European Court’s Preliminary Ruling on Posted Workers

The Posted Workers Directive 96/7 provides that, as regards minimum rates of pay, the terms and conditions of employment guaranteed to posted workers are to be defined by the law of the host Member State and/or by collective agreements, which have been declared ‘universally applicable ’ in the host Member State. According to the Finnish national legislation, namely under Paragraph 2 of Law on posted workers, a posted worker must be paid the minimum wage, that is determined on the basis of a collective agreement within the meaning of Paragraph 2(7) of the Employment Contracts Law.

A Polish company had concluded, in Poland and under Polish law, employment contracts with 186 workers in order to carry out electrical installation work at the construction site in Finland. A Finnish trade union in the electricity sector accused the company for not paying the minimum remuneration for the workers posted, which was due to them under the applicable Finnish collective agreements.

According to the collective agreements, employees’ minimum pay was calculated on the basis of criteria that were more favourable to employees than those applied by the company. Those criteria concerned, amongst other things, the method of categorising employees by pay groups, of determining pay (on the basis of time or piecework) and of granting employees a holiday allowance, a daily allowance and compensation for travelling time as well as the coverage of their accommodation costs.

The workers assigned their pay claims to the trade union, which they were members of, so that it could recover those claims. Before Satakunta District Court, the Polish employer company argued that the actions should be dismissed, because the Finnish trade union did not have the authority to bring proceedings on behalf of the posted workers, on the ground that Polish law prohibits the assignment of claims arising from an employment relationship. Satakunta District Court then referred questions to the Court of Justice for a preliminary ruling.

Firstly, the referring court asked whether the trade union was authorised to act on behalf of the Polish workers even though the assigning of a claim arising from an employment relationship to a third party (such as a trade union) was prohibited under Polish law. The European Court found that the standing of the Finnish trade union to bring proceedings before the referring court is to be governed by Finnish procedural law. Therefore, the union was authorised to bring the action against the employer company despite the fact that under Polish Employment Act this was not possible.

Secondly, the referring court enquired as to how the concept of ‘minimum rates of pay’ should be interpreted for the purposes of Directive 96/7. The European Court answered that the Directive expressly refers to the national law or practice of the host Member State for the purpose of defining minimum rates of pay. The Court concluded that the method of calculating rates of pay and the criteria used in that regard are also a matter for the host Member State. Therefore, the minimum rates of pay was to be determined according to the relevant collective agreements.

The case is now being heard before Satakunta District Court. If the District Court finds that the Polish company indeed has not acted according to EU and relevant national legislation, the company may be ordered to pay a total amount of EUR 6 648 383.15 to its workers posted.