TILBURG UNIVERSITY THE POSTING OF WORKERS DIRECTIVE IN THE CONTEXT OF THE BALTIC STATES. Master thesis

Transcription

1 TILBURG UNIVERSITY THE POSTING OF WORKERS DIRECTIVE IN THE CONTEXT OF THE BALTIC STATES Master thesis LLM International and European Public Law: European Union Law track Agnė Vaitkevičiūtė, Anr Defended on 25 June, 2014 Supervisor: prof. Frank Hendrickx

2 Table of contents Introduction Posting of workers from the perspective of the Court of Justice of the European Union and the Court of the European Free Trade Association Laval and the Swedish collective agreements in the construction sector Rüffert and the German collective agreements in the construction sector Commission v. Luxembourg and the public policy exception Isbir and the determination of minimum wages The EFTA Court decision in STX Norway Offshore Lithuania, Latvia and Estonia as host Member States receiving posted workers The implementation of the Posting directive in national law from the host state s perspective Substantive issues Legal background regulating the posting of workers Appropriateness of the transposition of the Posting directive Article 1(1) and 1(3) of the Posting directive Article 2 of the Posting directive Article 3(1), 3(7) and 3(8) of the Posting directive Minimum wages in the Baltic countries Article 3(10) of the Posting directive Procedural issues Institutions involved in the application of the Posting directive Access to information about posting and administrative cooperation The application of control measures National courts practice Lithuania, Latvia and Estonia as home Member States posting workers The implementation of the Posting directive in Finland, Germany, Sweden and Norway in relation to minimum wages Setting of minimum wages in the construction sector in Finland, Germany, Sweden and Norway Collective agreements as instruments for fixing minimum wages Minimum wages in the construction sector in Finland, Germany, Sweden and Norway Posting of workers in the practice of national courts Conclusions Bibliography

3 Introduction Research problem. Transnational posting has become a widespread phenomenon in the Member States of the EU there are more and more workers posted from one Member State to another to temporally perform particular work, especially in the construction industry 1. In order to balance the freedom to provide services and to safeguard the social protection of posted workers 2, the Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (hereinafter referred to as the Posting directive) 3 has been adopted. Even though the Member States of the EU have implemented the Posting directive in their national legal systems, there are still a number of issues related to social dumping which leave a broad field for discussion. These issues are particularly relevant for the low wage Baltic states posting workers in the most popular construction sector to Finland, Sweden, Germany and Norway. On the other hand, workers are posted to the Baltic countries, what means that their social rights must be similarly guaranteed within the scope of the Posting directive. The first issue is the restrictive interpretation of the Posting directive in the practice of the Court of Justice of the European Union (hereinafter referred to as the CJEU) and the Court of the European Free Trade Association (hereinafter referred to as the EFTA Court). Furthermore, it has to be ascertained if the Posting directive is a powerful tool for safeguarding the social protection of workers posted to the Baltic states. That is specifically relevant for their right to get minimum wages of the host Member State and raises a question if the Baltic states can guarantee posted workers more favourable minimum wages than their home Member States. It must also be answered if the Posting directive, insofar as it is related to minimum wages, ensures the social protection of workers posted from the Baltic countries to work in high wage EU Member States, such as Sweden, Finland, Germany and Norway 4. Moreover, it has to be identified how workers posted from the Baltic countries can take full advantage of opportunities offered by the Posting directive, insofar as it is related to minimum wages in the construction sector in Sweden, Finland, Germany and Norway. Finally, it must be answered how national courts dealing with posting cases can contribute to the social protection of posted workers. Therefore, the aim of this research is to examine how the Posting directive is to be interpreted and applied in the context of the Baltic states. 1 Commission, Posting of workers in the framework of the provision of services: maximizing its benefits and potential while guaranteeing the protection of workers (Communication) COM(2007) 304 final, 3. 2 Mijke Houwerzijl, Towards a More Effective Posting Directive In Roger Blanpain (ed), Freedom of Services in the European Union Labour and Social Security Law: the Bolkestein Initiative (Kluwer Law International, 2006) Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services [1997] OJ L18. 4 Norway is a member of the European Free Trade Association. 3

