In a previous article, I claimed that the case Viking,[i] decided by the European Court of Justice (ECJ) in 2007, did not violate labour rights standards set by other bodies such as the European Court of Human Rights (ECtHR). The Viking case is usually associated with two others: cases Laval[ii] and Rüffert[iii]. Together, they prompted an outcry by trade-unions and labour lawyers. For instance, Professor Ewing, who taught me Labour law at King’s College London, asserted that the ECJ was undermining labour rights, in particular collective bargaining. Are these cases really as harmful to collective labour rights as has been claimed? This article will look at the applicable European law and at the motives of the ECJ judgments, and it will show that the ECJ case law is not anti-social.
I/ The existing legislation: the ‘Posted Workers Directive’[iv] (PWD)
The ECJ has to take decisions on the basis of existing European legislation. Accordingly, before examining the incriminated judgments, it is necessary to identify which rules apply. In this situation, the relevant legislation was the ‘Posted Workers Directive’ which sets rules applying “to undertakings established in a Member State which, in the framework of the transnational provision of services, post workers […] to the territory of a Member State” (Article 1(1)).
This Directive’s legal basis is the dispositions of the TFEU related to the economic freedoms (freedom of establishment and freedom to provide services). The economic purposes of this directive are also visible in the preamble which states that the PWD aims at “the completion of the internal market” (recital 3) and that a “climate of fair competition” is needed (recital 5). However, there is also a ‘social rationale’ in the PWD which provides “a ‘hard core’ of clearly defined protective rules [that] should be observed by the provider of services notwithstanding the duration of the worker’s posting” (recital 14).
The most important article of the PWD is Article 3 about the terms and conditions of employment. Its main dispositions are summarised below:
(1) National rules (laid down by law or universally applicable collective agreements) apply to posted workers in matters of:
(a) “Maximum work periods and minimum rest periods.
(b) Minimum paid holidays.
(c) The minimum rates of pay [as defined by national law and/or practice in the host MS], including overtime rates; this point does not apply to supplementary retirement pension schemes [nor to sick pay, according to the case law of the EFTA Court].
(d) The conditions for hiring out workers […].
(e) Health, safety and hygiene at work.
(f) Protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people.
(g) Equality of treatment between men and women and other provisions of non-discrimination.”
(2) to (6) set several exceptions.
(7), §1: “Paragraphs 1 to 6 shall not prevent application of terms and conditions of employment which are more favourable to workers.”
(8) defines “collective agreements or arbitration awards which have been declared ‘universally applicable’”: they must be “observed by all undertakings in a geographical area and in the profession or industry concerned”. There are alternative solutions where there is no system to declare universal application in the host MS. Professor Ewing pointed out that in the UK there are not many collective agreements in the private sector. And ‘gentlemen’s agreements’ do not come within the scope of Article 3(8).
(10) gives the possibility to the host MS to apply its rules, in a non-discriminatory manner, to undertakings of other MS posting workers on its territory, for public policy reasons.
Moreover, Article 4 of the PWD sets rules on cooperation between Member States to provide information about posted workers and posting undertakings.
Finally, before turning to the two ECJ judgments, it is worth noting that posting workers is not done only by cheap countries: France and Germany are among the countries posting most workers abroad. An appropriate deduction is that posting workers is also an answer to skills shortages, not only an instrument of social dumping.
II/ Case C-341/05, Laval 
Laval, a Latvian undertaking, wanted to post some of its workers in Sweden, where its wholly-owned subsidiary operated, to build a school. The Swedish trade-union (‘Byggnads’, which had a local branch called ‘Byggettan’) wanted to force Laval to enter into negotiations on the pay of these workers and to sign a collective agreement covering these workers. Because Laval refused, the trade-union called upon the solidarity of other Swedish sectoral trade-unions (‘Elektrikerna’), and a blockade of the construction site ensued. In the end, Laval gave up the contract.
The collective agreement that the Swedish trade-union wanted to sign with Laval did not fall within the scope of the PWD, because:
– It covered some matters not covered by the directive.
– It aimed at imposing more favourable conditions than those resulting from the relevant legislative provisions (which covered all the matters referred to in Article 3(1), except minimum rates of pay).
– Provisions regarding the level of remuneration to be paid were not “sufficiently precise and accessible”, so that they did not meet the criterion of minimum rate of pay (set in Article 3(1)(c)).
Since Sweden does not have a system to declare collective agreements universally applicable, foreign undertakings are not legally required to apply Swedish collective agreements, in order to avoid any discrimination in comparison with Swedish undertakings that do not apply such collective agreements.
