EU Law Blog

Minimum Wages, Collective Agreements and Posted Workers: Case C-346/06

The Court of Justice has handed down an great judgment in Case C-346/06 Dirk Rüffert v. Land Niedersachsen defending the rights of workers posted from a low wage state to work in a high wage state.

The Court held that if a member State has in force a system for declaring the rate of pay fixed by a collective agreement to be universally applicable but fails to make such a declaration, a legislative measure of that member State applicable to public contracts is precluded by Directive 96/71/EC on the posting of workers in the framework of the provision of services from imposing a requirement on providers of cross-border services who post workers to that member State to comply with the rate of pay fixed in the collective agreement.

Here's the story. A German contractor was awarded the contract to build a prison and it undertook to pay those working on the site the wages at the rate fixed in the "Buildings and public works" collective agreement. But the German contractor employed a Polish subcontractor whose workers posted from Poland were paid roughly half the German rate fixed in the collective agreement.

The law of the Land of Lower Saxony - where the prison was being built - on the award of public contracts states that public works contracts may be awarded only to undertakings which agree in writing to pay their employees at least the wages at the rate prescribed by the applicable collective agreement. The contractor must also undertake to impose that obligation on subcontractors and to monitor their compliance with it. Non-compliance with that undertaking triggers the payment of a contractual penalty. Because the Polish subcontractor breached the German contractor's obligation, the German company was fined.

The German company appealed the fine in the competent German court which then referred the question to the Court of Justice whether Article 49 EC on the freedom to provide services precludes a statutory obligation requiring a contractor in a public works contract to undertake to pay its employees at least the remuneration prescribed by the applicable collective agreement.

The Court of Justice held that, in the particular circumstances of this case, the law of the Land of Lower Saxony was contrary to Directive 96/71/EC read in the light of Article 49 EC.

The Court found that the rate of pay provided for by the ‘Buildings and public works’ collective agreement was not fixed according to one of the procedures laid down by Directive 96/71/EC. Although Germany has a system for declaring collective agreements to be of universal application, no such declaration appears to have been made in respect of the collective agreement applicable in this case. As a result, such a rate of pay cannot be considered to constitute a minimum rate of pay within the meaning of Article 3(1)(c) of Directive 96/71 which member States are entitled to impose, pursuant to that directive, on undertakings established in other member States, in the framework of the transnational provision of services (see, Case C‑341/05 Laval un Partneri, paragraphs 70 and 71 - see our post here).

The Court also held that the law of the Land of Lower Saxony was contrary to Article 49 EC. By requiring undertakings performing public works contracts and, indirectly, their subcontractors to apply the minimum wage laid down by the ‘Buildings and public works’ collective agreement, a law such as the one in issue may impose on service providers established in another member State where minimum rates of pay are lower an additional economic burden that may prohibit, impede or render less attractive the provision of their services in the host member State. Therefore, such a measure is capable of constituting a restriction within the meaning of Article 49 EC.

The Court also found that no plausible justification of the measure had been put forward.

Same Sex Partnerships, Survivor's Pension and Discrimination: Case C-267/07

The Court of Justice handed down a judgment in Case C-267/06 Tadao Maruko v. Verorgungsanstalt des deutschen Bühnen that is a step, a small step, toward the recognition of gay marriage in EC law.

Mr. Maruko lived in Germany with his male partner, a designer of theatrical costumes. In 2001 they registered their relationship under the German law on registered life partnership of February 16th 2001 (BGBl. 2001 I, p. 266). Mr Maruko's partner had been a member of the VddB, the pension fund for theatrical professionals, since 1959. Mr. Maruko's life partner died in January 2005. Mr. Maruko then applied to the VddB for a widower's pension but his application was rejected because the VddB rules made no provision for such an entitlement in the case of surviving life partners. He challenged that decision before the referring German court.