4 Considering what was mentioned above, the research question can be identified as follows: to find out whether the generally discussed problematic issues about the posting of workers raise problems to three Baltic countries, how these countries deal with these issues in practice as host and home Member States and how the social protection of posted workers, in particular as it is related to minimum wages, should be safeguarded. This research is structured and arguments are unfolded in three main parts and the concluding part. The first part deals with the most relevant issues of interpretation and application of the Posting directive by relying on the CJEU s judgments in Laval 5, Commission v. Luxembourg 6, Rüffert 7, Isbir 8 cases and the EFTA Court decision in STX Norway Offshore 9 case. The second part of the master thesis analyses the implementation of both substantive and procedural provisions of the Posting directive in national legal systems of the Baltic states. This part similarly deals with the most relevant issues of the application of the Posting directive in the Baltic countries from the host state perspective. The third part aims to disclose the posting of workers from the Baltic states from the home state perspective. Therefore, this part examines the implementation and application of the Posting directive, insofar as it is related to minimum wages in the construction sector in Finland, Sweden, Germany and Norway. The concluding part will provide an answer to the research question in light of the investigation carried out and will propose particular conclusions. The sources of the master thesis. Main sources of this master thesis are EU and national legal acts, documents of the European Commission (hereinafter referred to as the Commission), the practice of the CJEU, the EFTA Court and national courts, collective agreements applicable in the construction sector in Finland, Sweden, Germany and Norway, legal doctrine and other documents (reports, studies). The Posting directive and legal documents of the Commission, such as communications 10, implementation reports 11, proposals 12, staff working documents 13, is an important source and the 5 Case C-341/05 Laval [2007] ECR I Case C-319/06 Commission v. Luxembourg [2008] ECR I Case C-346/06 Rüffert [2008] ECR I Case C-522/12 Isbir [2013] ECR 0000 (not yet reported) January 2012 Judgment of the EFTA Court in Case E-2/11, STX Norway Offshore v. Norwegian State. 10 Commission Communication on posting of workers (n 1). 11 Report from the Commission on the implementation of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (2003): < accessed 25 April 2014; Report from the Commission on the implementation of Dorective 96/71 of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services New Member States (2007): < accessed 25 April Commission, Proposal for a Directive of the European Parliament and of the Council on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services COM(2012) 131 final, 13; see the information on the website of the European Parliament: 4

5 starting point for the analysis of the content of relevant legal norms of the Posting directive and their application in practice. National legal acts of Lithuania, Latvia, Estonia, Finland, Sweden, Germany and Norway implementing the Posting directive are similarly of great significance to examine the transposition of the Posting directive in national legal systems. It has to be emphasized that legal acts of Finland, Sweden, Germany and Norway, transposing the Posting directive, are analysed insofar as they are related to minimum wages and instruments where minimum wages can be fixed. Collective agreements concluded in the construction sector in Finland, Sweden, Germany and Norway is another important source for analysing constituent elements of minimum wages applicable in the construction sector in these countries. The jurisprudence of the CJEU and the EFTA Court is relevant for interpretation and application of particular provisions of the Posting directive. The practice of national courts is similarly significant for this research as a valuable resource of application of the Posting directive. Other documents, such as reports 14, comparative reports 15 and background papers 16 are also relevant for our research in relation to the transposition of the Posting directive into national legal systems of Lithuania, Latvia, Estonia, Finland, Germany, Sweden and Norway. Legal doctrine is of great importance for the purpose of our research. However, the analysis of legal doctrine shows that posting in the context of three Baltic states still needs to be thoroughly researched. Legal scholars mostly deal with general problematic issues of posting, such as the relationship between the protection of workers and freedom to provide services (R. Giesen 17, G. Bertola and L. Mola 18, C. Barnard 19, V. Hatzoupoulus and T. U. Do 20, M. Biagi 21 ) and relevant < > accessed 27 April 2014; see also the information on the website of the European Commission: < > accessed 5 June Commission, Staff Working Document Impact Assessment: revision of the legislative framework on the posting of workers in the context of provision of service SWD(2012) 63 final. 14 Thematic Report of the European network of legal experts in the field of labour law on challenges of cross-border mobility (2008): < > accessed 25 April 2014; Eurofound Report: Posted workers in the European Union (2010): < > accessed 25 April Aukje van Hoek and Mijke Houwerzijl, Comparative study on the legal aspects of the posting of workers in the framework of the provision of services in the European Union (2001): < ec.europa.eu/social/blobservlet?docid=6677&langid=en > accessed 25 April Eurofound Background paper on extension of collective bargaining agreements in the EU (2011): < > accessed 25 April 2014; Eurofound Background paper. Wages: a working conditions and industrial relations perspective (2013): < > accessed 25 April Richard Giesen, Posting: social protection of workers vs. fundamental freedoms? (2003) 40 CMLR Giuseppe Bertola and Lorenza Mola, Paths to Harmonization: Legal Evolution of Internal and External Trade in Services through Personal Mobility in the EU (2008) 35 Legal Issues of Economic Integration Catherine Barnard, Unravelling the Services Directive (2008) 45 CMLR Vasilis Hatzoupoulos and T. U. Do, The Case Law of the ECJ Concerning the Free Provision of Services: (2006) 43 CMLR Marco Biagi, The posted workers EU directive: from social dumping to social protectionism (1998) 32 Bulletin of Comparative Labour Relations

