Case C‑19/23 on the Minimum Wage Directive

The much-awaited Choice on the validity of the “Minimal Wage Directive” by the Courtroom of Justice from November 2025 was mirrored and analysed from a number of completely different points, however within the current commentary, I concentrate on the Courtroom’s interpretation of the restrict set by Article 153(5) TFEU to the Union’s legislative competence. The latter excludes the adoption of measures referring to […] “pay”. Arguably, the Courtroom’s reasoning shrinks the contours of the exclusion of “pay”, thereby limiting the sensible attain of Article 153(5) TFEU in a means that invitations consideration of whether or not the supposed preservation of nationally retained competences is actually taken critically by the CJEU.

Overview

In a nutshell, in 2022, the European legislature adopted the “Minimal Wage Directive”, on the idea of Article 153(2), level (b), at the side of Article 153(1), level (b) TFEU. The Directive set standards that Member States ought to use, with some selection, to ensure the adequacy of statutory minimal wages. On the time, Denmark and Sweden voted towards the adoption of the Directive. None of these States is understood for having low incomes, and presumably their economic system wouldn’t be affected by the Directive. What triggered these States’ disagreement with the Directive was the truth that they maintain a robust custom of collective bargaining, during which wages are negotiated for every sector between unions and employers. Representatives of these international locations within the Council had thought of that the autonomy of social companions must be preserved, thereby opposing each obligatory regulation on the Union stage.

Denmark challenged the validity of the Directive, arguing that wages and commerce union legislation are issues expressly reserved to Member States by Article 153(5) TFEU, and that the legislative process beneath which the Directive was adopted was not in accordance with the Treaty. In reality, issues on level (b) of Article 153, referring to working circumstances, must be regulated beneath the bizarre legislative process (set in Article 294), requiring certified majority within the Council and the co-decision of the Parliament; whereas issues on level (f) of the identical provision, referring to the collective defence of the curiosity of employees, require the adoption of a particular legislative process consisting of an unanimous resolution by the Council and mere session with the European Parliament. Each issues had been lined by the Directive, and the required legislative procedures weren’t suitable. Thus, in keeping with settled case legislation (see, as an illustration, Opinion 1/15, para 78), the Directive mustn’t have been adopted as such: the choices could be both to desert regulation on one of many issues or break up the topic into two legislative acts, every one adopted by the corresponding legislative process.

Advocate Basic Emiliou agreed with the primary a part of the argument and proposed that the Courtroom annul the Directive in full, on the grounds that the Union had overstepped its competence. He thought of that the Directive interfered straight with wages (AG Opinion, para 95), and therefore it violated Article 153(5) TFEU.

The Courtroom didn’t settle for Denmark’s request to annul the Directive in full. However, it determined to declare void some provisions that it thought of affected the autonomy of Member States: Article 5(2), which set out the standards Member States ought to take into account when figuring out minimal wages (“(a) the buying energy of statutory minimal wages, bearing in mind the price of residing; (b) the final stage of wages and their distribution; (c) the expansion price of wages; (d) long-term nationwide productiveness ranges and developments); the a part of Article 5(1) referring to paragraph 2 (the removing of which was a mandatory consequence of the previous); and the ultimate a part of Article 5(3), the place it was acknowledged that the use, by Member States, of automated mechanisms for indexation changes of statutory minimal wages mustn’t result in a lower within the minimal wage. The Courtroom thought of that solely these provisions of the Directive “[amount] to harmonisation of a few of the constituent parts of these wages and, subsequently, direct interference by EU legislation within the willpower of pay throughout the European Union” (CJEU Judgement, para 96 and, to the identical impact, para 98).

A tackle the Union’s competences

As this temporary abstract exhibits, the difficulty goes to the very coronary heart of the dialogue in regards to the division of competences between the Union and the States. A dialogue that’s intensified by the truth that Article 153 excludes wages from the Union’s competence in social issues.

Critics of the AG’s Opinion had instructed that, if the Courtroom adopted his proposal, it ran the danger of “precipitating Social Europe into an existential disaster” and would “jeopardise the attainment of plenty of social regulatory aims pursued by the EU Treaty”. As horrifying as these arguments could seem, it is very important recall that the powers of the Union don’t observe from beliefs or well-intentioned functions, however from clear competence guidelines inserted into the Treaties, and that these don’t function in a vacuum and may slightly be articulated coherently with one another. Traces of the idealism highlighted above can in the end be seen within the Courtroom’s Choice, when it states that “the flexibility of the EU legislature to realize the goals of social coverage, as set out within the first paragraph of Article 151 TFEU, and, extra usually, to offer concrete expression to the social dimension of integration throughout the Union could be critically compromised if that legislature had been prevented from adopting measures which, in follow, have optimistic results or repercussions on the extent of pay” (CJEU Choice, para 71). The analysis is effectively recognized: the social dimension of Europe is much from being passable. However so long as the Treaties say what they are saying, that’s one thing we have now to dwell with.

