New European Attack on Collective Labour Agreements

4 April 2008

New European Attack on Collective Labour Agreements

With a decision of the European Court of Justice in what has come to be known as the Ruffert case, a new attack has been launched on the validity of the Netherlands' Collective Labour Agreements (CAOs) and similar sectoral agreements in other EU member states. The minimum wage stipulated in one such agreement in Germany need not, according to the Court, be applied by foreign forms active in the Federal Republic. The decision opens the door to social dumping, the term given to the favouring of countries which impose no or low demands on employers in relation to workers' pay and conditions. Following previous ECJ rulings in the comparable Laval and Viking, this decision appears once again to bear out the warnings issued by campaigners against the EU's Services Directive - sometimes known as the Bolkestein Directive, after the right-wing Dutch European Commissioner who spawned it. "Social Europe" is being razed to the ground.

The Ruffert case concerns the question as to whether a member state, when putting a building contract out to tender across the whole of the EU - an obligation under European law - is allowed to demand that foreign firms respect the minimum wages agreed in the sector.

The German state of Lower Saxony specified just such a demand in a recently issued tender. Only firms which agreed to this in writing would be considered for a contract, an obligation which also applied to subcontractors. In one case in Lower Saxony, however, a Polish subcontractor paid fifty-three building workers employed in the construction of a prison a rate amounting to only 46% - less than half - of the agreed rate for their trade. The contractor Object und Bauregie was prosecuted under the terms of the collective labour agreement and fined 100.000 euro, but responded by taking the case to court. The German court referred the matter to the ECJ, which yesterday ruled that due to the requirements of the EU Posted Workers' Directive the Polish firm should not have been obliged to pay wages in line with the collective agreement.

According to the ECJ the demand that agreed rates be respected is in conflict with the freedom to provide services. The Polish firm was thereby justified in ignoring the agreed rate and refusing to pay what had until then been regarded as the legally binding rate, for these collective agreements, in Germany as in the Netherlands and many other EU member states, had the force of law. This legal obligation is viewed by the ECJ as referring only to German employers, which means that any and every agreement hammered out between workers and employers can be challenged by foreign firms before the courts. The trade union movement is thus effectively rendered powerless by this ruling, and agreement between the two sides of industry replaced by a judge obliged to follow the EU's neoliberal rules.

The Netherlands is far from safe such an infringement of our social model. The Services Directive and the Posted Workers Directive represent a direct threat to everything which has been gained in this area over sixty years. The SP has repeatedly warned that the Bolkestein Directive's neoliberal tendencies would have precisely these consequences. The ongoing conflict between the German state postal service and the Dutch postal service TNT must also be regarded in this light. German collective labour agreements are not valid in relation to the Dutch enterprise, which has also refused to be bound by the agreed minimum wage for postal workers. The case is now before the courts.

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