On 19 May 2015, the European Commission announced it was initiating an infringement procedure against Germany, by sending a letter of formal notice regarding the application of the Minimum Wage Act to the transport sector.
Here are the three phases which have already occurred, and the fourth one yet to come.
- It all began at the beginning of this year, when a law stating that all employees should receive a minimum wage of € 8.5 per hour was issued in Germany, with a clear protectionist intent to combat social dumping. This law has had inevitable repercussions for foreign companies operating in Germany, in particular for the logistics and transport operators coming to Germany to carry out loading, unloading and cabotage operations, but also just for mere transit. The law requires, in fact, the prior submission to local authorities (the Bundesfinanzdirektion West Cologne, namely the Customs Authority) of a formal certification of payment complying with the minimum wage, as well as the obligation to provide a number of data regarding transport operations.
- The German Ministry of Labour has then taken steps to suspend the application of the minimum wage law to transports transiting through Germany. The law though still applies to international transports with loading / unloading in Germany, as well as to cabotage in German territory.
- After an exchange of information with the German authorities and a detailed legal analysis of the German regulatory framework, the EC, while supporting, in principle, the introduction of a minimum wage in Germany, has recently stated that the application of this protectionist law on road haulage transiting through the German territory disproportionately limits the freedom to provide services and the free movement of goods. In its statement, the EC clarified that the application of the anti-dumping measures contained in the German law to international transport is not justified, as it creates disproportionate administrative obstacles which prevent the internal market to function properly. However, the Commission supports the need to safeguard the social protection of workers and to ensure fair competition, even though allowing the free movement of goods and services.
- 4. Germany will have two months to reply.
While waiting to see what happens, without making any predictions, some legal considerations can be made.
The protectionist intent pursued by the German law has clearly been that of opposing cabotage operations which alter the German market in terms of competitiveness, but since its issue it has given rise to concerns about the feared infringement of Article 56 of the Treaty which states the freedom to provide services in Europe.
The case law already includes a similar case relating to German law: the so called Bundesdruckerei case which concerned a particular case of restriction of freedom to provide services in the field of procedures for the award of public service contracts. The dispute had recently arisen as a result of a specific German law (issued by the Land of North Rhine-Westphalia) which had established the possibility of awarding public service contracts only to companies that, upon submitting the tender, committed to pay their employees a minimum hourly wage of 8.62 euro. The city of Dortmund had thus issued a call for tender for the award of a public contract for the digitization of documents and data conversion for its urban planning services. Applying the regional law, the call for tender requested to ensure this minimum wage of 8.62 euro also to workers employed by a subcontractor established in another Member State (Poland), whom the tenderer intended to use, and who performed the contract only in that State. In that case, the European Court of Justice ruled that the compliance with the minimum wage in a public procurement cannot cross national borders when the contractor makes use of a subcontractor established in another Member State. According to the EU Court, in fact, a law such as the one issued by the German Land implies a restriction of the freedom to provide services. Indeed, the imposition of a minimum wage to subcontractors of a tenderer established in another EU state, in which the minimum wages are lower, constitutes an additional economic burden, preventing, hindering or making the performance of their services less attractive in that other Member State.
In light of this precedent, future scenarios concerning the issue are far from certain. For now we just need to adjust to the new measures (with the necessary contractual precautions, and with the use of appropriate operating protocols), in order to avoid the penalties for violating the law, which range from € 30,000.00 to € 500,000.00.
(Bologna Office – Barbara Michini – 0039(0)512750020)