The referring German court held that as a matter of German law it was clear that heterosexual couples could enter into marriage and be entitled to survivor's benefits in the event of the death of one of the spouses. The insured person and Mr Maruko could not validly marry each other in German law because of their sexual orientation. Consequently, it referred a series of questions to the Cort of Justice on whether refusal to grant a survivor’s pension to a life partner constitutes discrimination prohibited by Directive 2000/78/EC of November 27th 2000 establishing a general framework for equal treatment in employment and occupation. The aim of that directive is to combat, inter alia, discrimination on grounds of sexual orientation.

The Court of Justice held that, in principle, such a difference in treatment was a form of discrimination prohibited by Directive 2000/78 if surviving spouses and surviving life partners are in a comparable situation in German law as regards their pension rights.

But first the Court of Justice had to determine whether Directive 2000/78 applied at all because it does not cover social security and social protection schemes the benefits of which are not equivalent to pay. The Court held it did apply as the benefit was equivalent to pay. It found that the occupational pension scheme managed by the VddB has its origin in a collective agreement on employment and is funded exclusively by the workers and their employers, without any financial involvement on the part of the State.

On the issue of discrimination, the Court held that according to the order for a preliminary reference from the German court that Germany, while reserving marriage solely to persons of different sex, has established the life partnership, the conditions of which have gradually been made equivalent to those applicable to marriage. The provisions of the VddB restrict entitlement to survivor’s pensions to surviving spouses with the consequence that life partners are thus treated less favorably than surviving spouses.

The Court added that the referring court must determine whether, as a matter of German law, surviving spouses and surviving life partners are in a comparable position as regards pension rights.

So, the Court of Justice does not go as far as stating that EC law itself must recognize gay marriage but it must draw out the consequences should national law confer a status equivalent to marriage to same sex partnerships.

State liability, implementation of directives and state discretion: Case C-278/05

The Court of Justice has handed down a neat judgment on the liability of the member States when faced with the implementation of a provision of a directive which leaves a certain margin of discretion to the States on how it should be implemented.

Case C-278/05 Carol Marilyn Robins and Others concerns claims for old-age benefits under Directive 80/987/EEC on the protection of workers in the event of the employer’s insolvency. That Directive requires that the member States ensure that the necessary measures are taken to protect the interests of employees and former employees in the event of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits under supplementary occupational pension schemes. The claimants in the national proceedings, Ms Robins and 835 others, were former employees of an English company which went into liquidation in April 2003. They were members of final-salary pension schemes funded by their employer. The schemes were terminated in July 2002 and are in the process of being wound up. There were insufficient assets to cover all the benefits of all members, and the benefits of non-pensioners will therefore be reduced. According to United Kingdom legislation, the claimants will not receive all the benefits to which they were entitled. Two of the claimants will receive only 20% and 49% respectively of those benefits.

The claimants considered that the United Kingdom legislation did not provide them with the level of protection called for by Directive 80/987/EEC. Consequently, they brought an action against the British Government before the High Court for compensation for the loss suffered. The English High Court referred questions to the Court of Justice on whether the member States are required to fund themselves the rights to old-age benefits and if so to fund them in full, whether the United Kingdom legislation compatible with the directive and what is the liability of the member State in the case of incorrect transposition of Directive 80/987/EEC.

In the first place, the Court held that the Directive does not oblige the member States themselves to fund the rights to old-age benefits: The directive leaves the member States some latitude as to the means to be adopted to ensure protection and may impose an obligation on employers to insure or provide for the setting up of a guarantee institution in respect of which it will lay down the detailed rules for funding, rather than provide for funding by the public authorities. Moreover, the Court held that the directive does no more than prescribe in general terms the adoption of the measures necessary to ‘protect the interests’ of the persons concerned and thus gives the member States considerable latitude which excludes an obligation to guarantee in full.

Secondly, the Court held that the system of protection as provided for in the United Kingdom was in principle compatible with the directive.

