The employment title (Title IX) of the Treaty on the Functioning of the European Union (TFEU), comprising Articles 145-150 TFEU (formerly Articles 125-130 of the EC Treaty), commits Member States and the Union to work towards ‘developing a coordinated strategy for employment and particularly for promoting a skilled, trained and adaptable workforce and labour markets responsive to economic change’ with a view to achieving the objectives defined in Article 3 of the Treaty on European Union – these include the development of a ‘highly competitive social market economy, aiming at full employment and social progress’. Further, Article 9 TFEU states that EU policies and practices should take into account the promotion of a high level of employment.
The institutional structure of the European Employment Strategy (EES) is provided for in Article 2 TFEU, which states that Member States shall coordinate their economic and employment policies, within arrangement as defined by the TFEU.
The employment title of the TFEU (specifically Article 148) sets out the specific process for implementing the EES. The Council and Commission formulate an annual joint report that is put to the European Council. On the basis of the conclusions of the European Council, the Commission draws up employment guidelines to be adopted by the Council and which the Member States ‘shall take into account in their employment policies.’ Each Member State is obliged to draft an annual report (national employment report) on ‘the principal measures taken to implement its employment policy in the light of the guidelines for employment’. This goes to the Council and Commission, which then prepare a joint report to the European Council of that year, which, on the basis of the proposals by the Commission, may make (non-binding) recommendations to Member States concerning their employment policies.
This non-binding process is based on the open method of coordination (OMC) process, under which the Member States are evaluated by one another (peer pressure), with the Commission's role being limited to surveillance. The European Parliament and the Court of Justice play virtually no part in the OMC process.
The employment title is usually characterised as a typical ‘soft law’ coordination measure. The Member States engage in the field of employment policy, but the title does not confer any competences on the Community to regulate national labour markets. However, there are links between the employment title and Community policy and labour regulation. For example, Article 147 TFEU includes an explicit provision according to which ‘the objective of a high level of employment shall be taken into consideration in the formulation and implementation of Community policies and activities.’ Further, in framework agreements reached in the EU social dialogue and transformed into Union Directives, the social partners have explicitly regarded their agreement as, in the words of one example, ‘a contribution to the overall European strategy on employment’ (Preamble of the European Framework Agreement on part-time work, annexed to Council Directive 97/81/EC).