Editorial from IDS Brief 849, March 2008

Protecting workers’ rights in ‘race to the bottom’

In International Transport Workers’ Federation and anor v Viking Line ABP and anor, reported in Brief 846, the ECJ was asked by the Court of Appeal to rule on the extent to which collective action taken by trade unions may lawfully restrict a company’s right to freedom of establishment under Article 43 of the EC Treaty. It has now been announced that, following the ECJ’s ruling, the case has been settled. While the relatively unfamiliar issues involved may have meant that it slipped under the radar of most employment practitioners, the ECJ’s judgment deserves some attention, so it is regrettable that the Court of Appeal will no longer have the opportunity for the final word on the matter.

Reviewing the role of collective action

In the case, trade unions initiated collective action against Viking Line, a Finnish shipping company, when it sought to ‘reflag’ one of its vessels in order to man it with a cheaper Estonian crew. Viking sought an injunction in the High Court restraining the collective action on the ground that it would encroach upon its Article 43 rights. On appeal to the Court of Appeal, the issue was referred to the ECJ, which held that while the action might indeed restrict Viking’s Article 43 rights, that restriction could in principle be justified by an overriding reason of public interest such as the protection of workers, provided the action did not go beyond what was necessary to achieve that objective. This would have been for the Court of Appeal to decide, had the parties not settled.

Similar issues were involved in the case of Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet and ors, also reported in Brief 846. There, Swedish trade unions took collective action, in the form of a blockade, aimed at forcing a Latvian company to abide by a Swedish collective agreement governing the terms and conditions of building workers in respect of Latvian workers posted to Sweden. The ECJ found that the unions’ action constituted a restriction on the Latvian company’s freedom to provide services under Article 49. As in Viking, the ECJ held that such a restriction could in principle be objectively justified. However, given that the Swedish government had already enacted legislation providing for minimum conditions of employment in respect of posted workers, as required by the EC Posted Workers Directive (No.96/71), and the fact that Swedish law makes no provision for a minimum wage or the applicability of Swedish collective agreements to posted workers, collective action aimed at obliging the Latvian company to observe the terms of a collective agreement providing for better working conditions could not be objectively justified.

As we noted in our report on these cases, the judgments in Viking and Laval are something of a double-edged sword for trade unions. On the one hand, in both judgments the ECJ recognises the fundamental nature of the right to strike. On the other, the judgments suggest that taking strike action against employers operating transnational undertakings might have to be justified in order to be lawful. Furthermore, the ECJ’s holding in Laval that collective action could not be justified where national legislation implementing the Posted Workers Directive already provided a minimum level of protection for cross- border workers suggests that the burgeoning sphere of European employment legislation is restricting the role of trade unions.

Unions tackling ‘social dumping’

In both Viking and Laval, the trade unions’ action was aimed at combating so-called ‘social dumping’, whereby employers establish themselves in states with less beneficial employment laws in order to provide services more cheaply in another. Interestingly, there is another case currently before the ECJ looking at the conflict between providing minimum levels of worker protection and the freedom to provide services. In Rechtsanwalt Dr Dirk Ruffert v Land Niedersachsen (Case C-346/06), a Polish company fulfilling a public works contract in Germany is challenging a German law requiring public sector contractors and sub-contractors to pay workers the German minimum wage. The Polish company argues that this constitutes a restriction on its Article 49 rights. The Advocate General’s opinion, given on 20 September 2007, was that while this was potentially a restriction on Article 49, it would be justified by the need for public authorities not to discriminate on the ground of nationality. The ECJ is due to give judgment in the Ruffert case in the next couple of months, and it is likely that it will follow the Advocate General, given that the Court rarely departs from an opinion.

No ‘race to the bottom’

Trade unions have expressed the fear that the principles of market freedom enshrined in the EC Treaty would result in a ‘race to the bottom’, with employers shifting establishments across Europe in order to offer lower pay and benefits. Following the ECJ’s judgments and the Advocate General’s opinion in the cases above, this fear seems unlikely to be realised. However, these cases serve to emphasise the scope for transnational employers to challenge measures aimed at improving the lot of workers by asserting their own rights under EC law – highlighting the tension that exists under EC law between employment protection on the one hand, and economic liberalisation on the other. The judgment in Laval, at least, suggests that the ECJ will not shy away from protecting the rights of business at the expense of greater protection of workers’ rights where there is justification for doing so.