Abstract
The EU Directive 2022/2041 on adequate minimum wages has been welcomed by many stakeholders, but Sweden (together with Denmark), with its historically good track record regarding labour rights, is opposing it on both political and legal grounds. The Directive, the Swedish Government argues, will not fulfil its goals, and concerns, in any instance, matters that are excluded from the competence of the EU. This article describes and analyses the implementation measures in a system whose wage-setting mechanism – at least according to its own opinion – needs no support, and in which legal and political objections have been raised against the Directive.
Introduction
The EU Directive 2022/2041 on adequate minimum wages 1 (henceforth the Directive), adopted on 19 October 2022, has been welcomed by both the European trade union movement 2 and labour law scholars 3 as an efficient measure against in-work poverty and a tool which will ‘contribute to upward social convergence and reduce wage inequality’ (Art. 1.1). The Directive provides for two means to achieve this in Member States: the promotion of collective bargaining on the setting of minimum wages and the establishment of a framework that ensures that statutory minimum wages are adequate.
The legislative process was quite lengthy and filled with disagreement. 4 While many stakeholders welcome the new Directive, Sweden (together with Denmark), with its historically good track record regarding labour rights, is opposing it on both political and legal grounds, using the yellow card procedure. 5 The Directive, the Swedish Government argues, will not fulfil its goals, and concerns, in any instance, matters that are excluded from the competence of the EU. 6 Some labour law scholars have argued that the Directive is ultra vires. 7 In the matter of an EU initiative on minimum wages, the Swedish trade union movement disagrees with its European brothers and sisters and is instead in agreement with the Swedish employers and their organisations in their opposition to the Directive. 8 An annulment proceeding, in which Sweden wants to intervene, is underway before the Court of Justice of the EU (see section 10, below). 9
However, the Directive is currently on the books and must be implemented in the Member States. Most Member States (22 of 27) 10 have statutory minimum wages and must implement Articles 5 to 8 into their systems. Against the backdrop of the political and constitutional concerns and reservations voiced by Sweden, it is interesting to describe and analyse the implementation of the Directive into an industrial relations system, such as the Swedish system, in which ‘wage formation is ensured exclusively via collective agreements’ (Art. 1.4.a).
The purpose of this article is therefore to describe and analyse implementation measures in a system whose wage-setting mechanism – at least according to its own opinion – needs very little support and in which legal and political objections have been raised against the Directive. 11
The Inquiry tasked with outlining Sweden's transposition measures presented its proposal June 2023. 12 The Government had emphasised to the Inquiry that the Swedish labour market model must be protected, and that the autonomy of the social partners and their right to negotiate and conclude collective agreements must be respected. Furthermore, the Government had highlighted that the Inquiry should not propose measures other than those necessary for the implementation of the Directive. 13 By way of conclusion, the Inquiry stated unequivocally that the transposition measures it proposed would not have any influence on the Swedish model for wage-setting and collective bargaining.
Trade union density, collective bargaining coverage and minimum wages in Sweden
The collective bargaining coverage rate is high in Sweden: for a long time, it has been around 90%. Trade union density and the employers’ organisation rate are also high: around 70% of employees are members of a trade union and 80% of employers are organised. 14 These figures vary from sector to sector, and are significantly lower in some sectors, such as hospitality. Wages for different public sector employees are also set in collective agreements with a collective bargaining coverage rate of 100%.
Collective bargaining agreements always regulate salary, but the construction of the wage system varies. Some agreements stipulate minimum wages or starting wages and the like: this is true for about 250 of the 650 sectoral collective bargaining agreements regulating the Swedish labour market. Other agreements, primarily those concerning white-collar workers, do not provide for any fixed salaries at all, but rather procedures for wage-setting.
The Inquiry was of the opinion that the Swedish model for wage formation has been shown to work very effectively.
