Collective bargaining – where exactly does the EU stand?

Will there be any real change when the EU now aims to promote collective bargaining at all levels – or is it just pretty words? This was one of the questions discussed at a Nordic conference on current EU issues at the end of 2024.

The conference was organised by the Nordic newsletter EU & arbetsrätt in collaboration with the Swedish Ministry of Employment.  

Under the heading “The status of collective agreements in EU Law – theory, practice, and rhetoric”, Professor Niklas Bruun from Hanken School of Economics in Helsinki described the gap between theory and practice. 

First, the theory: According to the treaty that dictates what the EU can and cannot do, unanimous decisions from member states are required for the EU to adopt regulations on collective bargaining. 

And the EU cannot legislate at all on “pay, the right of association, the right to strike or the right to impose lock-outs.” The EU must also respect the autonomy of the social partners and take into account the differences between member states’ systems.

Thus, in theory, regulations on collective bargaining and collective agreements are essentially the member states' own business.  

However, in practice, the social partners have gradually seen their freedom of contract curtailed. This has mainly occurred in cases where the EU Court of Justice has concluded that collective agreements and industrial actions conflicted with EU treaty provisions on the free movement of services, competition, and the freedom to conduct business.

In such cases, these treaty provisions have been considered superior. Yet there are also examples of the Court rejecting collective agreements that have implemented pure labour law directives.

All this leads to particularly large consequences for the Nordic countries, where the social partners enjoy an unusually large leeway compared to the rest of Europe. So, when the EU adopted a directive on minimum wages in 2022, it was the final straw for Danes and Swedes. 

The Union had gone too far by legislating on “pay,” which it is not supposed to do. That is why Denmark and Sweden are currently trying to get the EU Court of Justice to annul the directive.

However, Bruun pointed out an aspect of the minimum wage directive that has not received as much attention, an issue which he described as a paradigm shift. The directive imposes a number of obligations on member states aimed at increasing collective agreement coverage and facilitating collective bargaining on pay both at the sectoral and national levels. 

Does this represent any real change in the EU’s stance on collective bargaining, or is it mostly rhetoric, he wondered.

Mette Søsted Hemme from Aarhus University pointed out that the directive contains some assurances: It will not affect “the full respect” for the autonomy of the social partners and will be applied “in full compliance” with the right to collective bargaining. 

So at first glance, it seems that it will have limited implications in Denmark. The fact that Denmark has brought the case before the EU Court to have the directive annulled is primarily a matter of principle, linked to negative experiences of how the EU Court typically interprets EU law.

For example, it has not yet accepted the idea that a collective agreement is in itself fair as a compromise between conflicting interests.

Mette Søsted Hemme emphasised that the language in the directive is vague, allowing the EU Court room for interpretation, and provided several examples of possible indirect consequences this might have in Sweden and Denmark. 

Professor Łukasz Pisarczyk from Silesian University in Katowice provided an entirely opposite perspective. He spoke about the situation in Central and Eastern European countries.

There, it is not about preventing the negative consequences of the minimum wage directive. There it could – perhaps – contribute to restoring the systems for wage bargaining at the sectoral level that collapsed under neoliberal ideology during the transition from communism.

Another theme at the conference was how Denmark, Finland, Norway and Sweden are complying with the EU Court's ruling on working hours. Two cases were discussed in particular.

In the first case, the EU Court ruled that employers must have an objective and reliable system for recording the daily working hours of each employee. Otherwise, it is impossible to verify that the employee is not working too much. 

With today's flexible work arrangements, creating such a system is no easy task. Still, you might think that the countries would have had time to adapt to the ruling, which came five years ago. 

However, in Sweden, there is still no general requirement for employers to record employees’ working hours, despite the Swedish Work Environment Authority recently issuing new regulations, noted Associate Professor Erik Sjödin from Stockholm University. This means that Sweden is the only Nordic country without such rules. 

In Denmark, as of 1 July 2024, employers are required by law to register the daily working hours of each employee, said Mette Søsted Hemme. There are some exceptions, but they are very limited. 

Finland already had such requirements, explained Associate Professor Jari Murto from the University of Helsinki. Norway also did not consider it necessary to adopt any new regulations beyond what already existed in the work environment law, said Associate Professor Melanie Regine Hack from the University of Bergen. 

The second case discussed came as recently as July 2024. The case involved part-time employees who only received their regular hourly wage when working overtime. They were entitled to overtime pay only if they worked more than the full-time hours at the workplace. 

The EU Court, however, ruled that this constituted discrimination, stating that they were entitled to the higher compensation when working more hours than they were contracted for.  

This ruling is expected to have significant consequences in the Nordic countries, the conference heard. In Denmark, Norway and Sweden, the same practice applies: Part-time employees only receive their regular hourly rate when working overtime. Most collective agreements will need to be amended. 

But collective bargaining involves give and take from both parties. You could question whether workers should "pay" in collective negotiations for something they are entitled to under according to the EU Court, noted Erik Sjödin.