ECJ ruling on wages a win for social Europe

The ruling is positive for workers, but it still can't make up for Ireland's weakness when it comes to trade union rights, writes Darragh Golden

A 24-hour strike in Athens last year called by Greece's largest labour union halted ferries and public transport services in the Greek capital and other cities, to press for a return of collective bargaining rights axed more than a decade ago during a severe financial crisis. File photo: AP/Thanassis Stavrakis

On November 11, the European Court of Justice (ECJ) ruled in a landmark case on the viability of a progressive EU law in the social sphere known as the Directive on Adequate Minimum Wages (DAMW). 

Denmark sought to have the directive, in its entirety, annulled. The ECJ addressed some Danish concerns but ultimately ruled that the directive’s core provisions are valid, binding and on solid ground. 

This ruling should reassure folk that the EU can act in a pro-social fashion by addressing the concerns not only of big business but of workers too.

DAMW’s genesis: The law of unintended consequences 

Cast your mind back to the dark days of the euro crisis (2008-2011) when the EU faced an existential threat resulting from ‘macroeconomic imbalances’ between the ‘core’ and the ‘periphery’. Ireland, along with Portugal, Italy, Greece, and Spain, belonged to the latter, known unaffectionately as the PIIGS. 

Remember the Troika, where EU executives visited these shores, offering sage advice that we were unable to ignore, not least because the country was dependent on its financial assistance. 

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Public sector wage cuts and reductions in the minimum wage were at the behest of the Troika, while elsewhere, such as Italy, EU executives promoted labour market reforms, including the decentralization of collective bargaining.

Portugal also found itself in the eye of the economic storm, such that its judiciary was not immune from wage cuts by the Troika. A Portuguese magistrates’ union brought a case before the ECJ, which ruled that the cuts were legitimate as they were part of the broader effort to save the euro. 

Hence, by stipulating wage policy and industrial relations changes, the EU, somewhat unwittingly, waded into waters that were once considered out of reach and the preserve of national governments.

It stands to reason that if cuts and (negative) changes to industrial relations systems can be implemented in times of crisis, the opposite holds in better circumstances. In 2019, Commission president, Ursula von der Leyen, promised to deliver “a legal instrument” to reverse the negative effects following a decade of austerity.

Unintended consequences

Drafting social laws at the EU level is notoriously difficult, and the DAMW is no exception. For starters, BusinessEurope, which represents employers’ associations such as IBEC, and had supported the EU-stipulated pay cuts and industrial relations changes, was confident that it could undermine von der Leyen’s social leanings by relying on the competence argument. 

The employers’ umbrella-group insisted the DAMW is "completely against the letter and spirit of the EU treaty". This approach held sway in the past, but the EU-competence argument no longer stood following the aforementioned interventions. This is perhaps the greatest irony.

On account of its genesis being a complex one, the DAMW was seen by advocates of Social Europe as a "game changer" because it sought to improve the living and working conditions of EU workers and reverse the cuts wreaked by austerity politics in response to the euro crisis. 

Improvements would be achieved by establishing criteria for minimum wages and increasing collective bargaining coverage, ie the number of workers that are covered by a collective bargaining agreement (CBA) negotiated between unions and employers.

Having navigated the EU’s institutional hurdles, including a vote in the European Parliament, the DAMW was met with Nordic opposition, primarily from the Danish government (supported by the Swedes, but not the Finns). The Nordics argued that the EU Commission, which proposes legislation, lacked the competence to address wage policy and industrial relations. 

The ECJ was effectively called upon to decide the DAMW’s fate. To the relief of the European Trade Union Confederation and unions across the EU, the ECJ found that while some provisions would require amendments, in the main, the DAMW stood.

Where to now?

The directive requires all member states, where collective bargaining coverage is below 80% of workers, to provide a framework for collective bargaining and establish an action plan to promote union recognition and collective bargaining.

Collective bargaining coverage in Ireland stands at 34% down 8% from 2000. Increasing collective bargaining coverage is the most challenging and contentious aspect for Irish policymakers.

BusinessEurope was right about one thing in their response to the prospect of the DAMW: "Where national social partners are weak, European legislation cannot suddenly make them strong." 

Darragh Golden: 'Ireland’s legacy on trade union rights pales in comparison to most other European countries.'

The DAMW obliges member states to strengthen the social partners’ capacity to engage in collective bargaining on wage-setting at sector or cross-industry level, by protecting workers and union representatives from victimisation and protecting unions from acts of interference by employers, otherwise known as union-busting. 

Ireland’s legacy on trade union rights pales in comparison to most other European countries. For instance, there is no obligation on employers to recognise unions, a prerequisite to collective bargaining. 

In this sense, we are closer to Boston than Berlin, to revive a noughties term. I’m not so sure that’s where we want to be.

• Darragh Golden is an Ad Astra fellow and assistant professor in Employment Relations at University College Dublin. He is the author of the book Labour Euroscepticism (ECPR Press) and co-author of Politicising Commodification (Cambridge University Press).