The Directive on adequate minimum wages in the European Union (the ‘AMW Directive’) took effect on 14 November 2022. The deadline for the EU member states to implement the Directive into national law was 15 November 2024.
In short, the AMW Directive does not impose an actual minimum wage on member states. It requires member states with statutory minimum wages to put into place a procedural framework for setting and updating minimum wages. Furthermore, member states without statutory minimum wages are to introduce the means to promote the coverage of collective agreements on wage-setting. All member states must collect and report data on minimum wages to the EU under the AMW Directive.
From the very beginning, the AMW Directive has been met with considerable resistance from Denmark, although it is considered to have little immediate impact in Denmark. On 18 January 2023, Denmark lodged an action for annulment against the European Parliament and the Council, which was later supported by Sweden. The Advocate General has recently assessed that the AMW Directive should be annulled in its entirety.
In this update, we explore the annulment action, the Advocate General’s Opinion, and the potential significance of the upcoming CJEU ruling on this matter.
___
The annulment action
The Danish government filed an annulment action of the AMW Directive, arguing it is incompatible with the EU Treaty provisions that give the European Parliament and the Council the competence to adopt directives on ‘working conditions’, and noting that ‘pay’ is expressly excluded from the EU’s competence.
The European Parliament and the Council – with the support of the European Commission and seven member states – argued, among other things, that the AMW Directive does not breach the EU Treaty provisions, as the Directive does not directly interfere with the wage-setting mechanisms of member states, but only sets the procedural frameworks for wage-setting.
___
Opinion of the Advocate General
In its Opinion, the Advocate General assessed that the AMW Directive should be annulled in its entirety because it is incompatible with the EU Treaty basis.
The Advocate General first noted that the exclusion to the EU’s competence regarding ‘pay’ is not limited to measures harmonising the ‘level of wages’ itself in member states, as the exclusion also covers measures harmonising other aspects of the wage-setting mechanisms of member states.
The Advocate General then assessed whether the objective of the AMW Directive is to regulate ‘pay’. In reaching their conclusions on this point, the Advocate General emphasised, among other things, that the title of the AMW Directive, which contains the word ‘wages’, is a ‘clear and even obvious sign that the object of the AMW Directive is to regulate pay’. They further noted that an interpretation of the preamble and provisions of the Directive further confirms that objective.
For these reasons, the Advocate General found that the Directive is incompatible with the Treaty provision which states that the EU does not have the competence to adopt directives on ‘pay’.
___
Implications of the Opinion
The Advocate General’s Opinion is not binding on the CJEU. The question of whether the AMW Directive is incompatible with the EU’s Treaty-based competence to adopt directives regarding labour market issues, and should therefore be annulled, will not be settled until the CJEU makes its ruling in the case. The ruling will also have an impact on how member states should interpret the exclusion provision specifying that the EU does not have the competence to adopt directives on ‘pay’.
In this respect, the Advocate General’s Opinion has set the stage for a significant decision to be made by the CJEU, one that will address key constitutional questions such as the scope of the authority of the EU and the relationship it has with member states. If the AMW Directive is not annulled, how will Member States such as Sweden and Denmark react? On the other hand, if it is annulled, how will Member States more supportive of the directive respond? The impact of the forthcoming ruling will be closely watched.
___
Takeaway for employers
The Advocate General’s Opinion marks a fascinating development in this case as we now await the outcome of the CJEU’s final ruling. Regardless of whether it decides to annul, a measure rarely adopted by the court, or not, the implications will likely be significant.
In the meantime, employers should of course still comply with the applicable local legislation that implements the AMW Directive, in the usual way.
*Norrbom Vinding