First, the interpretation of the authorized foundation for the train of competence must be articulated with the boundaries to that competence set out within the Treaties. The truth that the Treaty offers for various legislative procedures in Article 153 is indicative of the significance of those issues for the Member States. On prime of this, Article 153(5) provides, slightly incisively, that the motion of the Union “(…) shall not apply to pay (…)”. Particularly, though the present and authorized that means of the expression “working circumstances” would possibly fairly embody “wages”, the truth that that particular side of the “circumstances” is excluded from the Union’s legislative competence can’t be missed.

Recalling its earlier case legislation, the Courtroom acknowledged:

The “exclusion of competence [under Article 153(5)] should be construed as masking measures – such because the equivalence of all or a few of the constituent components of pay and/or the extent of pay within the Member States, or the setting of a minimal assured wage at EU stage – that quantity to direct interference by EU legislation within the willpower of pay throughout the European Union. However, it can’t be prolonged to any query involving any kind of hyperlink with pay” (CJEU Judgement, para 69).

On condition that the Directive pertains to “ample wages” and that the Courtroom apparently thought of it to be topic to the second a part of the assertion simply quoted (as a query involving merely a “kind of hyperlink with pay”, thus throughout the Union’s competence), it’s arduous to guess which measures in relation to pay would “quantity to direct interference by EU legislation within the willpower of pay” precluding EU resolution. If “ample wages” just isn’t straight associated to “pay”, then what language is the Courtroom talking? Is the Courtroom suggesting that Article 153(3) must be so narrowly interpreted that solely acts that mounted the precise quantity of the wage could be excluded from the Union’s competence?

The suggestion that exceptions to the Union’s competence, resembling that of Article 153(5) TFEU, must be interpreted strictly, which is implied within the reference the Courtroom makes to Impression (see, particularly, para 68), can also be questionable. An interpretation approach resembling this must be used with warning and requires a earlier definition of what the final rule is. In my opinion, each the formulation of the precept of conferral (Article 5 TEU) and the particular classification of social coverage as a shared competence (topic to the precept of subsidiarity) result in the conclusion that, by default, competence pertains to the Member States and that it’s the Union’s competence that must be justified (see, additionally Article 286 TFEU). In any case, Member States retain the Kompetenz Kompetenz). Thus, Article 153(3) intends merely to protect what’s, initially, a States’ competence.

Because it occurs, the Courtroom required the removing of Article 5(2) of the Directive, which listed the standards that Member States ought to embody when fixing the minimal wage. Apparently, that call goes in the correct route, because it leaves discretion for Member States to determine which standards must be thought of for that objective, and is in step with the limitation of the Union’s motion mentioned above. Nonetheless, it’s value noting that the removing doesn’t eradicate the danger of competence creep. Because the Advocate Basic has already instructed (para 82), it’s not arduous to think about the Courtroom being seized sooner or later with a query in regards to the interpretation of the idea of “ample minimal wages”. In that respect, the Courtroom’s assurances that the idea won’t be given an autonomous (European) that means (para 90 of the choice), and the reference to the restrict of Article 51(2) of the EU Constitution for that objective (para 93), are considerably contradicted by the report of the Courtroom – it should suffice to say Fransson, the place the Courtroom thought of the EU Constitution relevant even when Member States weren’t implementing EU legislation, however merely performing “throughout the scope of EU legislation”. Is it not attainable, following that caselaw, that sooner or later the Courtroom considers that, given the adoption of the Directive, nationwide laws on minimal wages can now be thought of to fall inside EU legislation, and therefore topic to conformity with the EU Constitution?

Safeguarding the rule of legislation throughout the EU itself

Lastly, Advocate Basic Emiliou has accurately framed the query within the following elementary phrases:

“[H]ow competences are distributed between the Member States and the European Union is a query of a constitutional nature, which (…) is important to a European Union primarily based on the rule of legislation” (para 36 of the AG opinion).

The rule of legislation precept has been on the forefront of debate in mild of dangers rising in some Member States. The Courtroom of Justice has been notably energetic in addressing the disaster, taking up the function of guarantor of the values of the EU.

It can be crucial to not overlook, although, that the rule of legislation just isn’t addressed solely to Member States. Moderately, the rule of legislation is expressly recognised in Article 2 TEU as a founding and binding worth of the Union itself. Moreover, legality is extensively understood as a core dimension of the rule of legislation, insofar because it requires public energy to be exercised solely on the idea of and throughout the limits of legislation. From this attitude, the precept of conferral could actually be thought of a selected expression of the precept of legality within the EU constitutional order.

Conclusion

None of what has been stated is supposed to disregard the necessity for a social coverage and the elemental rights of employees. These are, after all, essential substantive dimensions of the rule of legislation precept. But when one is to take the division of competences critically, the conclusion would then be {that a} political resolution from Member States is important for that objective, to ensure that the social coverage to be totally full.