6 aspects of the CJEU s practice (M. Franzen and C. Richter 22, S. Krebber 23 ), in particular the famous CJEU s judgment in Laval case (U. Bernitz and N. Reich 24, Mia Rönnmar 25, N. Reich 26, F. Hendrickx 27, R. Blanpain 28, R. Nielsen 29, M. Schlachter 30, S. Evju 31, A. M. Swiatkowski 32 ), to which the whole Bulletin of the Legal Journal of Comparative Labour Relations 33 was dedicated. However, Laval is analysed mostly from the perspective to take collective action. Other specific posting-related issues which are being dealt with in legal doctrine include the posting of workers in the United Kingdom (C. Barnard) 34, the relationship between the Posting directive and the Temporary Agency Work Directive (M. Schlachter) 35, the enforcement of rights of posted workers (M. Kullmann) 36, the implementation of the Posting directive in the Central Europe (M. Štefko) 37, the transposition of the Posting directive in Belgium (R. Blanpain) 38, the 22 M. Franzen and C. Richter, Case C-346/06, Rechtsanwalt Dr. Dirk Rüffert, in his capacity as liquidator of Object and Bauregie GmbH & Co. KG v. Land Niedersachsen, [2008] ECR I-1989 (2010) 47 CMLR Sebastian Krebber, Case C-319/06, Commission v. Luxembourg, Judgment of the Court (First Chamber) of 19 June 2008, [2008] ECR I-4323 (2009) 46 CMLR U. Bernitz and N. Reich, Case No. A 268/04, The Labour Court, Sweden (Arbetsdomstolen) Judgment No. 89/09 of 2 December 2009, Laval un Partneri Ltd. v. Svenska Byggnadsarbetareförbundet et al. (2011) 48 CMLR Mia Rönnmar, Free Movement of Services versus National Labour Law and Industrial Relations Systems: Understanding the Laval Case from a Swedish and Nordic Perspective In C. Barnard (ed), Cambridge Yearbook of European Legal Studies (Oxford, Hart Publishing, ) ; Mia Rönnmar, Laval returns to Sweden: The Final Judgment of the Swedish Labour Court and Swedish Legislative Reforms (2010) 39 ILJ Norbert Reich, Free Movement v. Social Rights in an Enlarged Union the Laval and Viking Cases before the ECJ 2008 GLJ Frank Hendrickx, Beyond Viking and Laval: The Evolving European Context (2011) 32 Comp. Labor Law & Policy Journal Roger Blanpain, LAVAL AND VIKING: Who Pays the Price? In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) xix xxii. 29 Ruth Nielsen, Denmark In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Monika Schlachter, Germany In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Stein Evju, Norway In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Andrzej M. Swiatkowski, Poland In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Vol Catherine Barnard, The UK and Posted Workers: The Effect of Commission v. Luxembourg on the Territorial Application of British Labour Law (2009) 38 ILJ Monika Schlachter, Transnational Temporary Agency Work: How Much Equality Does the Equal Treatment Principle Provide? (2012) 28 Int l. Journal of Comp. Labour Law and Industrial Relations Miriam Kullmann, The Principle of Effet Utile and Its Impact on National Methods for Enforcing the Rights of Posted Workers (2013) 29 Int l Journal of Comp. Labour Law and Industrial Relations Martin Štefko, The Posted Workers Directive as the End of National Welfare Policy: A Case Study in Central Europe, (2011) 2 LQ Roger Blanpain, Implementation of the Posting Directive in Belgium. In Roger Blanpain (ed), Freedom of Services in the European Union Labour and Social Security Law: the Bolkestein Initiative (Kluwer Law International, 2006)

7 implementation of the Posting directive in Italy (M. Colucci) 39, the transposition of the Posting directive into the Dutch national legal system (M. Houwerzijl) 40, the implementation of the Posting directive in Poland (A. M. Swiatkowski) 41. Consequently, there is a lack of research on transposition and application of the Posting directive in the context of the Baltic states. Therefore, this master thesis is valuable in terms of academic novelty and practical significance. It should be mentioned that this master thesis does not intend to analyse the legal content of employment conditions (excluding minimum wages) in Lithuania, Latvia, Estonia, Finland, Sweden, Germany and Norway. This research does not similarly involve the analysis of enforcement of the Posting directive. Methodology used. Main methods used in this master thesis are: collection and analysis of data, transnational, logical-analytical, systemical analysis and teleological. The method of collection and analysis of data will assist to collect relevant legal sources in library funds and internet data bases, analyse their content and consequently summarize them. The transnational method contributes to examine the implementation and application of relevant legal norms of the Posting directive a general legal act enacted by EU institutions in the local context of three Baltic countries and Finland, Sweden, Germany and Norway. The logical-analytical method is used for critical analysis of particular provisions of the Posting directive, EU and national legal acts, national collective agreements concluded in the construction sector, jurisprudence of national courts, the practice of the CJEU and the EFTA Court, and legal doctrine. The method of systemical analysis will be used to examine the relevant provisions of the Posting directive within the context of national legal systems of Lithuania, Latvia, Estonia, Finland, Sweden, Germany and Norway, to apply the principles formulated in the practice of the CJEU and the EFTA Court for the posting of workers within the context of the Baltic countries. The teleological method is helpful for disclosure of the real meaning of relevant provisions of the Posting directive and national legal acts, the identification of how the jurisprudence of the CJEU and the EFTA Court has influenced the interpretation and application of the Posting directive in practice. 39 Michele Colucci, The Implementation aof the Posting Directive in Italy. In Roger Blanpain (ed), Freedom of Services in the European Union Labour and Social Security Law: the Bolkestein Initiative (Kluwer Law International, 2006) Mijke Houwerzijl, Implementation of the Posting Directive in the Netherlands. In Roger Blanpain (ed), Freedom of Services in the European Union Labour and Social Security Law: the Bolkestein Initiative (Kluwer Law International, 2006) Andrzej M. Swiatkowski, Implementation of the Posting Directive in Poland. In Roger Blanpain (ed), Freedom of Services in the European Union Labour and Social Security Law: the Bolkestein Initiative (Kluwer Law International, 2006)

