Brussels, 18/09/2014 (Agence Europe) - The different wage levels between member states must be regarded as a “competitive advantage” and, for this reason, the minimum wage fixed in the context of the award of public contracts may not be extended to employees of a subcontractor established in another member state, where those employees perform the contract at issue exclusively in that state, the Court of Justice of the European Union concluded in a decision (C-549/13) on Thursday 18 September.
In an effort to tackle social dumping, the Land of North Rhine-Westphalia (Germany) provides that certain public service contracts may be awarded only to undertakings which, at the time of the submission of the tender, have agreed to pay their staff a minimum hourly wage of €8.62 for the performance of the service.
The city of Dortmund, applying that law to a tender for a public contract relating to the digitalisation of documents and the conversion of data, employed a subcontractor established in Poland who would carry out the work exclusively in Poland at significantly lower labour costs than in Germany. The city of Dortmund demanded that the minimum wage included in the law of the Land of North Rhine-Westphalia should be applied to Polish workers. A German company, concerned by that invitation to tender, took the case to the competent German Public Procurement Board to assess the compatibility of the legislation at issue with European Union law and, in particular, with the freedom to provide services.
The German Board referred the matter to the Court of Justice, which first of all stated that this case did not involve the posting of workers because the provision of service in question was not being carried out in the territory of the member state (Germany) where the contract is made.
Secondly, the European judges believe that rules that impose a minimum wage for the employment of foreign workers providing a service in their member states of origin is illegal because it is likely to hinder the free provision of services (Art. 56 TFUE).
The Court put forward several arguments to justify its decision. (1) Imposing a minimum wage may prohibit, impede or render less attractive the provision of services in that other member state, which is an unjustified restriction under EU law. (2) If, in principle, the objective sought in such regulation, namely the protection of workers (general interest), can be justified, in this case it is disproportionate because it restricts the public market, without demonstrating that such a measure of protection would be necessary for workers active in the private market. (3) Finally, the imposition of a minimum wage fixed at a level that has no relationship with the cost of living where the workers reside means that this regulation violates possible competitive advantages in other member states. (JK)