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German rules not contrary to EU free movement rules

Germany’s laws on employee participation giving staff based in the country the right to vote for half of the membership of its supervisory board do not contravene the EU’s law on the free movement of people, the European Court of Justice has ruled.

The rules had been challenged by Konrad Erzberger, a shareholder in German-listed but globally-operated travel group TUI. Erzberger claimed that preventing workers employed by a subsidiary of the TUI group located in another EU member state, who it could be assumed are in general not German citizens, from participating in the composition of TUI’s supervisory board, infringed the general prohibition on discrimination on grounds of nationality. At the same time, Erzberger suggested that the loss of membership on the supervisory board, in the case of a transfer to another member state, was likely to dissuade Germans from exercising their right to free movement.

German rules EU free movement

German law compatible with EU rules on free movement

Germany’s Berlin Higher Regional Court, the Kammergericht, decided to refer the question to the Court of Justice on the compatibility of the German Law on employee participation with EU law. The Court stated that the situation of employees employed in a TUI subsidiary established in a member state other than Germany   needed to  be analysed not on the basis of the general prohibition on discrimination on grounds of nationality, but on the basis of the free movement of workers which is a specific rule against discrimination on the basis of nationality in respect of employment conditions.

The Court said that the situation of the employees at issue did not fall within the scope of the free movement of workers. The rules relating to the free movement of workers were not applicable to workers who had never exercised their freedom to move within the EU and who do not intend to do so. The fact that the subsidiary which employs the employees at issue is controlled by a parent company established in another member state (Germany in this instance) was not relevant in that regard.

Commenting on the situation of German  employees who might consider working abroad the Court said that the loss of the right to vote and to stand as a candidate in elections of workers’ representatives to the supervisory board of the German parent company and, as the case may be, the loss of the right to act or to continue to act as a representative on that board did not constitute an impediment to the free movement of workers.

The Court added that the free movement of workers did not grant to that worker the right to rely, in the host member state, on the conditions of employment which they enjoyed in the member state of origin under the national legislation of the latter state.

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