8 1. Posting of workers from the perspective of the Court of Justice of the European Union and the Court of the European Free Trade Association The Posting directive has been enacted in order to safeguard a balance between the social protection of workers, temporarily posted from one Member State to another to perform particular work, and the freedom to provide services. Consequently, the Posting directive is aimed to ensure that posted workers are guaranteed the same core employment conditions as local employees and thus social dumping is to be evaded. Equal competition of service providers within the EU must be similarly ensured 42. Article 3(1) of the Posting directive is the core of this EU legal act as it establishes what employment conditions, such as, for instance, minimum wages, maximum work periods, minimum annual holidays, must be applied to posted workers in the host Member State 43. However, Article 3(1) of the Posting directive ensures only a minimum protection with which foreign employers, posting workers to perform particular work in another (host) Member State, must comply 44. Even though the Posting directive has harmonized main issues of transnational posting, the interpretation and application of this EU legal act in practice, more specifically its Article 3, still raises a lot of problematic issues related to social dumping. These issues include the level of protection of posted workers within the scope of Article 3 of the Posting directive, the list of mandatory labour rules (employment terms and conditions) applicable to posted workers and legal instruments where those core labour rules can be found (Article 3(1) and 3(8), the possibility to extend the list of mandatory labour rules in case of public policy provisions (Article 3(10) 45, the application of more favourable employment conditions to posted workers (Article 3(7) 46. As a result, this part of the master thesis aims to identify these general problematic areas by mainly concentrating on CJEU s judgments in Laval 47, Rüffert 48, Commission v. Luxembourg 49 and Isbir 50 cases. The analysis of the EFTA Court decision in STX Norway Offshore 51 case is of great importance as it is evident that both courts face very similar problems related to interpretation and application of the Posting directive in practice and thus can influence each other s decisions. 42 Houwerzijl, Towards a more effective Posting directive (n 2) The Posting directive, art 3(1). 44 Houwerzijl, Towards a more effective Posting directive (n 2) 180, Štefko (n 37) Houwerzijl, Towards a more effective Posting directive (n 2) Laval (n 5). 48 Rüffert (n 7). 49 Commission v. Luxembourg (n 6). 50 Isbir (n 8). 51 Norway Offshore (n 9). 8

9 1.1. Laval and the Swedish collective agreements in the construction sector Laval had an important impact primarily on Swedish national legislation Sweden has amended its legal acts 52 in order to comply with the CJEU s decision 53. Denmark has accordingly adjusted its national law (which was in fact very similar to the Swedish) after the CJEU s ruling in Laval 54. Moreover, Laval is essential for all Member States law on collective bargaining 55. The CJEU s decision in Laval is important for the issue of social dumping 56 the posting of workers from low wage Baltic state Latvia to high wage Sweden for construction works (renovation of the school). Laval did not sign the collective agreement determining minimum wages for construction workers in Sweden with the Swedish Building Workers Union (Byggnads) 57. As a result, a collective action aiming to encourage foreign employers to pay their posted workers the same minimum wages as local Swedish employees get 58 was initiated against Laval 59. The CJEU in Laval was confronted with Swedish national legislation implementing the Posting directive, more particularly, with the fact that the list of mandatory labour rules terms and conditions of employment 60 listed in Article 3(1) of the Posting directive 61, will be applied to all workers posted to a territory of Sweden and that these employment conditions must be laid down either by legal acts or by collective agreements declared universally applicable in accordance with Article 3(8) of the Posting directive 62. The problem with the Swedish national legal system was that minimum wages in the construction sector were negotiated in every case separately 63 and there was no system of declaring collective agreements universally applicable pursuant to legal provisions of the Posting directive 64. Therefore, minimum wages constituted the only one employment condition, which was not laid down in accordance with one of the means provided for in Directive 96/ The CJEU made several important conclusions, relevant for our research, in Laval. The CJEU ruled that foreign employers posting workers to Sweden, cannot be bound by a collective 52 The third part of this master thesis analyses if Sweden has properly amended its national legislation after Laval. 53 Rönnmar, Laval returns to Sweden (n 25) Nielsen (n 29) Schlachter, Germany (n 30) Ibid, Laval (n 5), paras Patrick Humblet, Belgium In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Laval (n 5), paras The Posting directive, art 3(1). 61 Ibid. 62 Ibid, art 3(8). 63 Laval (n 5), para Hendrickx (n 27) Laval (n 5), para 63. 9

