EU Court of Justice partly upholds Minimum Wage Directive

Brussels – The European minimum wage directive will not be touched. Or rather, it will have to be fine-tuned, but it remains in place. In a judgment issued today (11 November), the Court of Justice of the European Union confirmed the validity of most of the law, annulling only two provisions that constitute an interference with the exclusive competence of member states in wage determination. 

Adopted in 2022, the directive does not require Member States to introduce a single, uniform minimum wage, but essentially establishes a framework to ensure adequate minimum wages in those countries where they are set by law, while promoting stronger collective bargaining on wage setting in the others. Denmark – one of the five countries of the EU that has not yet adopted a guaranteed minimum wage by law, along with Italy, Austria, Finland, and Sweden – dragged the European Commission before the Court in Luxembourg, arguing that the directive violates the Treaties, as it legislates on pay and the right of association, areas that are outside Brussels’ competence. Copenhagen demanded its complete annulment.

In January, the Advocate General of the Court ruled in favour of Denmark, recommending that the judges follow up on the appeal. Instead, today, the Court of Justice agreed with Copenhagen only in part, finding interference in only two specific provisions. The first concerns the criteria that the directive requires Member States with a statutory minimum wage to consider in the procedures for setting and updating it. The second interference in national competences is the provision that effectively prevents the reduction of minimum wages when they are subject to an automatic indexation mechanism. 

These two safeguards will be removed. However, the Court dismissed the rest of Denmark’s appeal, effectively confirming the validity of most of the directive in question. According to the Luxembourg judges, the exclusive national competence provided for by the Treaties “does not extend to all matters having any connection whatsoever with pay or the right of association” nor does it cover “any measure which, in practice, would affect or have an effect on the level of pay.” Interference by Brussels only occurs in the direct determination of remuneration.

As for the provision regarding the promotion of collective bargaining on wage determination, the Court excluded that it implies an interference of Union law with the right of association. “That provision does not oblige Member States to require the accession of a greater
number of workers to a trade union organisation,” the judgment clarifies.

The European Commission immediately welcomed the ruling that “largely confirms the legal soundness” of the directive. President Ursula von der Leyen, in a note, called the verdict “a milestone” that “concerns the dignity, fairness, and financial security​” of European citizens. Von der Leyen reiterated that the directive must be implemented “with full respect for national traditions, the autonomy of social partners and the importance of collective bargaining.” On the two provisions annulled by the Court, a spokeswoman for the executive explained that the Commission was “analyzing the impact” of this decision. She estimated that “it will not significantly affect the general framework.”