Employment balances

07 March 2008

In last month's issue FIEC looked at the ‘Posting Directive' and recent developments regarding the controls available to countries hosting workers from elsewhere in the EU. There have also been two cases heard by the European Court of Justice (ECJ) in the last few months that will have an impact on the complex area of EU employment law.

In December the ECJ announced its judgements in two known cases, ‘Viking' (case C-341/05) and ‘Laval' (case C-438/05), which address two EU fundamental rights – the right for workers to take collective action (including striking) and the freedom of establishment and the right to provide services for enterprises.

Balance

Given the fact that the exercise of one of these rights may impede or limit the exercise of the other, the challenge for the ECJ was to provide a robust judgment that would allow space for both.

The freedom of establishment and the freedom to provide services are guaranteed under Articles 43 and 49 respectively of the EU Treaty and are therefore considered as fundamental freedoms central to the functioning of the Internal Market. The right to take collective action is enshrined in Article 28 of the Charter of Fundamental Rights, which will become legally binding once the new Lisbon Treaty is ratified by all 27 Member States.

In the ‘Viking' case the International Transport Workers' Federation (ITF) started a collective action against Viking Line, a Finnish ferry company operating in the Baltic between Finland and Estonia. Viking wanted to lower costs by registering (re-flagging) its ship “Rosella” in either Estonia or Norway, which would allow it to enter into a new collective agreement with a trade union established in one of those countries. In reaction to this ITF wrote to its affiliates asking them not to negotiate with Viking and announcing its intention to call a strike.

The ECJ recognised that collective action may be justified by an overriding public interest such as the protection of workers. Such an action must be suitable to achieve a legitimate aim but must not go beyond what is necessary to achieve that objective. In other words, the fundamental right to take collective action must be subject to certain restrictions.

In the second case, Swedish trade unions started a collective action against a Latvian construction company Laval, which had won a contract for the renovation of a school in Vaxholm, near Stockholm. Unions started to blockade Laval's worksite after talks on the pay received by Latvian posted workers failed, and after Laval signed a collective agreement with a Latvian trade union, agreeing an hourly wage lower than the normal local one. The boycott by the Swedish unions ultimately led to the bankruptcy of Laval's Swedish subsidiary.

Posting Impact

This case directly concerns the practical application of the ‘Posting Directive' (1996/71/EC) and its transposition in the various national legislations.

In this case, the ECJ backed Laval's argument, going against the position previously expressed by the Advocate General. The ECJ said that because Swedish law does not set any minimum pay levels, trade unions had no right to force Laval to pay its workers a locally determined minimum wage. It also referred to a Swedish law prohibiting a strike to overturn a collective wage agreement, including one signed by a foreign company in its home country, which was the case of Laval. The blockade of the site was therefore a restriction on the freedom to provide services and was not justified to protect workers.

It is now up to the Swedish national court to follow up on the ECJ's judgement and it leaves little room for interpretation. Swedish law will have to change and there may also be implications in certain other Nordic countries regarding their systems of collective bargaining.

To sum up, the two ECJ judgements imply that the right to freedom of establishment and to provide services is not an all-embracing restriction on the right to take collective action. However, the right to take collective action must take account of the fundamental right of businesses to exist and provide services.

Unfortunately, the two judgements do not define a clear borderline between the two fundamental rights. In the ‘Viking' case in particular there is a grey area where national courts will have to make their own decisions, and these will not necessarily follow the same path throughout the EU. This raises the prospect of more animated debates between workers' and employers' groups at both the national and European levels, which will have further implications for the posting of workers in the EU.

The detailed judgements can be found on the ECJ's website at: http://curia.europa.eu/en/content/juris/index.htm

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