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.
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.
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