10 agreement and thus have an obligation to pay wages (which cannot be considered as minimum wages) set in a collective agreement not declared universally applicable in accordance with Article 3(1) and 3(8) of the Posting directive 66. By relying on Article 3(7) of the Posting directive, requiring to apply more favourable conditions of employment to posted workers, the CJEU clarified that this article cannot be interpreted in such a manner as to extend the list of employment terms and conditions referred to in Article 3(1) of the Posting directive. The level of protection of posted workers is limited. Therefore, the list of employment conditions set in Article 3(1) of the Posting directive cannot be expanded in accordance with the collective agreement applicable in the construction sector in Sweden 67. Moreover, collective action aiming to force a foreign employer to sign such a collective agreement infringes freedom to provide services and is not consistent with the social protection of posted workers 68. Laval induces us making the following conclusions. Firstly, the list of mandatory labour rules set in Article 3(1) of the Posting directive have to be interpreted restrictively. Even though the CJEU in Laval ruled that this list is extensive, it was left unanswered what the purpose of Article 3(10) of the Posting directive, determining the public policy exception, is and under which conditions in must be applicable. However, it was evident that the CJEU was willing to ensure the social protection of posted workers against social dumping by guaranteeing them the same minimum wages 69. Secondly, the Posting directive does not confine Member States setting minimum wages by legal acts only. If a Member State wishes to lay down minimum wages in collective agreements, one important condition must be taken into account these collective agreements have to be either declared universally applicable pursuant to Article 3(1) and Paragraph 1 of Article 3(8) of the Posting directive or applied in accordance with Paragraph 2 of Article 3(8) of the Posting directive. The Swedish system did not satisfy either of these requirements and was therefore condemned by the CJEU. Consequently, Latvian workers posted to Sweden could not enjoy higher minimum wages. Thirdly, Article 3(7) of the Posting directive cannot form a legal basis to extend the list of employment conditions fixed in Article 3(1). Nevertheless, a host Member State can apply to posted workers more favourable employment conditions including minimum wages if they do not transcend the abovementioned list. 66 Laval (n 5), para Ibid, paras Ibid, para Schlachter, Germany (n 30)

11 The CJEU s judgment in Rüffert case confirms that the problem of setting minimum wages in collective agreements and thus safeguarding posted workers the same minimum wages is relevant. This is the CJEU s decision in Rüffert that we now turn to analyse Rüffert and the German collective agreements in the construction sector The problem of fixing minimum wages in collective agreements was repeatedly confronted by the CJEU in Rüffert case. Rüffert concerned the posting of workers from another low wage Member State of the EU Poland for construction works in Germany, and the German system of the application of collective agreements in the construction sector. A German company Objekt und Bauregie was awarded a public contract to perform the construction of a prison in the Land of Lower Saxony. The subcontractor was a Polish company which posted workers from Poland to Germany to work under wages lower than those determined in the applicable Buildings and public works collective agreement 70. Due to these infringements, Objekt und Bauregie had to terminate the contract 71. The CJEU was asked to rule on whether it was legitimate to require a contractor for public works paying his employees wages provided for in the collective agreement in force at the place where those services are performed 72. In other words, the CJEU had to answer if a local collective agreement can be regarded as universally applicable 73. The CJEU was strict as in Laval by ruling that the Building and Public Works Collective Agreement was not a collective agreement declared universally applicable (as was similarly confirmed by the Land of Lower Saxony) in accordance with Article 3(1) and Paragraph 1 of Article 3(8) of the Posting directive and thus could not fix minimum wages for posted workers 74. The CJEU stressed that Paragraph 2 of Article 3(8) of the Posting directive could not be applied in this case. This legal provision should be used only if there is no system for declaring collective agreements universally binding, which is not the case in the Federal Republic of Germany 75. The CJEU was of the opinion that even if Paragraph 2 of Article 3(8) of the Posting directive could be applied, the Building and Public Works Collective Agreement did not satisfy that criteria as it was not generally applicable to all similar undertaking in the geographical area and in the profession or industry concerned 76 and covered only a part of the construction sector falling within the geographical area of that agreement 77, i.e. the public sector 78. Therefore, wages determined in the Building and Public 70 Rüffert (n 7), paras 10, Ibid, para Ibid, para Schlachter, Germany (n 30) Rüffert (n 7), para Ibid, paras Ibid, para Ibid, para