The restriction to freedom to provide services could not be justified by the objective of protecting workers because the employer is required by Article 3(1) of the PWD “to observe a nucleus of mandatory rules for minimum protection in the host Member State” (para 59). Moreover, Article 3(7) of Directive 96/71 does not allow the host Member State to require “the observance of terms and conditions of employment which go beyond the mandatory rules for minimum protection” (para 80). This does not prevent undertakings from signing collective agreements that entail more favourable provisions for workers, but “the level of protection which must be guaranteed to workers posted to the territory of the host Member State is limited, in principle, to that provided for in Article 3(1), first subparagraph, (a) to (g) of Directive 96/71, unless, pursuant to the law or collective agreements in the Member State of origin, those workers already enjoy more favourable terms and conditions of employment as regards the matters referred to in that provision” (para 81). In addition, the PWD did not “harmonise the material content of those mandatory rules for minimum protection”, the content of which can be “freely defined by the Member States in compliance with the Treaty and the general principles of Community law” (para 60).
The Court recorded that the right to take collective action is a fundamental right, the exercise of which may, however, be subject to certain restrictions (cf. Art.28 of the Charter of Fundamental Rights of the EU). The right to take collective action can justify a restriction to the economic fundamental freedoms, but must be balanced against these in a proportionate manner (para 105). In this case, the outcome was unfavourable to the trade-unions: the collective action (i.e., the blockade) could not be “justified in the light of the public interest” and was a disproportionate means of protecting workers (para 110).
This outcome was severely criticised by trade-unions and parts of the doctrine, but it is actually far less anti-social than has been claimed. Indeed, the ECJ does not hinder collective bargaining and collective action; it simply ensures the respect of the distribution of competence between the trade-union in the home State and the trade-union in the host State on the basis of the PWD. More precisely, the posted Latvian workers could enjoy a higher protection than set in the PWD, but collective bargaining would have to take place with the Latvian trade-union, not the Swedish one. This allows Article 3(7) to make sense: “[the PWD] shall not prevent application of terms and conditions of employment which are more favourable to workers.” Contrary to the claim of some scholars and trade-unionists, this does not cover only ‘voluntary commitments’ by the undertaking, but also collective agreements signed in the home State. In addition, it is worth noting that the Latvian posted workers were not members of the defending Swedish trade-unions and that these trade-unions had no member employed by Laval, so the legitimacy of these trade-unions’ involvement can be raised.
The second reason why this judgment does not undermine the protection of workers is that, as the ECJ itself states at para 60, the Member States remain free to determine the “material content” of ‘minimum protection’, i.e., they can impose a higher degree of protection but they have to apply it to all undertakings. In the present case, apart from the rules on minimum pay, the other provisions were set by law, which could have set higher standards if Swedish authorities had wanted to. As to the collective agreement, it did not apply to every undertaking as it was not universally applicable. Therefore, it was not justified to attempt to force a specific foreign undertaking (here, Laval) to sign it.
III/ Case C-346/06, Rüffert 
In this case, the incriminated legislation required the public contracting authority to choose only contractors who agreed to pay their employees at least the wage provided for in the collective agreement in force at the place where those services are performed. The winning bidder had subcontracted some work to a Polish undertaking that did not respect the legislation. This led to the termination of the contract.
Like in Laval, “the remuneration was not determined by one of the means laid down in Article 3(1) and (8) of the directive”: the collective agreement was not universally applicable (para 26) and the rate of pay set in the collective agreement could not be a “minimum rate of pay” (para 40). So, the legislation was contrary to the PWD and to the freedom to provide services. The Court considered that the restriction to the freedom to provide services was not justified by the objective of ensuring the protection of workers, since the collective agreement applies only to a part of the construction sector because the legislation applied only to public and not to private contracts and the collective agreement had not been declared universally applicable (para 39). Again, the ECJ does not criticise the concept of minimum rate of pay, not does it express an appreciation regarding the level of pay; it simply notes that all undertakings are not treated in the same way (because the collective agreement is not universally applicable), and therefore the law violates European rules.
Another of my teachers, Nicola Countouris, claims that “the PWD is not for minimum harmonisation but for exhaustive harmonisation.” However, this article showed that, contrary to the fears of trade-unionists and labour lawyers, the ECJ judgments in Laval and Rüffert do not undermine worker’s protection, nor collective bargaining and action, but simply indicate which country (and, potentially, which trade-union) is competent to set which rules. The fact that trade-unions are weak in some countries, e.g., the UK, cannot justify that a court ignores the rules determined within a political process, nor that it accepts practices that discriminate between foreign undertakings and some domestic firms.
[i] Case C-438/05, Viking 
[ii] Case C-341/05, Laval 
[iii] Case C-346/06, Rûffert