Implementation into and through a ‘model’
The Inquiry perceived the Directive as a highly flexible instrument which can be implemented in an appropriate way in all Member States. Most importantly, it emphasised that the Directive does not entail any new individual rights or obligations. 15
The Directive envisions that two labour market models (or a combination of the two) can be used for realising its objective: either the promotion of collective bargaining on wages or the securing of the standard of ‘adequacy’ of statutory minimum wages. Sweden does not have legislation on statutory minimum wages, and therefore the most significant part of the Directive (Arts. 5 to 8) does not need to be implemented in Sweden.
In important consequence, the objective of the Directive can be fulfiled by supporting a model such as the Swedish one, in which wages are set by autonomous regulation. In the absence of legislation on minimum wages, the promotion of collective bargaining becomes key in transposing the Directive.
The Inquiry concluded that the Directive's objective is met by means of the Swedish model for wage formation and the outcomes resulting from that model.
Promotion of collective bargaining in the promised land of collective bargaining
Article 4 of the Directive regulates the promotion of collective bargaining on wage-setting by providing for four obligations on the part of Member States, who shall: 1) strengthen the social partners’ capacity for collective bargaining, 2) encourage negotiations, 3) protect the exercise of collective bargaining (i.e., protect workers and trade union representatives from discrimination), and 4) protect the institutional social partners (i.e., the organisations).
The Inquiry concluded that Sweden meets the requirements of Art. 4.1 through the strong position of both of the labour market parties, the National Mediation Office (a government agency) and employment law and collective labour law; the Employment Protection Act (1982:80); the Co-determination in the Workplace Act (1976:580); the Trade Union Representatives Act (1974:358); and the 1974 Instrument of Government (Sweden's constitution).
Hope for the best and prepare for the worst: what if the collective bargaining coverage rate drops?
The Inquiry interpreted Article 4.2 as not entailing any demands on Member States where the collective bargaining coverage rate exceeds 80%. Therefore, Sweden does not have to present any evidence of transposition of this Article.
A framework of enabling conditions for collective bargaining was not deemed necessary since Sweden already has laws and a system which promotes collective bargaining. Thus, there is no need for new legislation or other measures, even if the collective bargaining coverage rate were to fall below the 80% threshold.
The Inquiry argued that it was not possible to predict which factors could result in the coverage rate falling to the extent that measures must be taken. The most appropriate measures for addressing this development would relate to the reasons behind the fall in collective bargaining coverage rate. Furthermore, the Inquiry argued, it was inappropriate to decide in advance which government agency should establish the action plan.
Besides tasking the National Mediation Office with monitoring the collective bargaining coverage rate, no measures have been taken to transpose Art. 4.2.
Collecting and reporting on data to monitor minimum wage protection to the Commission
The data to be reported to the Commission, pursuant to Art. 10.2 of the Directive, is already available to the National Mediation Office. No measures regarding data collection are necessary to comply with the Directive. The requirement on reporting to the Commission, however, must be transposed. Following an amendment to the Ordinance concerning the duties of the National Mediation Office (2007:912), it is now tasked with this reporting.
Right to redress and dispute resolution mechanisms
Articles 12 and 13 of the Directive provide for the right to redress, protection against adverse treatment and penalties. The Inquiry interpreted these Articles as only requiring transposition measures where rights or obligations referred to in the Directive are already provided for in national law or collective agreements. It reiterated that the Directive does not entail any new rights or obligations for individuals and that Sweden meets the overall objective of the Directive by means of the Swedish model for wage formation and the outcomes resulting from that system. It furthermore submitted that the Swedish model is essentially a collective model which does not contain any individual rights or obligations under national law or collective agreement. Since there are no rights or obligations in Sweden corresponding to Arts. 12 and 13, no transposition measures are needed.
Right to redress and dispute resolution mechanisms – an important hypothetical
The Inquiry also engaged in a hypothetical: Even if the Directive were to be interpreted differently, so as to contain new rights and obligations, Swedish law already on the books would meet the requirements of Arts. 12 and 13.
