C-164/99

'The legal provisions laid down in a collective agreement in the construction industry declared to be universally binding within the meaning of Paragraphs 1 and 2 of the Baubetriebe-Verordnung (Regulation The German legislation on employment on the Building Industry) ... , shall also terms which are mandatory for cross- apply in so far as the undertaking is border services principally engaged in providing building services within the meaning of Paragraph 75(1), point 2, of the Arbeitsförderungs- gesetz (Law on the Promotion of Employ- ment) ... and German law is not in any 2. The Arbeitnehmerentsendegesetz (Ger- event determinative for the employment man statute laying down mandatory terms relationship, to an employment relation- of employment for posted workers, here- ship binding an employer established inafter 'the AEntG'), in the version of abroad and his employee working within 26 February 1996 applicable to the instant the territorial scope of that collective agree- case, applies to the construction industry. ment, where and to the extent to which

3. The first sentence of Paragraph 1(1) of the AEntG extends the applicability of (1) the collective agreement lays down a single minimum wage for all workers 1 — Original language: French. within its scope of application and

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(2) domestic employers established outside minimum wage in the construction sector the territorial scope of application of in the Federal Republic of Germany (here- that collective agreement must also inafter 'the collective agreement'). guarantee their employees working within the territorial scope of appli- cation of the collective agreement at the very least the collectively agreed work terms in force at the place of work.' 7. This was declared universally binding on 12 November 1996 but effective only as of 1 January 1997.

10. In March and May 1997, the Arbeits- 13. Taking the view that the case depended amt (Employment Office) in Tauberbis- on an interpretation of the relevant Com- chofsheim carried out an investigation into munity rules, the Amtsgericht (Local the employment conditions on that build- Court) Tauberbischofsheim stayed the pro- ing site. On the basis of the documentation ceedings and, by order of 13 April 1999, submitted, it concluded that Portugaia was referred the following questions to the paying the workers who had been the Court for a preliminary ruling: object of the inspection a wage lower than the minimum wage payable under the AEntG. It accordingly ordered the forfeit- ure of the unpaid balance, that is to say the difference between the hourly wage pay- able and that actually paid, multiplied by '( 1 ) Is an interpretation of Directive the total number of hours worked, a total 96/71/EC of the European Parliament of DEM 138 018.52. and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services 2 or, if that direc- tive is not applicable, an interpretation of Article 59 et seq. of the EC Treaty, 11. The case to be decided by the referring under which overriding requirements court is an appeal brought by Portugaia of public interest capable of justifying a against that forfeiture decision. restriction on the freedom to provide services in cases involving the posting of employees can lie not only in the social protection of the employees posted but also in the protection of 12. The national court has doubts about the national construction industry and the compatibility of the German legislation the reduction in national unemploy- with Article 59 of the EC Treaty (now, ment for the purpose of preventing after amendment, Article 49 EC) and social tension, consistent with Com- Article 60 of the EC Treaty (now munity law? Article 50 EC). It points out that, according to the explanatory memorandum of the AEntG, its objective is to protect the national labour market (in particular against 'social dumping' resulting from an influx of low-cost labour), to reduce (2) Does it amount to an unjustified national unemployment and to enable restriction on the freedom to provide undertakings in the Federal Republic of services under the EC Treaty if a Germany to adapt to the internal market. domestic employer can pay less than The national court also observes that, the minimum wage laid down in a unlike German employers, employers from collective agreement declared to be other Member States do not have the generally binding by concluding a col- option of entering into more specific col- lective agreement specific to one under- lective agreements with a German trade union in order to avoid the application of the collective agreement. 2 — OJ 1996 L 18, p. 1.

14. The referring court explains its first 16. It deduces from this that '[n]ational question above by noting that Portugaia rules on posting workers the purpose of 'would be under no legal obligation to pay which is to protect the national labour the minimum wage payable under the market and which prevent employers from collective agreement if that obligation was other Member States from exploiting an incompatible with Article 59 et seq. of the economic advantage based on lower wage Treaty. According to the case-law of the costs are based on the premiss that that Court, a (non-discriminatory) restriction economic advantage constitutes a distor- on the freedom to provide services estab- tion of competition'. lished by Article 59 et seq. of the Treaty can be justified by overriding requirements in the public interest only if that interest is not already safeguarded by the rules of the State of origin and if the restriction is proportionate ... According to the case-law of the Court, overriding requirements in the public interest, in the present case of the Preliminary observation posting of construction industry workers, can relate only to the social protection of the workers ... '. 17. The referring court asks the Court for an interpretation of Directive 96/71 or, if that is not applicable, of Article 59 et seq. of the Treaty. 15. In this regard it adds that '[t]he national rules laid down in Germany by the statute on the posting of workers run counter to the social interests of the posted employees. The objective of the statute, according to its explanatory memorandum, 18. The Netherlands Government submits is to protect the national labour market (in that the first question does not have to be particular against "social dumping" result- considered in the light of Directive 96/71.

