Minimum wages vary widely across the EU. Of the 27 EU member states, 22 have a statutory minimum wage. In the remaining five countries (Denmark, Finland, Sweden, Italy, Austria) wage levels are determined by collective bargaining. The practices in the member states must be respected by the EU legislators; the Adequate Minimum Wage Directive (AMWD) therefore provides a framework that addresses both types of wage setting.

What's at stake?
From the point of view of trade unions, collective bargaining is the best way to set fair wages. In Austria, there is 98% collective bargaining coverage. Almost all employees thus benefit from rights and entitlements that are not regulated by law. In some other EU member states, however, collective bargaining structures have been weakened more and more in recent decades. According to the impact assessment on the AMWD, collective bargaining coverage decreased on average in the EU from around 66% in 2000 to around 56% in 2018, with a particularly sharp decline in Central and Eastern Europe. Countries such as Poland, Romania and Greece have particularly low coverage of less than 15%.

Article 4 AMWD provides that all member states shall take measures to promote collective bargaining with the involvement of the social partners. Member states with collective bargaining coverage below 80% shall also provide a framework for collective bargaining and develop an action plan to ensure higher coverage.

Article 5 AMWD addresses statutory minimum wages. Member states shall use certain criteria and benchmarks to determine them. As a recommendation, the directive mentions 60% of the gross median wage and 50% of the gross average wage. These thresholds are not legally binding, but provide a strong normative orientation.

Action for annulment brought by Denmark
At the beginning of 2023, the Danish government, with the later support of Sweden, brought an action before the CJEU. It argues that the AMWD infringes EU law and seeks its annulment. It also requests the repeal of Article 4 (promotion of collective bargaining), in case the directive will not be repealed in full. Denmark refers to Article 153(5) of the Treaty on the Functioning of the European Union (TFEU). This states that the EU has no legislative competence in the area of pay and the right of association (the right to form and join trade unions or employers’ organisations).

However, Recital 19 of the AMWD already clarifies that the directive is in line with Article 153(5) TFEU, as it neither aims to harmonise the level of minimum wages across the Union nor to establish a uniform mechanism for setting minimum wages. It does not interfere with the freedom of member states to set statutory minimum wages or to promote access to minimum wage protection provided for in collective agreements (...). Article 153(1)(b) TFEU provides for EU legislative competence in the field of working conditions in order to achieve certain objectives, such as improving living and working conditions. The AMWD was adopted on that legal basis, since it undoubtedly contributes to that objective.

Opinion of the Advocate General
A special feature of the proceedings before the Court of Justice of the European Union is the role of the Advocate General. Advocates General are lawyers who support the ECJ in its decision-making. He or she has the task of submitting a proposal for a judgment in the form of a so-called Opinion. The judges do not have to adopt the legal view expressed in the Opinion, but in many cases do. On 14 January 2025, a bombshell occurred in the procedure on the AMWD: Advocate General Nicholas Emiliou delivered his Opinion. He agrees with the applicant and proposes to repeal the directive in full.

Focus on EU legislative competence
In his Opinion, the Advocate General takes the view that the pay exclusion in Article 153(5) TFEU from EU legislative competence must be interpreted as violating the conferral of powers as soon as a law has the objective of regulating pay, regardless of whether the pay level or the modalities for setting wages are regulated. He argues that any consideration of the issue of pay constitutes direct interference. According to the ECJ case-law ‘Impact’ such direct interference is inadmissible.

However, there are numerous legal arguments against this view of the Advocate General. In his argumentation, he failed to take into account several central aspects. In its case-law, the CJEU has always emphasised that the pay exclusion must be interpreted narrowly. The ‘Impact’ decision must be interpreted as meaning that direct intervention takes place only if the freedom of the member states is restricted by a directive in the field of pay – which is not the case with the AMWD. In a counter-opinion, ETUC summarises the legal arguments against the repeal of the directive. In the context of the EU legislative process, all institutions also agreed that the conferral of powers within the meaning of Article 153(5) TFEU is not violated; the Council Legal Service also gave the green light. The fact that the directive is one of the most important achievements in terms of the EU's social objectives  is completely ignored in the Opinion.

Outlook
The AMWD does not interfere with the way wages are set in the member states, but provides guidance and support in setting adequate minimum wages and promoting collective bargaining. Overall, the directive aims to contribute to improving living and working conditions, in particular the adequacy of minimum wages in the EU, in order to contribute to upward social convergence and reduce wage inequality (Article 1 AMWD). "This directive is absolutely necessary because the wage gap between the old and the so-called new member states is still large", ETUC President Wolfgang Katzian explains the relevance of the directive. Trade unions will therefore continue to work tirelessly for better wages and greater collective bargaining coverage, notwithstanding the forthcoming decision of the European Court of Justice.

Further information:
AK EUROPA: The Minimum Wage Directive. Paradigm shift for a social Europe
A&W Blog: Is the EU Minimum Wage Directive coming to an end? (German only)
ETUI: EU Minimum Wage Directive before the European Court of Justice
ETUI: Why the Directive on Adequate Minimum Wages does fit within EU competence
ETUC: Counter opinion on minimum wage directive case
Social Europe: The EU Minimum Wage Directive before the European Court of Justice