12 Works Collective Agreement are not minimum wages within the meaning of Article 3(1) of the Posting directive and thus cannot be considered employment conditions more favourable to workers within the meaning of Article 3(7) of Directive 96/ Such measures cannot be justified by the objective of ensuring the protection of workers 80, as otherwise the list of mandatory labour rules set in Article 3(1) of the Posting directive will be extended. That will be incompatible with the aim the Posting directive pursues and the freedom to provide services 81. It is not surprising why legal scholars consider this case as a continuation of Laval and the confirmation of restrictive social protection of posted workers 82. M. Schlachter assumes that the CJEU was equally strict in Rüffert by willing to show that only generally applicable collective agreements can impose minimum standards, as required by the Posting directive 83. H. Franzen and C. Richter maintain that the CJEU in Rüffert proved that even though the Posting directive guarantees minimum standards for the protection of posted workers, it at the same time sets a maximum degree of protection that is required to assert the freedom to provide services 84. That is in particular evident in relation to Article 3(7) of the Posting directive ensuring the application of more favourable employment conditions. More favourable employment conditions of the host state cannot surpass those listed in Article 3(1) of the Posting directive 85. To conclude, the CJEU in Rüffert has opted for the same restrictive approach (as it did in Laval) to fix minimum wages in collective agreements. Therefore, only minimum wages set in collective agreements, meeting the criteria of Article 3(1) and 3(8) of the Posting directive, can be guaranteed to posted workers. If a Member State has a system of declaring collective agreements universally applicable, this system must be used in practice. Otherwise, posted workers will be deprived of more favourable employment conditions, including minimum wages, as guaranteed by Article 3(7) of the Posting directive. After Laval and Rüffert cases it became evident that the protection offered by Article 3(1) of the Posting directive is maximum. However, the CJEU had to clarify if a Member State still has a possibility to rely on the public policy exception Article 3(10) of the Posting directive in order to expand the list of employment conditions set in Article 3(1) of the Posting directive. That was 78 Rüffert (n 7), para Ibid, paras Ibid, para Ibid, paras Franzen and Richter (n 22) 537, 546; Evju, Norway (n 31) 124, Schlachter, Germany (n 30) Franzen and Richter (n 22) Ibid

13 finally explained in a more detail in Commission v. Luxembourg 86, which after Rüffert and Laval was not a real surprise Commission v. Luxembourg and the public policy exception Luxembourg transposed the Posting directive to its national legal system by enacting the legal act, which imposed an obligation on foreign employers, posting workers to Luxembourg, to comply with terms and conditions of employment going beyond the legal provisions of Article 3(1) and (10) of the Posting directive 88. Although the Commission stressed that Article 3(10) of the Posting directive aims to strike the balance 89 between the effective social protection of posted workers and free movement of services within the EU 90, the CJEU in Commission v. Luxembourg was of the opinion that Article 3(1) of the Posting directive sets up an exhaustive list of mandatory labour rules 91. As a result, the CJEU found that Luxembourg failed to implement the Posting directive, in particular by requiring that the employment contract has to be concluded in writing and that minimum wages must be automatically adjusted in accordance with inflation. These provisions cannot be regarded as the public policy exception, interpreted in a restrictive way, within the scope of Article 3(10) of the Posting directive as they restrict the freedom to provide services 92. It is surprising though that the CJEU similarly ruled that Member States, wishing to expand this list of employment conditions set in Article 3(1) of the Posting directive, can nevertheless apply Article 3(10) of the Posting directive related to public policy provisions 93. Public policy provisions are those mandatory rules from which there can be no derogation and which by their nature and objective meet the imperative requirements of the public interest 94. Public policy provisions will be applied in a non-discriminatory manner and be crucial for the protection of the political, social or economic order in the Member State concerned 95. These criteria were not met in Commission v. Luxembourg, what made the Commission to conclude that Luxembourg had failed to fulfil its obligations under the Posting directive Commission v. Luxembourg (n 6). 87 Hendrickx (n 27) Commission v. Luxembourg (n 6), para Commission Communication on posting of workers (n 1) Ibid. 91 Commission v. Luxembourg (n 6), paras 26, 27, Ibid, paras 26, 41, 44, 47, Ibid, paras and Ibid, para Ibid, para Ibid. 13

