Ane Aranguiz, Postdoctoral Researcher, University of Antwerp
Less than a year after the Commission announced its commitment
to an initiative on minimum wages, on 28 October 2020 the Commission finally presented
the fiercely criticized proposal
for a directive on adequate minimum wages. The Commission had to find an balance
on the tightrope of criticisms en masse regarding, inter alia, its lack of
competence, concerns regarding the autonomy of social partners and the
sustainability of collective bargaining systems or the impact on the competitive
advantage of lower wages on certain Member States.
Background
Over the last years, low wages have not kept up with other
wages in many Member States and recent labour structural trends such as
globalization, digitalization and the upturn of non-standard employment have
resulted in increased job polarisation leading to an increased share of
low-paid and low-skilled jobs. These trends have further contributed to the
erosion of collective bargaining systems. Making matters worse, the recent
Covid-19 crisis is particularly hitting sectors with a higher share of low-wage
earners and having a disproportionate impact on disadvantaged groups such as
women, young, low-skilled workers or people with disabilities.
Ever since the adoption of the European
Pillar of Social Rights (EPSR) in 2017, the European institutions have been
committed to delivering more effective social rights to the European society.
The latest initiative relates to a proposal for a directive on adequate minimum
wages in the EU, implementing principle 6 EPSR which aims at providing better
working conditions, addressing adequacy of minimum wages to contribute to
improving the fairness of the labour market in the EU and to stimulate
productivity and socioeconomic progress.
The initiative was first addressed in the Political
Guidelines for the Commission 2019-2024. In January 2020, the Commission
presented its communication on ‘building
a strong social Europe for just transitions’ alongside the first-stage
consultation where social partners were consulted on the need for a
potential initiative on minimum wages and its possible direction. The second-stage
consultation, between June and September, dealt with the content and the
legal instrument. In view of a lack of agreement among the social partners to
enter into negotiations to conclude an agreement according to Article 155 TFEU
and after carrying out an impact assessment following the policy on Better
Regulation, the Commission presented its proposal for a Directive.
Content
On the basis of Article 153(1)(b) TFEU on working conditions
and Article 153(2)(b) TFEU, the Commission puts forward a directive that aims
at ensuring that work is remunerated adequately as to allow for a decent living
wherever they work. The design of the directive is thought to take into account
and adapt to country specific characteristics, therefore respecting national
competences, the contractual freedom and autonomy of social partners. Moreover,
it has the objective of promoting collective bargaining on wages, ensuring
formal coverage and guaranteeing compliance with existing collective agreements
of statutory minimum wages.
To this end, the proposed directive is structured in four
chapters: General provisions (Articles 1-4: subject matter, scope, definitions,
promotion of collective bargaining on wage setting); statutory minimum wages
(Articles 5-8: adequacy, variations and deductions, involvement of social
partners in statutory minimum wage setting and updating and effective access of
workers to statutory minimum wage); horizontal provisions (Articles 9-12:
public procurement, monitoring and data collection and penalties); and final
provisions (Articles 13-19: implementations, dissemination of information,
evaluation and review, non-regression and more favourable provisions,
transpositions, entry into force and addresses).
Among these, there are a number of provisions that need to
be emphasized. In the first place, attention should be paid to the scope of the
proposal, which applies to every worker in the Union who has an employment
contract or employment relationship as defined by law or collective agreements
and in consideration with the case-law of the ECJ. What is interesting is that
recital 17 of the preamble complements this by specifically addressing
categories that are often disputed to qualify as ‘workers’, including domestic
workers, on-demand workers, intermittent workers, voucher based-workers, bogus
self-employed, platform workers, trainees and apprentices. Remarkably, it
enshrines that it is the actual performance of work and not the work
description provided by the parties what determined the existence of an
employment relationship. This provision is clearly designed to ensure that
non-standard forms of employees are covered by minimum wages, regardless of
whether they have traditionally been considered as workers insofar as they
fulfil similar criteria.
Differently, Article 4 provides for the promotion of
collective bargaining, including the obligation to install a framework to
enable collective bargaining where coverage is less than 70%, which requires an
action plan to be made public and presented to the Commission. In the case of
statutory minimum wages, the proposal enshrines a provision on adequacy in its
Article 5, imposing an obligation on Member States to establish national
criteria in a stable and clear way that includes (at least) the purchasing
power of minimum wages, the general level of gross wages and their
distribution, their growth rate and labour productivity developments. Member
States are further obliged to use indicative reference values commonly used at
the international level. While the preamble refers to the at-risk-of-poverty
threshold in this regard as a possible aid to assess adequacy, the provision
does not include a specific reference value that (even remotely) sets a
threshold. Article 6, in turn, limits possible variations and deductions that
allow different rates of statutory minimum wages, and provides that in any case
they should be objectively justified and proportionate.
