The European Court of Justice has upheld the legality of the EU's minimum wage directive following a legal challenge by Denmark to have the directive in its entirety annulled.
The ruling has been welcomed by left-wing parties and SIPTU.
Labour MEP Aodhán Ó Ríordáin, a member of the European Parliament Employment Committee, described the judgment as a "landmark moment for workers’ rights in Europe".
In a statement, he said: "It puts beyond any doubt that fair pay and collective bargaining are at the heart of the European social model. The Court has been crystal clear: governments must act to strengthen workers’ bargaining power and ensure that every worker earns a wage that meets the threshold of decency."
The EU Directive on Adequate Minimum wages became law in October 2022 and was designed to establish a legal framework to promote adequate statutory minimum wages and collective bargaining on wage-setting.
However, Denmark challenged the directive, seeking its annulment on the basis that it undermined the division of powers between the EU and member states.
In particular, Denmark had argued that the law amounted to direct interference in the determination of pay within the EU and with the right of association, two areas which Denmark argued were outside the EU’s competences, as provided for in the Lisbon Treaty.
Today, the ECJ rejected the claim, holding that the exclusion of EU competence in these two areas did not extend to any question involving a link with pay or the right of association.
The court also found that the directive did not cover any measure which would have any practical impact on the level of pay within member states.
Otherwise, the court argued, certain competences conferred on the EU to support the activities of member states in terms of working conditions would be "deprived of their substance", according to a court statement.
The ECJ did annul two parts of two provisions of the directive.
These included the provisions which list the criteria required by member states with statutory minimum wages and a rule preventing a decrease in minimum wages when they are automatically indexed.
The European Commission welcomed the ruling, saying that it had confirmed that the directive stood on "firm legal ground".
Spokesperson Eva Hrncirova said, "adequate minimum wages are key to strengthening social fairness and a productive and inclusive economy," as well as protecting workers and their purchasing power.
She said minimum wages had risen rapidly across the EU since the directive was adopted and it had "helped to raise pay and living standards of many workers".
She added: "In this respect, we also understand that well-functioning collective bargaining are key factors for fairer and adequate wages."
Ireland transposed the directive into national law in November last year, a move which required the National Minimum Wage Act 2000 to be amended.
However, Mr Ó Ríordáin MEP said the Government had treated the directive as "an afterthought" and had still not produced the action plan required by the directive to raise collective bargaining coverage.
He said: "Collective bargaining - the cornerstone of fair pay - remains woefully underused in Ireland. Barely four in ten workers are covered by collective agreements, far below the EU average and just half the 80% benchmark set in the Directive."
He said there was mounting evidence of employers using "aggressive tactics to block trade union access, intimidate organisers, and undermine the basic right of workers to come together and negotiate better pay and conditions".
'A key moment for workers'
SIPTU welcomed the ruling, with Deputy General Secretary Ethel Buckley describing it as "a key moment for workers across Europe".
She said: "Crucially, the Court has upheld all measures to promote collective bargaining, including the requirement for member states, like Ireland, to produce action plans to increase collective bargaining coverage.
"This is a vital tool to rebalance power in the workplace and ensure workers have a genuine say in their pay and conditions."
She said it was up to the trade union movement to ensure that the commitments in Ireland’s National Action Plan and its implementation were treated as a priority by the Government "and that would see union members win real-life and concrete outcomes, not hollow words".
The Government last week launched an action plan to promote collective bargaining between employers and trade unions in order to meet the 80% collective bargaining coverage under the directive.
The strategy commits the Government to assessing the feasibility of introducing mandatory mediation processes, to review the Unfair Dismissals Act, and to examine legal protections for trade union representatives.
There will be new capacity-building programmes, funding for productivity-enhancing agreements, recognition of best practices, and a new Code of Practice.
The plan also commits to new public awareness campaigns and the exploration of tax incentives to support union membership, and targeted research to measure the benefits of collective bargaining.