14 Legal authors, analysing this case, conclude that a Member State can apply such mandatory labour rules to posted workers, which are only included in the list of Article 3(1) of the Posting directive 97. As a result, with Commission v. Luxembourg the CJEU has solved the minimalistic interpretation of the Posting directive 98 and has given Article 3(10) of the Posting directive a narrow scope 99. Accordingly we can only talk about the maximum character of the Posting directive 100, and Member States cannot go beyond the scope of employment terms and conditions embedded in Article 3(1) of the Posting directive 101. To sum up, what Laval and Rüffert cases left to some extent unclear, the CJEU s judgment in Commission v. Luxembourg confirmed that Member States, wishing to guarantee the social protection of workers posted to their territory and thus aiming to extend the list of Article 3(1) of the Posting directive, are only theoretically allowed to do that. Therefore, it is arguable if Article 3(10) of the Posting directive is necessary, whether it ensures a real social protection of posted workers and helps to evade social dumping Isbir and the determination of minimum wages The analysis of CJEU s judgments in Laval, Rüffert and Commission v. Luxembourg cases has shown that safeguarding minimum wages of a host Member State for workers, posted from low wage to high wage Member States, is of great relevance. However, only those minimum wages of the host Member State set in legal acts or collective agreements declared universally applicable (or applied in accordance with Paragraph 2 of Article 3(8) of the Posting directive) can be guaranteed. This is the only possibility to apply Article 3(7) of the Posting directive, requiring to guarantee posted workers more favourable employment conditions 102, including minimum wages. Article 3(1) of the Posting directive does not determine minimum wages and leaves their definition (which can differ) for Member States 103. The CJEU s judgment in its up-to-date Isbir case is of relevance from this point of view 104. Isbir was a Cypriot posted as industrial cleaner to the German company DB Services GmbH belonging to the Deutsche Bahn group 105. There were several collective agreements 97 Krebber (n 23) Giovanni Orlandini, Italy In Roger Blanpain and Andrzej M. Swiatkowski (eds), The Laval and Viking Cases: Freedom of Services and Establishment v. Industrial Conflict in the European Union (Kluwer Law International, 2009) Evju, Norway (n 31) Franzen and Richter (n 22) Laval (n 5), para The Posting directive, art 3(7). 103 Laval (n 5), paras 60, 68; see also Commission Staff Working Document (n 13) Isbir (n 8). 105 Ibid, paras 2 and

15 applicable in the industrial cleaning sector (some of them expired and subsequently were replaced by the others) which set minimum wages. Isbir claimed he had not received an hourly minimum wage according to these collective agreements. The employer maintained that Isbir had already received more than the minimum hourly rate determined in the applicable collective agreements because he had already been paid the lump sum payments and the contribution to the capital formation fund, what has to be also included in the calculation of a minimum wage 106. The CJEU was asked to adjudicate if the concept of minimum wages pursuant to Article 3(1) of the Posting directive includes payments which reward the usual work within the respective wage payment period 107 and if minimum wages can be composed of payments for the capital formation for workers and lump sum payments 108. The CJEU ruled that the definition of the minimum wage and its constituent parts is the duty of a Member State. By doing that, Member States cannot restrict freedom to provide services 109. Basing its arguments on its previous judgment in Commission v. Germany case 110, the CJEU went further and clarified that payments in the form of allowances and supplements, which are not defined by national legislation or practice and which alter the relationship 111 between the service and the payment for that service, cannot be regarded as minimum wages. Therefore, payments for additional work or for work under particular conditions 112 cannot be included when calculating minimum wages. Only payment which does not alter the relationship between the service provided by the worker 113 and the remuneration for that service can be taken into account when defining minimum wages 114. Even though the CJEU left it for the referring national court to decide whether the lump sum payment and the payment for a capital formation can be similarly included into the calculation of minimum wages, it was evident from the CJEU s argumentation that lump sum payments under the basis of the applicable collective agreement can be incorporated into the concept of minimum pay, while payments for capital formation could not as they tend to alter the relationship between the service provided by the worker and the payment 115. The CJEU also stressed that even though such a contribution is not separable from the work done, it is distinguishable from the salary itself 116, as 106 Isbir (n 8), paras Ibid, para Ibid. 109 Ibid, paras Case C-341/02 Commission v. Germany [2005] ECR I-2733, paras Isbir (n 8), para Ibid, para Ibid, para Ibid. 115 Ibid, paras Ibid, para

16 the worker will only benefit from it in the longer term 117 and it aims to achieve an objective of social policy supported, in particular, by a financial contribution from the public authorities 118. Several important conclusions can be made from Isbir. Firstly, the concept of minimum wages is wide and can comprise not only minimum wages determined on hourly or monthly basis, but also all other payments defined in accordance with national legal acts or universally applicable collective agreements. Secondly, Isbir did not submit a general definition of minimum wages, which must be left for Member States. This case dealt exclusively with other supplementary payments (various bonuses), which can be similarly included into the calculation of minimum wages in a host Member State. Thirdly, the CJEU showed some flexibility for the definition of constituent elements of minimum wages by emphasizing that the most relevant criterion which has to be taken into account is the ability of payments to alter the relationship between the work performed and the remuneration received for that work by a posted worker. If this relationship is not altered by a particular payment (for example, a special bonus in accordance with the collective agreement declared universally applicable), this payment must be included into the concept of minimum wages. Fourthly, remuneration for specific tasks or for work under exceptional conditions must not be included when calculating minimum wages of the host state. Therefore, additional bonuses can also be incorporated into the concept of minimum wages if they are typical for a particular work and are determined under an appropriate legal basis (for example, legal acts or collective agreements declared universally applicable). Minimum wages paid to Polish workers posted to work in a power plant in Finland form a central issue of the request from the Finnish court, currently pending in the CJEU 119. The CJEU has been asked to consider: if minimum wages fixed in the applicable Finnish collective agreement declared universally binding can include hourly pay in accordance to pay groups, job guarantee pay, holiday allowance, flat-rate daily allowance and compensation for daily travel-to-work time 120 ; whether daily allowances, travelling (when posted workers have to constantly travel during the posting period) and accommodation expenses, vouchers for meal can be similarly included in the concept of minimum wages 121 ; if a foreign employer can determine the categories of his employees 117 Isbir (n 8), para Ibid. 119 Request for a preliminary ruling from the Satakunnan käräjäoikeus (Finland) lodged on 12 July 2013 Sähköalojen ammattiliitto ry v Elektrobudowa Spółka Akcyjna (Case C-396/13): < =&occ=first&part=1&cid= > accessed 16 April Ibid, para Ibid, paras and