Another interpretation of the Directive cannot be entirely ruled out: it could be argued that while the Swedish model for wage-setting is primarily of a collective nature, it also contains some individual aspects, such as protection against discrimination for those who engage in collective bargaining. It is possible to interpret the Directive in a way that makes the right to organise and rights of shop stewards fall under Arts. 12 and 13. Importantly, the Inquiry also did not rule out that the Directive could be interpreted in such a way that an individual employee’s claim against his or her employer based on a provision about minimum wage in a collective bargaining agreement might constitute a right within the meaning of Arts. 12 and 13.
It is submitted that no transposition measures are needed in the event of a reading of the Directive which provides individual rights to employees. Swedish labour law contains sanctions for breaches of both collective bargaining agreements and legislation in the form of damages (also punitive) which can be levelled against employers (cf Art. 13). The system for adjudication of legal disputes in the labour market fulfils the Directive's requirement for a dispute resolution system (cf Art. 12.1). Several rules and principles are said to fulfil the Directive's requirement (Art. 12.2) for protection against adverse treatment resulting from enforcing compliance in the case of infringements of rights relating to minimum wage protection. The inquiry enumerates i.a. employment protection (just cause for dismissal), restrictions to the right to direct work and to transfer employees, good labour market practice, the right to organise, and the ordinance on organisational and social work environment, but also criminal law provisions such as those on molestation, defamation and insulting behaviour.
The inquiry concludes that even in case the Directive provides for new individual rights, no transposition measures are required to fulfil the Directive.
Dissemination of information and public procurement
Article 14 of the Directive demands that Member States ensure that the national transposition measures, together with the relevant provisions already in force relating to the subject matter of the Directive, are brought to the attention of workers and employers.
No transposition measures are proposed. The information the social partners and the National Mediation Office already provide is enough to fulfil the Directive.
Since Sweden has transposed the public procurement directives referenced in Art. 9 of the Directive, no transposition measures are needed on this point.
The Nordic case for annulment of the Directive
On 18 January 2023, the Kingdom of Denmark brought an action against the European Parliament and Council of the European Union. 16 Denmark primarily asked the Court to annul the Directive in its entirety, and in the alternative, it requested that the Court annul Art. 4.1.d and Art. 4.2 of the Directive.
Denmark argued that the adoption of the Directive infringes the principle of conferred powers and is in breach of Art. 153.5 TEU. The Directive interferes directly with the determination of the level of pay in the Member States and concerns the right of association, which is excluded from the competence of the EU legislature, pursuant to Art. 153.5 TFEU.
Furthermore, Denmark argued that the Directive could not validly be adopted based on Art. 153.1.b TFEU because it pursues both the objective set out in Art. 153.1.b TFEU and the objective set out in Art. 153.1.f TFEU. The latter objective is not ancillary to the first and presupposes the use of a decision-making procedure different from that followed when the Directive was adopted (Art. 153.2 TFEU). The two decision-making procedures are incompatible since the adoption of acts under Art. 153.1.f TFEU ‒ in contrast to those adopted under Art. 153.1.b TFEU ‒ requires unanimity in the Council (Art. 153.2 TFEU). In support of the claim put forward in the alternative, Denmark submitted that, in adopting Art. 4.1.d and Art. 4.2 of the Directive, the principle of conferred powers was infringed and Art. 153.5 TFEU breached. Those provisions interfere directly with the determination of the level of pay in the Member States and concern the right of association, which is excluded from the competence of the EU legislature pursuant to Art. 153.5 TFEU.
On 27 April 2023, Sweden asked permission to intervene in support of Denmark's annulment action. 17
Regardless of outcome, the judgment will shed light on Member States’ obligations according to the Directive. Hopefully the ECJ will deliver its judgment before the end of the Directive's implementation period (i.e., before 15 November 2024). This would allow for the judgment to be considered in the implementation process and would ensure that Member States do not take any unnecessary measures.
Evaluating the Swedish transposition measures
No changes to labour law or employment law are deemed necessary to fulfil the objective of the Directive. A government agency (the Swedish National Mediation Office) is given responsibility for reporting on data about the labour market to the Commission. The absence of statutory minimum wage setting renders many of the rules in the Directive irrelevant for Sweden, while the absence of individual rights in the Directive implies that Sweden does not have to change its labour law.
