the subject