17 receiving different wages on his own or will he be obliged by the categories of employees defined according to the applicable Finnish collective agreement declared universally binding 122 ; if the universally applicable collective agreement of the host Member State can be justified under the basis of the public policy exception for interpretation of job-based pay, compensation for travelling time and daily allowances 123. It is evident that the CJEU will have to decide if posted workers can get all possible pecuniary benefits guaranteed by the collective agreement declared universally applicable and whether such benefits can be included into the calculation of minimum wages. If the CJEU will judge in the affirmative, the concept of minimum wages within the scope of Article 3(1) of the Posting directive must be particularly expanded, what can be of significant importance for posted workers. On the other hand, it can similarly cause problems for foreign employers as a broad definition of minimum wages, applicable in a host Member State, can sufficiently increase the costs of foreign employers when paying those minimum wages to their posted employees. The second important question, which will similarly be answered by the CJEU, is whether collective agreements declared universally binding, more precisely their provisions on minimum wages, can serve as a public policy exception for the expansion of the concept of minimum wages under the basis of Article 3(1) of the Posting directive. Thus the principle of strict interpretation of Article 3(1) and 3(10) of the Posting directive will be either confirmed or denied. Even though it is very likely that the CJEU will follow the line of argumentation embodied in Commission v. Luxembourg, the judgment of the CJEU is very much welcomed and it will undoubtedly contribute to the interpretation of relevant provisions of the Posting directive The EFTA Court decision in STX Norway Offshore A big number of workers are posted from the Baltic states (especially from Lithuania) 124 to Norway. Consequently, the EFTA Court s decision in STX Norway Offshore case 125 is of great relevance for our research. Moreover, this decision is very helpful for the interpretation of most relevant provisions of the Posting directive. The dispute in STX Norway Offshore case 126 was related to the posting of workers to the maritime construction industry in Norway. The EFTA Court had to clarify if Article 3(1) of the Posting directive permits the State of the European Economic Area (hereinafter referred to as the EEA), where workers were posted from another EEA state, to ensure such workers conditions of 122 Reference in Case C-396/13 (n 119), para Ibid, para Eurofound Report on posted workers (n 14) Norway Offshore (n 9). 126 Ibid. 17

18 employment fixed in collective agreements declared universally applicable according to Article 3(8) of the Posting directive and thus guarantees posted workers minimum wages and other employment conditions equivalent to Norwegian workers 127. The EFTA Court, by mainly relying on the CJEU s jurisprudence in Laval and Commission v. Luxembourg cases, concluded that posted workers will be guaranteed minimum social protection of the host state if this protection is higher than that of the home state 128. Article 3(1) of the Posting directive sets an exhaustive list of employment conditions 129, which must be fixed in national legal acts and only in such collective agreements, which must be observed by all undertakings which are in a comparable situation in the geographical area and in the profession or industry concerned 130. The EFTA Court ruled that the material content of minimum wages should be defined by the national law of the host state if that does not infringe the freedom to provide services 131. However, additional remuneration for work assignments requiring overnight stay away from home 132 cannot be considered as a minimum wage within the scope of Article 3(1) of the Posting directive 133 because such remuneration can reduce the job opportunities for workers from other EEA states 134, can deter their employers from free provision of services and does not confer a genuine benefit on posted workers 135. These payments can only be justified on public interest provision, such as the social protection of workers, if they form a genuine benefit for posted workers, what significantly adds to their social protection 136, as long as they do not impose on foreign employers additional administrative and economic burdens 137. The EFTA Court has similarly judged that compensation for travel, board and lodging expenses for overnight stays away from home 138 is specific and cannot form part of minimum wages within the scope of Article 3(1) of the Posting directive. A possibility exists to justify these expenses on the basis of Article 3(10) of the Posting directive the public policy exception which, however, has to be interpreted in a restrictive way 139. It is evident that the EFTA Court s decision in STX Norway Offshore case is not revolutionary and discloses the same line of argumentation as offered by the CJEU in Laval and 127 Norway Offshore (n 9), paras 2, 3 and Ibid, paras Ibid, para 29. See also Case E-12/10 ESA v. Iceland of 28 June 2011, para Norway Offshore (n 9), para Ibid, para 70. See also ESA v. Iceland (n 129), para Norway Offshore (n 9), para Ibid. 134 Ibid, para Ibid, paras Ibid, para Ibid, para 87. See also ESA v. Iceland (n 129), paras 42, Norway Offshore (n 9), para Ibid, paras