Debate over implications of Laval case for labour market relations

The Laval case raises questions about whether EC law can restrict trade unions in one Member State from taking industrial action, or if it can restrict the application of collective agreements in a host Member State. The European Court of Justice Advocate General held that a service provider from another Member State is obliged to follow the host agreement, but collective action must be proportional. This preliminary judgement has led to much debate among the social partners.

Background to case

In May 2004, Laval un Partneri, a Latvian construction company located in Riga, posted workers from Latvia to work on Swedish building sites (LV0501101F). The work was undertaken by the subsidiary company Baltic Bygg AB and included the renovation and extension of school premises in the town of Vaxholm near Stockholm.

In June 2004, Laval/Baltic Bygg and the Swedish Building Workers’ Union, (Svenska Byggnadsarbetareförbundet, Byggnads) initiated negotiations to conclude an application agreement (hängavtal) to the collective agreement for the building sector. Laval refused to sign an agreement; as a result, Byggnads initiated a blockade of the building site on 2 November 2004 (SE0412101N, LV0506101N). The Swedish Electricians Union (Svenska Elektrikerförbundet) joined the demonstration to express solidarity with Byggnads.

Laval brought proceedings relating to the legality of the collective action to the Swedish Labour Court (Arbetsdomstolen), which subsequently asked the European Court of Justice (ECJ) whether Community law prohibited such collective action (SE0505104N).

European and national law

European Parliament and Council Directive 96/71/EC concerning the posting of worker in the framework of the provision of services stipulates that the guarantees given to posted workers are to follow the law or administrative action in the building sector by collective agreements or negotiations that have been declared unanimously appropriate. Swedish Law refers to the terms and conditions of employment in relation to the matters listed in the directive, with the exception of that relating to the minimum rate of pay.

Preliminary judgement

In May 2007, the Advocate General, Paolo Mengozzi, legal advisor to the ECJ, issued his judgement on the case (EU0706029I). He highlighted that:

  • the exercise by trade unions of a Member State to take collective action to reach a collective agreement with a foreign service provider falls within the scope of Community law;
  • the fact that Swedish law leaves it to the social partners to define the terms and conditions of employment cannot in itself constitute inadequate implementation of Directive 96/71/EC;
  • Directive 96/71/EC and the freedom to provide services do not prevent trade unions from attempting to demand a service provider from another Member State to subscribe to a payment rate determined according to a collective agreement in the country where the services are provided;
  • collective action must be motivated by public-interest objectives, such as the protection of workers and the fight against social dumping, and must not be carried out in a manner that is disproportionate to the attainment of those objectives;
  • regarding proportionality of collective action, the Swedish Labour Court (Arbetsdomstolen) should determine whether the terms and conditions of employment laid down in the collective agreement for the building sector involve a real advantage significantly contributing to the social protection of posted workers.

Views of social partners

How to interpret this preliminary judgement by Mr Mengozzi has provoked much debate among the Swedish social partners. The judgement does not provide answers to all the questions raised by the social partners, among others.

The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) perceives the preliminary judgement positively. LO considers that foreign workers should have the right to the same terms and conditions of employment as Swedish workers, and that the union should have the right to take collective action to prevent social dumping. However, the union is concerned about Mr Mengozzi’s unclear statement regarding the proportionality within collective action.

The Confederation of Swedish Enterprise (Svenskt Näringsliv) finds it difficult to name a winner or loser in this case, partly because the final judgement is yet to come and partly because the question regarding proportionality is to be determined by the Swedish Labour Court. The organisation expects the ECJ’s final judgement to give a clear interpretation about current rules to avoid further confusion.

Commentary

This preliminary judgement is not obligatory and ECJ’s decisive judgement is expected during the autumn of 2007. This case highlights an important question in relation to where the line should be drawn between national and European legislation. Another interesting aspect about this case is that it will influence labour market discussions outside Sweden. This will probably not be the last such case to be brought before the ECJ; see, for example, the consequences of this case on the Danish labour market model (DK0511102F).

Thomas Brunk, Oxford Research

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