The European Court of Justice (ECJ) ruled on Tuesday that the core of the European Minimum Wage Directive is compatible with EU law, annulling only two specific provisions. The decision comes after Denmark challenged the directive, arguing it overstepped into national competencies.
While the court sided with the Scandinavian country on two points – striking down requirements related to national criteria for setting wages and a rule on automatic adjustment to inflation – the fundamental framework of the directive remains intact.
The annulled provisions stipulated that member states must consider at least four specific factors, including purchasing power and productivity, when determining their minimum wages. The court found this overly restrictive on national governments’ flexibility. A clause preventing the downward adjustment of minimum wages was also voided.
Nicolas Schmit, the former Luxembourgish EU Commissioner who initiated the directive, expressed overall satisfaction with the ruling. He revealed that the struck-out criteria, such as the productivity link, had been added during negotiations at the request of employers.
“These criteria have been removed, which I’m not happy about, but I can live with it”, Schmit stated. Regarding the possibility of lowering wages, he noted, “I don’t particularly like it, but in principle, it rarely happens. It has happened at times of crisis, especially during the financial crisis, but otherwise, it’s not the most common scenario.”
On the other hand, the European Court of Justice affirmed key aspects of the directive, including the use of international reference values for calculating minimum wages. These benchmarks are set at 50% of the gross average wage and 60% of the gross median wage – the point at which half the workforce earns less and half earns more.
This specific provision has already ignited a domestic debate in Luxembourg. Trade unions have accused Minister of Labour George Mischo of considering the exclusion of the high-wage public sector from the calculation, a move they argue would artificially lower the benchmark. Minister Mischo has responded that all options are being explored but that no decision has been made, and he is not fundamentally opposed to a minimum wage increase.
Schmit expressed confusion over the potential exclusion of public sector wages. “You can’t look at it like that”, he argued. “If public sector salaries in Luxembourg are high, then the cost of living in Luxembourg is also high. And it surely can’t be that the people at the bottom, those on minimum wage, are completely disconnected from others whose salaries are actually adjusted for the cost of living”, according to the former commissioner.
Schmit also welcomed the court’s endorsement of another core objective: achieving 80% collective bargaining coverage within national economies. This point has also been a subject of discussion between Luxembourg’s trade unions and the Minister of Labour.
The European Court of Justice’s ruling is final, and no further appeal is possible.