Finally, on the issue of the liability of the State in damages, the Court repeated its settled case-law (see, in particular, Joined Cases C-46/93 and C-46/93 Brasserie du Pêcheur and Factortame, paragraph 51; Case C-5/94 Hedley Lomas, paragraph 25; Case C-424/97 Haim, paragraph 36; and Case C-63/01 Evans, paragraph 83), for a Member State to incur liability for damage caused to individuals by a breach of Community law it is necessary that:
– the rule of law infringed should be intended to confer rights on individuals;
– the breach should be sufficiently serious;
– there should be a direct causal link between the breach of the obligation incumbent on the State and the damage sustained by the injured parties.

The condition requiring a sufficiently serious breach of Community law implies manifest and grave disregard by the member State of the limits set on its discretion, the factors to be taken into consideration in this connection being, inter alia, the degree of clarity and precision of the rule infringed and the measure of discretion left by that rule to the national authorities (Joined Cases C-46/93 and C-46/93 Brasserie du Pêcheur and Factortame, paragraphs 55 and 56). If, however, the member State was not called upon to make any legislative choices and had only considerably reduced, or no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach (see Case C-5/94 Hedley Lomas, paragraph 28). The discretion enjoyed by the member State thus constitutes an important criterion in determining whether there has been a sufficiently serious breach of Community law. That discretion is broadly dependent on the degree of clarity and precision of the rule infringed.

The liability of a member State by reason of incorrect transposition of that provision is conditional on a finding by the national court of manifest and serious disregard by that State for the limits set on its discretion. In order to determine whether that condition is satisfied, the national court hearing a claim for compensation must take account of all the factors that characterize the situation put before it (Case C-224/01 Köbler). Consequently, in the present case the national court will have to take into account the clarity and precision of the Directive with regard to the level of protection required.

Interestingly, the Court set out some pointers for the national court. It noted for instance that none of the member States and the Commission which have submitted observations had been able to suggest with precision the minimum degree of protection that in their view is required by the Directive. Also, the Court indicated that the national court may also take into consideration Commission report COM(95) 164 final of June 15, 1995 concerning the transposition of the Directive by the Member States which concluded that the United Kingdom had implemented Directive 80/987/EEC correctly.

United Kingdom "guidelines" breach the working time directive: Case C-484/04

The Court of Justice held in Case C-484/04 Commission v. United Kingdom that the United Kingdom has breached Directive 93/104/EC - the Working Time Directive - by adopting guidelines which give the impression of curtailing rights conferred by the Directive itself.

The Working Time Directive requires member States to take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24-hour period and, per each seven-day period, to a minimum uninterrupted rest period of 24 hours plus the 11 hours’ daily rest. The United Kingdom adopted a statutory instrument (Working Time Regulations 1998 (WTR) (SI 1998 n° 1833) to implement the Directive. But then, to help people understand the WTR, the Department of Trade and Industry published a set of guidelines that stated in Section 5 and in Section 6 that ‘employers must make sure that workers can take their rest, but are not required to make sure they do take their rest’.

The Commission considered that the guidelines endorse and encourage a practice of non-compliance with the requirements of the Directive. Consequently, it brought Article 226 EC proceedings against the United Kingdom.

The Court held in favor of the Commission. It held that the guidelines let it be understood by all that while they cannot prevent the rest periods from being taken by workers, the employers are not obliged (according to the Guidelines) to ensure that the workers actually exercise such a right. As a result, the Court held that the guidelines effectively render the rights granted in the Directive meaningless.

The judgment is an interesting and apparently innovative one because it shows how a member State can breach EC law by adopting legislation that is compatible with a directive on the one hand and then by adopting a measure that is ostensibly not legally binding, like a set of guidelines, that seems to go back on the rights granted by the implementing legislation. As a result, the behavior of the member State is not conducive to guaranteeing that the objectives of a Directive are met.

The Court issued a brief press release about the judgment.