ECJ clarifies Minimum Wages for Posted Workers

Tuesday, June 30, 2015 | Published by

Strategic elements to protect workers’ interests and to prevent against social dumping, “minimum pay” raises legal issues in its practical implementation. On this point, Directive 96/71 provides additional clarifications by the Court of Justice of the European Union (ECJ).

In this regard, the European Court, in its ruling of February 12th 2015, considered that a daily allowance, a compensation for traveling time and the minimum paid holidays must be regarded as part of the minimum wage. Whereas the coverage for the cost accommodation and the meal vouchers must be excluded from the minimum wage calculation.

EU Law

In the words of Article 3 of Directive 96/71, companies posting workers to the territory of another Member State, in the framework of the transnational provision of services, shall in particular guarantee minimum rates of pay for posted workers, regardless of the law applicable to the employment relationship.

First, the minimum wages “are laid down by law, regulation, or administrative provision and/or by collective agreement or arbitration awards which have been declared universally applicable” in the Member State where the worker is posted.

Therefore, Article 3 provides Member States with some leeway to determine the minimum rates of pay. Nevertheless, these rules shall not prevent application of terms and conditions of employment which are more favorable to workers.

Secondly, “allowances specific to the posting shall be considered to be part of the minimum wage, unless they are paid in reimbursement of expenditure actually incurred on account of the posting, such as expenditures for travel, board and lodging”.

Consequently, it is crucial for employers to determine the legal nature of the sums paid to the posted workers for calculating the mandatory minimum wage.

Facts of the Case

In this case, a Polish undertaking posted 186 workers in a Finnish branch in order to work on a nuclear power station. The employees considered that they did not receive the minimum wage that was due to them under the Finnish collective agreements for the electricity sector.

The collective agreements provided for a calculation of employees’ minimum pay, which is based on criteria that is more favorable to employees than those applied by the employer.

Accordingly, the workers, through a trade union, filed actions to obtain full payment of due wages before the competent Finnish Court. This jurisdiction, having some doubts concerning the interpretation of EU law and, in particular, the concept of “minimum rates of pay”, preferred to refer the following question to the Court of Justice for a preliminary ruling:

“Is Article 3 of Directive 96/71, read in the light of Articles 56 TFEU and 57 TFEU, to be interpreted as meaning that the concept of minimum rates of pay covers basic hourly pay according to pay groups, guaranteed piecework pay, holiday allowance, flat-rate daily allowance and compensation for daily traveling time, as those employment and working conditions are defined in a collective agreement declared universally applicable and falling within the scope of the Annex to the directive ? ”

Previous Rulings

In the past, the Court of Justice of the European Union had the opportunity to clarify the concept of “minimum pay”. Thus, the general bonuses granted to workers in the same business sector, such as bonuses in respect of the 13th and 14th salary months, shall be taken into account to determinate the “minimum pay.

However, allowances and supplements making up for additional work or under particular conditions shall not be taken into account for the purpose of calculating the minimum wage (ECJ April 14th 2005, n° C-341/02 Commission / Federal Republic of Germany).

More generally, according to the Court, “only the elements of remuneration which do not alter the relationship between the service provided by the worker, on the one hand, and the consideration that he receives in return, on the other, can be taken into account in determining the minimum wage within the meaning of Directive 96/71” (ECJ November 7th 2013, n° C-522/12 ISBIR).

ECJ Position

The ruling by the Court of Justice of the European Union held that Article 3 of Directive 96/71, read in light of Article 56 TFEU and 57 TFEU, must be interpreted as follows:

Calculation of the minimum wage for hourly work and/or for piecework “can arise from the classification of employees into pay groups, as provided by the relevant collective agreements of the host Member State, provided that this calculation and classification results from binding and transparent rules”.

Daily allowance must be regarded as part of the minimum wage. In fact, this allowance was intended to ensure the social protection of the workers, making up for the disadvantages entailed by the posting. This was not paid in reimbursement of expenditures actually incurred on account of the posting.

Compensation for daily traveling time, such as that at issue in the main proceedings, must be regarded as part of the minimum wage. The conditions governing the payment of this compensation made it so that it was not paid in reimbursement of expenses. Indeed, this compensation should be paid to workers if daily commutes to and from work exceed one hour and does not concern the reimbursement of costs incurred for the travels related to the workplace.

Coverage of the cost of accommodation must not be integrated into the minimum wage. The ECJ considers that the method which the employer has chosen to cover such expenditures has no bearing on the legal classification. Legally, this is a refund of expenditure actually incurred on account of the posting,

Meal vouchers must not be included in the minimum wage because these allowances are paid to compensate for living costs actually incurred by the workers on account of their posting.

The minimum paid annual holidays are intrinsically linked to that which the employee receives in return for his services. Accordingly, the posted workers must receive allowances corresponding to the minimum wage to which they are entitled during the reference period.

Conclusion

Major trends are emerging and the ECJ is seeking to neutralize abusive practices of employers who qualify the reimbursements of expenditures related to the posting as wage elements. Indeed, it can be tempting to artificially increase the wage of posted workers to more quickly reach the mandatory minimum provided by Directive 96/71.

Therefore, the legal qualification of wage elements or reimbursement of expenses must be assessed on a case by case basis. While the reimbursement of expenditures actually incurred or compensated in advance on account of the posting, particularly for the food, accommodation or transport, must be excluded from the minimum wage. All allowances or fixed indemnity related to distance and wage elements directly related to the work must be included.


ECJ, February 12th 2015, case C-396/13
ECJ, April 14th 2005, case C-341/02
ECJ, Novembre 7th 2013, case C-522-12
Image credit: Jack Georges [Public domain], via Wikimedia Commons