In addition, the monitoring system provides for a platform
of supervision, data collection and evaluation of the current framework.
Article 10 requires, inter alia, a report on annual basis, statistics and
information (disaggregated by gender, age, disability, company size and
sectors) which the Commission will assess and report accordingly to the Council
and the Parliament.
These are complemented with the more common provisions
regarding remedies, implementation, non-regression, dissemination, evaluation
and transposition.
Analysis
In spite of vast criticisms, this is a rather strong
proposal, if not so much in terms of adequacy, at least in terms of ensuring
access to minimum wages, transparency and compliance. The proposal has it
written all over how much the Commission has tiptoed around the concerns
regarding the autonomy of the social partners and the possible negative effects
on collective bargaining systems. Besides the obvious provisions on the
promotion of social partners (Articles 4 and 7), the preamble addresses this
concern extensively (recitals 18-20) and an entire chapter (2) is dedicated
solely to statutory minimum wages to make a clear separation between the two
systems.
In all certainty, one of the strongest points of this
proposal relates to its broad coverage. A combination of a broad concept of
worker, an obligation to put a framework to promote collective bargaining in
areas not yet covered by collective agreements and the clear limits to
variations and reductions in the case of statutory minimum wages, will in all
likelihood (if adopted) lead to the coverage of many workers who are not
currently able to access minimum wages. Complemented with a regular monitoring
system and access to effective remedy, these provisions could have the desired
effect to bring ‘fairness’ to the labour market by ensuring that many more are
covered by minimum wages.
As was to be expected, however, the proposal is weaker
from an adequacy point of view. On a positive note, Member States with
statutory minimum wages need to take into account important elements when
determining the level of minimum wages. These elements aim at giving important
insight regarding the adequacy of minimum wages and whether they allow
recipients access to essential services and participate in society. There is,
however, no indication on how to use these elements or a certain ‘threshold’ of
‘standard’ that Member States should aim to strive, such as the
at-risk-of-poverty threshold (60% of the equivalized median wage), even though
in 2018 most statutory minimum wages did not suffice to lift people out of
poverty. This might seem surprising, since one of the aims of the Directive is
to combat in-work poverty, but it is completely understandable considering the
legal basis chosen by the Commission that forbid the regulation of the level of
pay (Article 153(5) TFEU). While this provision may certainly ensure some
‘fairness’ and transparency in wage setting mechanisms, minimum wages that lie
below the poverty line can hardly be considered ‘adequate’. An alternative
legal basis could have allowed to include sturdier commitments to adequacy
instead.
Another point to warmly welcome is the link between the
Directive and other fundamental rights instruments such as the EPSR, the
Charter of Fundamental Rights (Article 31 CFR), the European Social Charter
(Article 4) and the 131 ILO Convention. These links could act as aid of
interpretation for Member States or courts in case of conflict and facilitate
judicial dialogue between different authoritative bodies. The clear link to
Article 31 CFR, moreover, ensures that the Directive will be read in line with the
CFR. In this vein, while Bauer
opened the door for the direct
application of Article 31 CFR, without a clear reference in the directive
it would be disputed that minimum wages are covered by the provision, since
Article 31 CFR does not explicitly refer to the right to minimum wages.
Further strengthening the proposal, the monitoring system
(which will be part of the European Semester) in addition to the access to Technical
Support Instrument and the European
Social Fund Plus to develop and improve the technical aspects of minimum
wage is likely to facilitate a successful and effective implementation of the
directive.
Conclusion
All in all, the Commission has put forward a strong
initiative that aims at establishing ‘fair’ minimum wages, if not necessarily
‘adequate’ as the title of the proposal falsely prescribes.
It remains to be seen whether the proposal will in fact
survive the brutal opposition to regulating minimum wages at the EU or at least
in its current form. In view of the vicious antagonism, it is not unlikely that
the proposal will be substantially watered down during the negotiations between
the Council and the Parliament, if not completely abandoned after potentially
becoming the fourth victim of the yellow-card procedure.
Barnard
& Peers: chapter 20
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