These concern, on one hand, the criteria for setting and updating wages. On the other hand, the case involves a rule that prohibits wage reductions when wages are subject to automatic indexation.
The lawsuit against the regulation, adopted in 2022 by EU states by majority vote, was filed by Denmark with Sweden’s support. In the Nordic countries, statutory wage floors are generally viewed critically as they are seen as a threat to the widespread and relatively high collectively bargained wage rates. The court partially upheld Denmark’s claims.
The judges ruled that by listing criteria for determining minimum wages, the EU legislature directly interfered with wage-setting. According to EU treaties, the question of wage levels falls under the competence of member states. The EU can regulate, for instance, working conditions through directives.
However, the directive will not need to be completely repealed. This was previously demanded by the Advocate General at the European Court.
The directive still obliges countries to strive for high collective bargaining coverage. According to the court, this does not constitute direct interference with the right to association, which also falls under EU countries’ competence. This provision does not, for example, prescribe that member states must ensure more workers join a trade union.
Employers: “An Encroaching Decision”
In Germany, the directive has not yet been implemented. However, it imposes additional tasks for Germany too. For instance, an action plan must be presented to increase the proportion of workers covered by collective agreements. This obligation applies under the Minimum Wage Directive if collective agreements cover less than 80 percent of workers.
According to the Federal Ministry of Labour and Social Affairs, Germany has not yet done this, even though it falls below the threshold. Reportedly, this must happen by December 31. Feedback has already been received from social partners.
“Contrary to the European trend, collective bargaining coverage in Germany has sharply declined over the last two decades, to around 50 percent,” stated political scientist Martin Höpner from the Max Planck Institute for the Study of Societies. This is dramatic, and the German legislature must definitely do more in this direction.
German employers, conversely, sharply criticized the decision. “The EU Court issued an encroaching decision and confirmed most of the directive,” stated Steffen Kampeter, Chief Executive of the Confederation of German Employers’ Associations. Further EU intervention in social policy must be prevented.
However, the ruling does not directly affect the level of the minimum wage in Germany as such. The federal government recently decided that the current minimum wage of €12.82 will increase to €13.90 per hour from January 1st, and a year later by another 70 cents to €14.60 per hour.
It remains unclear whether, and to what extent, the existing national legislation – Germany’s Minimum Wage Act, which has been in force for eleven years – needs to be adapted to EU law. In connection with the EU Minimum Wage Directive, there has long been a demand for employers to pay at least 60 percent of the average gross wage in Germany. The Minimum Wage Directive provides for using such reference values as a basis for assessing wage adequacy.
Germany’s Minimum Wage Commission, comprising representatives of employers and employees, also considered the criterion specified in the directive in its latest decision – though not exclusively. At that time, according to trade unions, the minimum wage in Germany should have been raised to over €15.
The SPD and trade unions particularly advocated for using the 60 percent criterion in the debate on raising the minimum wage. “This could achieve a minimum wage of €15 in 2026,” is also stated in the coalition agreement of the CDU/CSU and SPD. Since the German Minimum Wage Act primarily uses the past development of collectively agreed wages, rather than the average wage, as a benchmark, there is already an opinion in legal scholarship that the increase adopted in Germany could be “invalid.”
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