The Employers and Industrialists Federation (OEB) and Cyprus Chamber of Commerce and Industry (CCCI) have issued separate announcements to their members regarding a ruling by the Court of Justice of the EU (CJEU) upholding the legality of the EU's minimum wage directive. The ruling followed a legal challenge by Denmark to have the directive in its entirety annulled.
In its appeal, Denmark argued that the Directive violated the division of competences between the EU and its member states, as it entailed direct interference in wage determination within the Union and in the right to freedom of association – matters that fall exclusively under the competence of the member states.
Even though the CJEU ruled that the Directive was “valid”, it did however annul two of its provisions that it said amounted to a (Treaty-prohibited) direct intervention of EU law in wage determination:
- The Directive’s criteria that member states were required to consider when revising their national minimum wages – such as the purchasing power of minimum wages, cost of living, general wage levels, and wage growth rates – were deleted.
- The prohibition on reducing national minimum wages in member states that apply an automatic cost-of-living adjustment mechanism was abolished. This means that if a national minimum wage is linked to a cost-of-living allowance (COLA) and inflation turns negative, the national minimum wage may also decrease.
Laying out the changes, OEB said that it will contribute to a rational and objective regulation of the national minimum wage level, “based on objective criteria that will ensure not only its adequacy but also protect the competitiveness of the Cypriot economy and promote the sustainable development of the country”.
In its own announcement, CCCI said the Court also made it clear that the Directive encourages collective bargaining between social partners in countries where collective agreement coverage is below 80%, requiring Member States to develop an action plan with concrete measures to support and strengthen collective bargaining.
In Cyprus, it said, several frameworks already exist to facilitate collective bargaining, including:
- the Code of Industrial Relations,
- the Law on the Recognition of Trade Unions,
- the Trade Unions Law, and
- the regulations governing strikes in essential services.
But the CCCI was keen to clarify that: “The Court emphasised that member states are not obliged to extend the coverage of collective agreements, as claimed by some trade unions. The Directive aims to promote social dialogue, but it does not infringe upon the freedom of parties to decide whether to engage in collective agreements or to determine their own terms independently.”
The EU Directive on Adequate Minimum wages
The EU Directive on Adequate Minimum wages became law in October 2022 and was designed to establish a legal framework to promote adequate statutory minimum wages and collective bargaining on wage-setting.
However, Denmark challenged the directive, seeking its annulment on the basis that it undermined the division of powers between the EU and member states.
In particular, Denmark had argued that the law amounted to direct interference in the determination of pay within the EU and with the right of association, two areas which Denmark argued were outside the EU’s competences, as provided for in the Lisbon Treaty.
On 11 November, the CJEU rejected the claim, holding that the exclusion of EU competence in these two areas did not extend to any question involving a link with pay or the right of association.
The court also found that the directive did not cover any measure which would have any practical impact on the level of pay within member states.
Otherwise, the court argued, certain competences conferred on the EU to support the activities of member states in terms of working conditions would be "deprived of their substance", according to a court statement.
