Prof Dagmar Schiek UCD RIGHTS-TO-UNITE
AG Emiliou’s opinion in case C-19/23 for the European Court of Justice on the validity of the minimum wage directive (Directive (EU) 2022/2014) of 14 January 2025 has triggered some debate in the blog and social media sphere (for example: Elisabeth Brameshuber, Roland Erne, Claire Kilpatrick, Mette Klingsten and the two Thorstens Schulte & Mueller). Yet, two really important issues have not been sufficiently broached yet. First, legal commentaries so far miss the exact limitations of the EU regulatory competence in this matter, and second, the wider issue of employment law directives not creating rights but instead generating new governance feedback loops has not been taken up. This blog endeavours to address those points (provisionally).
Denmark, supported by Sweden, demands nullification of the Minimum Wages Directive on the basis of the EU lacking competence. Should this succeed? That depends on an interpretation of Article 153 paragraph 5 TFEU, according to which “The provisions of this Article shall not apply to pay, the right of association, the right to strike or the right to impose lock-outs.”.
Article 153 overall defines the EU’s competence in employment matters. Paragraph 2 (b) empowers the Union to legislate, by means of directives, minimum requirements for gradual implementation in the fields covered by paragraph one letters (a) to (i), which again comprise working conditions (letter b) and representation and collective defence of the interests of workers and employers (letter f) – all this is duly cited by Directive (EU) 2022/2041 on adequate minimum wages in Europe.
As Brameshuber has also highlighted, AG Emiliou’s opinion is contradictory, in that he interprets the limitation of the EU’s competence in relation to freedom of association and right to take collective industrial action narrowly, while he reads the limitation in relation to pay widely. This interpretation of Article 153 TFEU, and in particular its paragraph 5, is not only unconvincing, but indefensible from a systematic perspective due to neglecting a holistic interpretation of paragraph 5.
While there is no case law yet on the rights of association and collective action exception, the ECJ has ruled on the pay exception, because it was used to challenge directives guaranteeing equal pay to temporary agency workers (e.g. the IMPACT ruling of 2008) and part time employees (ECJ Bruno 2010), and irrespective of age (ECJ Specht et al, 2014), as well as in Hungary’s 2020 challenge to the reform of the EU’s directive on posted workers – all duly reported in the EU Commission’s Legal Service opinion on the draft directive in 2021.
The Court developed a specific exclusion for pay regulation, which is repeated over several cases. According to this definition, the “exception must be construed as covering measures — such as the equivalence of all or some of the constituent parts of pay and/or the level of pay in the Member States, or the setting of a minimum guaranteed wage — that amount to direct interference by EU law in the determination of pay within the European Union.” (ECJ Specht et al paragraph 33 with further references)
The Court also specified that paragraph 5 must not be read widely to exclude all EU legislation affecting all aspects of pay, because this would render much of Article 153 TFEU immaterial.
Emiliou has a point where he states that this case is the first one to challenge the Court to address both the pay exception and the freedom of association/collective industrial action exception. However, the weakness of his opinion rests on his treatment of Article 153 TFEU containing two separate, unconnected exceptions from the EU’s regulatory competence. This is far from convincing.
The substance of Article 153 (5) first emerged in the protocol on social policy annexed to the Treaty of Maastricht as Article 2 paragraph 6, and remained unchanged after its inclusion in the Treaties in 1997. The European Social Partners were extensively involved in adopting that agreement, and even drafted part of the provisions, though not Article 2. Yet, that legislative history underlines that the exception was meant to protect the common tradition in the then EEC Member States, that wages are set contractually, and that freedom of association underpinned by collective industrial action (instead of collective begging) had a role in the process.
