Laval case

On 18 December 2008, the European Court of Justice (ECJ) in the Laval case (99Kb PDF) ruled that the right to industrial action can sometimes be justified under EU law to protect against social dumping. However, the Court also pointed out that ‘the exercise of that right may be subject to certain restrictions’. The Laval case (Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avd. 1, Byggettan, Svenska Elektrikerförbundet) had its origin in a Latvian company, Laval un Partneri, being awarded a public tender in Sweden to renovate a school near Stockholm. The Riga-based company posted workers from Latvia to work on the building site in Sweden. The workers were employed to work through a subsidiary of Laval and negotiations began between it and the Swedish building and public works trade union, Svenska Byggnadsarbetareförbundet. However, these negotiations broke down and Laval subsequently signed collective agreements with the Latvian building sector trade union, to which 65 per cent of the posted workers were affiliated. The Swedish trade union then took collective action by means of a blockade of all Laval sites in Sweden and this action was supported by other Swedish trade unions. Laval brought proceedings in the Swedish courts for a declaration that the trade union action was unlawful in that it conflicted with rights established under Art 49 EC (now Article 56 of the Treaty on the Functioning of the European Union (TFEU)). The Laval case went to the ECJ, where it was considered in the context also of the Viking case (88Kb PDF) which similarly dealt with the lawfulness of industrial action which had the effect of placing restrictions on the freedom to provide services.

The freedom to provide cross-border services is set out in Article 56 TFEU and, along with the freedom of establishment, is acknowledged as a ‘fundamental freedom’ central to the effective functioning of the EU Internal Market. The principle of the freedom to provide services enables an economic operator providing services in one Member State to offer services on a temporary basis in another Member State, without having to be established. Furthermore, these Treaty provisions have direct effect so that Member States must modify national laws that restrict this freedom or otherwise is not compatible with the Treaty’s principles.

Directive 96/71 on posted workers sets out minimum standards that must apply in the case of workers posted from one Member State to work in another. Article 3 of the directive states that Member States should ensure that terms and conditions established by law, or by universally applicable collective agreements, apply to posted workers, in particular in relation to minimum work periods, breaks, annual holidays and rates of pay.

The ECJ in Laval held that the right to take collective action must be recognised as a fundamental right forming an integral part of the general principles of Community law. Additionally, the right to take such action against possible social dumping may constitute an overriding reason of public interest. However, this does not mean that Community law does not apply in relation to such action. The ECJ noted that industrial action aimed at obtaining terms and conditions which went beyond the minimum established by law made it less attractive for undertakings such as Laval to carry out its business in the Member State and therefore constituted a restriction on the freedom to provide services, guaranteed under the Treaty. The ECJ noted that while Article 3 of the posted workers’ directive gave a right to minimum terms and conditions to posted workers, these rights had to have been underpinned either by law or universally applicable collective agreements. In Sweden, there was no statutory minimum wage nor were collective agreements universally applicable. Consequently industrial action to impose terms, in the absence of legally enforceable national provisions, could not be justified under EU law. The court went further than this. It also held that failure to take account of the collective agreement reached between the employer and the Latvian trade union amounted to discrimination against both organisations, given that action to ensure that terms and conditions were in line with those generally applicable in Sweden did not amount to a public policy, security or health requirement.

Shortly after the decisions in Viking and Laval, the Second Chamber of the ECJ gave its judgement in the Rüffert case (100Kb PDF) which concerned national legislation on the award of public contracts, which provided that these would only be awarded to undertakings which agreed in writing to pay workers at least the rate provided in the collective agreement and to ensure that sub-contractors did the same. Here, too, the court ruled that Directive 96/71 precluded an authority of a Member State from adopting a measure which would require contractors for public works’ contracts to agree to pay their workers at the rate set by the collective agreement.

See also: European labour market; free movement of workers; mobility of workers; posted workers; professional qualifications; right to strike; Rüffert case; Schengen Agreement/Convention; services directive; social dumping; Treaties of Rome; Viking case.