The EU Minimum Wage Directive: To Be or Not to Be?

Court challenge to EU minimum wage directive exposes tensions between legal interpretation, political compromise and social policy.

The year began dramatically for Social Europe. On 14 January, Nicholas Emiliou, one of the European Union’s Advocates General, advised the Court of Justice of the European Union (CJEU) to annul the Adequate Minimum Wages Directive (AMWD). His opinion supported an action for annulment brought by the Kingdom of Denmark against the European Parliament and the Council, arguing that the AMWD would undermine the rights of national social partners and breach the principle of conferral of powers.

Emiliou’s position rests on precarious legal ground. Initial analyses of his opinion suggest the complaint is unlikely to succeed. Claire Kilpatrick and Marc Steiert of the European University Institute in Florence consider Emiliou’s argument flawed due to its inaccurate reading of existing jurisprudence. They point out that it neglects the drafting history of Article 153 of the Treaty on the Functioning of the European Union (TFEU), existing EU labour law, and the Court’s case law, which already regulates pay in ways that, under Emiliou’s interpretation, would be prohibited by Article 153(5) TFEU. The CJEU should, therefore, maintain its established approach of narrowly interpreting the pay competence exclusion in Article 153(5) and reject the annulment request.

European trade unions share this optimism. They argue that the AMWD neither undermines the autonomy of social partners nor determines pay levels. The directive does not seek to harmonise minimum wage levels across the EU or impose a uniform method for setting them. Rather, it aims to ensure an adequate standard of living for all workers in Europe. To achieve this, it mandates that member states devise their own action plans to extend collective bargaining coverage. Where statutory minimum wages are in place, governments must establish transparent procedures involving social partners, ensure regular updates, and guarantee that minimum wages suffice to cover workers’ basic living expenses. The directive also requires states to introduce enforcement measures to ensure workers receive the wages they are legally due.

The legal challenge against the AMWD cannot be divorced from the broader political context. From a labour politics perspective, the lawsuit’s outcome remains uncertain due to the powerful lobbying forces aligned against the directive. BusinessEurope, the European employers’ umbrella organisation, has from the outset relied heavily on legal arguments. However, this strategy proved ineffective during the political process. In 2019, BusinessEurope leaders expressed confidence that they would easily block any Commission proposal in this area, having persuaded Danish and Swedish union confederations of the directive’s alleged illegality. Yet their legal objections failed to resonate in Brussels, Strasbourg and other European capitals. This was, in part, because employers had undermined their own position through past actions.

Swedish employers had previously funded a complaint by a small Latvian company in the landmark Laval case, while BusinessEurope itself had called for EU leaders to develop a ‘European framework’ for business-friendly ‘product, labour, healthcare and social security reforms’ (emphasis added) in response to the 2008 financial crisis. These efforts paved the way for what former Commission President José Manuel Barroso described as a “silent revolution”, marking a shift from a predominantly market-driven (horizontal) mode of European integration to a more politically driven approach (vertical), particularly in wage policy.

This history allowed European trade unions to turn the legal competence argument on its head. They posed a straightforward question to European legislators: how can it be argued that the EU lacks the authority to establish a framework for adequate minimum wages after a decade of EU interventions that pressured governments to cut minimum wages and marketise collective bargaining? This line of reasoning proved compelling. The CJEU itself had previously rejected union challenges to Council decisions imposing austerity conditions, confirming that the Council could make bailout funding conditional on wage and pension cuts or labour market deregulation. Since 2011, the EU’s Six-Pack laws institutionalised the new economic governance (NEG) regime, equipping the European Commission with additional enforcement mechanisms. Since 2013, non-compliant member states have also faced the risk of losing EU cohesion funding.

Initially, European integration constrained wage growth indirectly through market pressures generated by the internal market and monetary union, as evidenced by the decline in wage shares across the EU since 1993. After the financial crisis, however, the Commission and Council issued more direct NEG prescriptions requiring states to curb wages. Researchers such as Guidi and Guardiancich have documented this development across the EU, while work led by myself has provided a detailed analysis of these prescriptions in specific semantic, communicative, and policy contexts. This increasingly vertical intervention in wage policy fuelled labour Euroscepticism and provoked union resistance, including transnationally. Against this backdrop, the von der Leyen Commission, the European Parliament, 24 national governments, nearly all trade unions and even the French employers’ association MEDEF supported the AMWD. Their aim was not merely to secure fair wages, but also to restore popular legitimacy to the European integration project.

Despite this political consensus, Emiliou contends that the CJEU could still annul the directive. He argues that the EU treaties suffer from a lack of clarity and overlap, particularly in the area of social policy, and asserts that it is the Court’s role, not that of democratic legislators, to resolve such ambiguities under the rule of law. Yet, in citing Article 2 of the Treaty on European Union (TEU), Emiliou conspicuously omits its reference to democracy, which precedes the mention of the rule of law.

Emiliou further claims that wage policy must be left to member states alone to safeguard the role of social partners. A review of the European integration process from the 1950s to the present, however, reveals this assertion to be a fiction. Whether employers’ associations and trade unions support EU-level wage policy interventions has always depended on their specific interests at a given time. Throughout the history of integration, both sides have endorsed European measures on pay to secure a level playing field, such as rules on equal pay for men and women, equal treatment for posted workers and protections for those with atypical employment contracts. Most tellingly, employers’ associations at both national and European levels championed the vertical NEG interventions that mandated minimum wage cuts and weakened collective bargaining in Ireland and other countries after the 2008 crisis.

The CJEU should not base its ruling on Emiliou’s speculative interpretation of the supposed true meaning of the treaties’ social policy provisions. The drafters of the Single European Act and subsequent treaties deliberately employed ambiguous language to paper over conflicting interests across countries and social classes. Emiliou himself concedes that the relevant treaty provisions are unclear and overlapping. This ambiguity means that the legality of the AMWD is ultimately a political question.

For this reason, the Court would do well to defer to the EU’s democratic legislative process. The ordinary legislative procedure, involving the European Parliament, the Council, social partners under Article 154 TFEU and national parliaments via the yellow card procedure introduced by the Treaty of Lisbon, is the proper forum for resolving contested political issues. Emiliou, in his previous capacity as Cyprus’s permanent representative to the Council, participated in this very process. It is now his legal opinion that seeks to overturn it.The outcome of this court case is not just of academic interest. If Emiliou‘s opinion prevails, the popular legitimacy of the EU will be in tatters. European workers will not understand why the many business-friendly EU governance prescriptions on wage cuts are legal while a labour-friendly directive on adequate minimum wages is not.