Accordingly, the pay exception was introduced because of the exception for freedom of association and collective industrial action and vice versa. How can any EU lawyer propose to disregard this close connection? AG Emiliou correctly follows the Court’s case law on the pay exception when interpreting the notion of freedom and association and collective industrial action used in Article 153 section 5. He argues that this, as an exception, must be read narrowly, and in particular cannot render the EU’s competence to legislate on representation and collective defence of employers and workers under Article 153 section 1 immaterial. Accordingly, he states that the EU is competent to legislate on collective bargaining. This is in line with the Court’s case law on the pay exception. However, he rejects that same principle when interpreting the pay exception, and demands that it must be read widely. This is not only contradictory, but also disregards the close link between those two aspects of Article 153 paragraph 5 TFEU.
The challenge to the Minimum Wage Directive requires the Court for the first time to consider that connection, which was part of the original rationale behind Article 153 (5) TFEU. That rationale remains current, as exposed by the very conflict leading to this opinion and the Court’s expected judgment: Denmark and Sweden defend their industrial relations model, which renders freedom of association underpinned by collective industrial action central for setting wages, to the exclusion of state measures.
A textual, systematic and teleological interpretation, which also is in line with the fundamental rights base of collective bargaining and collective industrial action in Articles 12 and 28 CFREU, would conclude that the paragraph 5 exception should cover any Union legislation that usurps the role of freedom of association underpinned by collective industrial action in matters of wage setting. That interpretation also happens to be in line with past case law, which developed the formula quoted above.
Given the very limited substance of the Minimum Wages Directive in terms of hard obligations for Member States, it would be difficult to find that the EU usurps the wage setting role reserved to freedom of association supported by collective industrial action in some Member States. The Directive’s long title already indicates that this is not the case: it is the Directive on adequate minimum wages, not a singular EU minimum wage.
While under national legislation in the majority of Member States workers have a right to be paid at least the minimum wage, and in the remainder of the Member States those covered by collective agreements have the right to be paid at least the collectively agreed wage, this directive does not aspire to create any individual rights in relation to minimum wages or collective rights in relation to collective bargaining at EU level. Article 1 section (a) letter (c) only refers to rights guaranteed at national levels, and provisions on their effective enforcement in Articles 12 and 13 retain that focus.
The Directive’s substantive provisions are entirely procedural, and moreover offer a variety of modifications and alternative approaches for Member States. They do not even require that any statutory minimum wage is introduced. Interestingly, the Directive creates more obligations for Member States which have a statutory minimum wage, as shown in the summary below.
The Directive allows Member States to switch regulatory models from a statutory minimum wage to a collective bargaining focus without penalty, at the expense of regulatory impact. Its main obligation consists of taking measures to enable collective bargaining, and that obligation expires once the collective bargaining coverage is raised to 80%. Further, all Member States must ensure that public procurement procedures safeguard rights to collective bargaining, and protect workers and their representatives from adverse treatment when engaging in enforcement of statutory and collectively agreed minimum wages. There is not even a hint of creating a legally binding European minimum wage. This means that the challenge of Denmark, supported by Sweden, must fail. The EU has not usurped the regulation of wages to the detriment of existing industrial relations models.
The Directive follows a tendency which Achim Seifert bemoaned in EU employment legislation as early as 208: the EU has taken a turn to new governance even in binding employment legislation. EU directives increasingly focus on procedural rules, leaving the substance of the matter to the Member States. Given its leniency for Member States without statutory minimum wages, the Minimum Wage Directive may even entice some of them to rescind minimum wage legislation. The contradiction between the EU new economic governance measures on national minimum wages, which frequently recommended reduction of that same minimum wage, and the substance of Directive (EU) 2022/2014 may be less pronounced than assumed (eg by Erne).
However, creating high expectations in a European minimum wage by a much-acclaimed directive, which then hinders neither the Member States nor the EU itself to continue down-grading minimum wages at national levels may be a dangerous course in times when the public already has low expectations in legislative processes in terms of improving their working and living conditions.
It is true that the competence limit of the Treaty does not allow the EU to do much more. Yet, the Court could further contribute to this spiral of negative perception regarding EU institutions by ruling that the Directive indeed exceeds the EU competence. Here is hoping that it does not follow that course as proposed by AG Emiliou, but instead relies on careful legal reasoning rooted in the purpose of the Treaty provisions on the EU’s competence in employment matters.