The Directive and the transposition process illustrate clearly how the Swedish model for wage-setting is highly collectivistic, with few individual rights. The prevailing analysis in Sweden is that the social partners have important roles on the labour market because the state abstains from exercising power. The absence of regulation restricting the scope of action on part of the social partners makes for strong trade unions and employers’ organisations and autonomous regulation of the labour market. This analysis underlies the proposal for transposing the Directive in Sweden.
However, it cannot be entirely ruled out that neither Swedish law nor the Directive provide for individual rights. On this reading of the Directive, the effects of the instrument on the Swedish model will probably be more far-reaching than what has been envisioned by the Inquiry to date. Not all Swedish collective bargaining agreements regulate minimum wages, i.e., not all participants within the model are covered by minimum wage protection in autonomous regulation.
On one specific point the Swedish model is surprisingly individualistic: labour market organisations are protected solely through the protection of individual members and representatives. Organisations have no protection, as such, and can only be harmed through an action affecting an individual member/representative. Swedish law stands in some contrast to the Directive which explicitly demands protection for trade unions and employers’ organisations (Art. 4.1.d).
The Inquiry failed to even envision how collective bargaining can be supported to a greater extent than it is currently in Sweden. Member States seeking to learn about supporting collective bargaining will find no suggestions in the Inquiry proposal. The EU, for its part, continues 18 to dismiss the measure interpreted in Sweden as the most important in supporting collective bargaining: allowing for the social partners to contract out, also in pejus for employees, of most legislated labour rights (i.e., semi-mandatory laws).
The Swedish model for labour relations and wage-setting is now instrumental in fulfilling Sweden's obligations to the European Union. In this respect, the model now serves a purpose beyond regulating the relationships between employer and employee and the institutional partners on the labour market. Significant deterioration of the model implies, according to the logic of the Inquiry, that Sweden will need to find other ways to fulfil the requirements of the Directive.
Despite assigning a new responsibility to the Swedish model (fulfilling obligations to the EU), the Inquiry did not problematise the sensitive issues of negative freedom of association, the standing of employees and employers choosing to not organise.
While trade union density and collective agreement coverage rates are high in Sweden, reports indicate that a rising number of workers are at risk of being exploited on the labour market. 19 The transposition of the Directive to the Swedish labour market would present an excellent opportunity to engage with this growing problem. However, to date the transposition process has not taken advantage of this opportunity.
The Directive is a complex legal instrument which can be understood in different ways. This becomes clear not least from comparing Sweden's transposition measures – no changes to labour law – and its decision to join the annulment proceedings by arguing the Directive represents a direct interference in wage-setting. Sweden's resistance towards the Directive is, in conclusion, therefore not about concerns about its implications for the Swedish model, but is instead about the Directive's direct interference in statutory minimum wage systems.
Parting words
The Inquiry's proposal will most likely be realised without changes. The transposition of the Directive will thus lead to no changes at all to the legal relationship between employer and employee. The only change to the legal system concerns the tasking of an agency with the duty to report to the Commission. The future will tell whether the Commission agrees with Sweden that no changes to Swedish labour law are required to fulfil the requirements of the Directive.
In cases relating to the labour market and EU labour law, the European Court of Justice has, in recent years, been innovative in using the EU Charter of fundamental rights to bolster labour rights. 20 The Directive contains several references to Article 31 of the Charter. This Article will likely serve as starting point not only when the Court adjudicates the annulment case, but also for future preliminary rulings concerning the Directive. It is unclear what Article 31 of the Charter, coupled with the Directive, can achieve in the Court's adjudication.
The future will also tell whether the CJEU decides that the EU is allowed to legislate as in the Directive, whether this instrument will prove to be a relevant countermeasure against in-work poverty, and what effects the Directive might have on trade union density and collective bargaining coverage rates in Sweden and elsewhere. It is not unlikely that the European Parliament and the Council will mention in the annulment proceedings that Sweden has argued, in the national implementation process, that the Directive has very limited effects on Member States without statutory minimum wage-setting,
Footnotes
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
