New legislation to link public procurement to observance of minimum labour standards

A recent survey by the Institute of Economic and Social Research shows that most of the 16 German federal states want to link public procurement to collectively agreed minimum labour standards. Five states have already passed such laws with another four announcing legislation for the near future. The new coalition government in North Rhine-Westphalia has similar plans. This follows a 2008 ruling by the European Court of Justice that laws enacted by Lower Saxony on this subject contravened European law.

Background

A recent survey (in German) by the Institute of Economic and Social Research (WSI) of the Hans Böckler Foundation (HBS) shows that 10 out of the 16 German states (Länder) could soon have laws, Tariftreuegesetze, linking public procurement to the observance of certain collectively agreed minimum standards. As of October 2010, these laws exist in five German states (see table below). Another four states have announced such legislation for 2010 and the new ‘red-green’ coalition government of North Rhine-Westphalia committed itself in its manifesto to developing similar legislation.

Trade unions, parts of employers’ associations and various regional governments have an interest in stabilising the German collective bargaining system and avoiding unfair competition which capitalises exclusively on lower wages. In 2008, in the case of Dirk Rüffert versus Niedersachsen (EU0805029I), the European Court of Justice (ECJ) ruled that it is unlawful and contrary to EU law to stipulate, within tender requirements, obligations regarding the pay and conditions of contracted workers beyond those established by law. As a consequence of this, 10 German states suspended laws affected by the ruling or stopped their plans of implementing such legislation. However, new attempts were then made to formulate regulations which would comply with the criteria set by the ECJ in the Rüffert ruling and still provide for higher standards of employment in works related to public procurement.

The provisions in detail

Five states have now implemented such legislation. In four of the states the laws cover all industries for which collectively agreed minimum wages have been declared generally binding under the Posted Workers Act (AEntG) by decree of the Federal Ministry of Labour and Social Affairs (BMAS) (DE0710019I; DE1008019I). They apply therefore to both foreign and domestic competitors alike, and partly compensate for the absence of an overall national statutory minimum wage in Germany.

There are eight industries covered by such decrees – the largest being the construction industry. This means that they apply to all employees in Germany working in the relevant occupations, regardless of the country of origin of their employer, and that they also cover temporary agency workers hired out to employers in the care sector. In one state (Lower Saxony) only the construction industry is covered. Laws in two states demand observance of collectively agreed standards for tenders covering the public transport sector. This sector is not covered by the Rüffert ruling and here the relevant laws usually demand that the most representative collective agreement is observed.

The city states of Berlin and Bremen also fix, under their legislation, a general minimum wage of €7.50 per hour which must be observed in all tenders. According to WSI senior researcher Thorsten Schulten this provision is particularly effective as it means a certain minimum pay is observed, even in industries where collectively agreed wages fall below €7.50.

A wider look at those states which plan such legislation in 2010 shows that, in three out of four cases, all industries with minimum wages under the Posted Workers Act are covered and all four states plan special provisions for the public transport sector. General minimum wages are planned in Brandenburg and the Rhineland-Palatinate.

Overview of existing or planned legislation linking public procurement to minimum labour standards

State

Legislation covering all industries with minimum wages under Posted Workers Act

Specific provisions for public transport sector

General minimum wages

Existing legislation

Berlin

Yes

Yes

€7.50

Bremen

Yes

Yes

€7.50

Hamburg

Yes

No

No

Lower Saxony

only construction industry

No

No

Saarland

Yes

Yes

No

Planned legislation

Brandenburg

Yes

Yes

€7.50

Mecklenburg-Western Pomerania

No

Yes

No

Rhineland-Palatinate

Yes

Yes

€8.50

Thuringia

Yes

Yes

No

North Rhine-Westphalia

not yet decided

not yet decided

not yet decided

Source: WSI

Heiner Dribbusch, Institute of Economic and Social Research (WSI)

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