3 — See also the written explanations or the Portuguese Govern- ment according to which a deadline laid down in Paragraph 10 of the AEntG was deleted when it was amended in 1998 4 — Case C-165/98 [2001] ECR 1-2189, paragraph 17. 'm order to cnahle the German State to comply with the 5 — Opinion of Advocate General Mischo delivered on 13 July obligation imposed by Community law to transpose Direc- 2000 (in Cases C-49/98, C-50/98, C-52/92 - C-54/98 and tive 96/71 into national law within the time-limit laid down C-68/98 - C-71/98, judgment of 25 October 2001, ECR for that purpose by Article 7 of the Directive'. I-7831, I-7835, points 29 and 30).

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26. First, Portugaia points out that 'Para­ graph 2(3) of the collective agreement establishes special rules for construction sector employers established outside Ger­ many, which do not include the collective agreement provisions applicable to German employers which benefit the latter, and thus impose different burdens on Germans and non-Germans'. 28. Portugaia also points out that under Article 16 of the Federal framework col­ lective agreement for the construction industry ('Bundesrahmentarifvertrag für das Baugewerbe — BRTV-Bau') German workers' claims on their wages are time- 27. Specifically, Paragraph 2(3) of the barred two months after payment becomes collective agreement provides that the due. This provision does not apply to minimum wage within the meaning of foreign employers. Even if, under the Paragraph 1(1) of the AEntG is composed relevant national law, there was a foreign of the wage specified in the collective provision laying down a time-limit for such agreement and a 'construction supplement claims, they could not rely on such a (Bauzuschlag)' of 5.9%. Part of this supple­ provision because of the mandatory nature ment, corresponding to 0.5% of the mini­ of the AEntG.

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29. Secondly, Portugaia argues that the 32. The German Government takes the level of the minimum wage in question is view that the scheme of the German statute not justified by overriding requirements in and the policy reasons behind it are not the public interest. It points out that the relevant for the purposes of the answer to minimum hourly wage of DEM 17 (or the first question referred. The question DEM 15.64 in five Länder) is higher than concerns the interpretation of Community the minimum wages set by collective agree- law and of the directive, and not the ments in other sectors of industry where the interpretation of the German statute. work is equivalent in nature, for example wages in the steel industry or in agriculture.

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35. The Netherlands Government notes 38. Moreover, the Portuguese Government that the purpose of the AEntG is to protect argues that 'the requirement, for an under- the national labour market (in particular taking established in one Member State, to against 'social dumping' resulting from an pay its employees posted to another influx of low-cost labour), to reduce Member State, in the course of a provision national unemployment and to enable Ger- of services, the minimum wage laid down man undertakings to adapt to the internal (for construction workers) in a collective market. agreement which is universally binding in that Member State is not contrary to the provisions of Article 49 et seq. EC, where the requirement flows directly from the Community rules on free movement of workers, in particular Council Regulation No 1612/68 of 15 October 1968, Directive 96/71, and the case-law of the Court of 36. It points out that, according to the Justice of the European Communities'. case-law of the Court, overriding require- ments of public interest cannot include Objectives of an economic nature'. It infers from this that 'the objective of the AEntG cannot therefore justify a restriction on the freedom to provide services'.

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time have repercussions in other spheres struction industry and reduce unemploy- does not affect its status as a reason ment. justifying a restriction.

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45. In point 36, I observed that 'even if in a collective wage agreement declared to views were expressed during the political be universally binding debate preceding the adoption of the AEntG, and expressions used in the intro- ductory summary of that law itself, which could give rise to the impression that, in this case, it concerned the protection of an economic sector against foreign compe- 48. However, as the Portuguese Govern- tition, we can only examine the content of ment and the Commission observe, the that law and the other relevant texts in mere fact that an undertaking established in order to determine whether, objectively one Member State is obliged to pay viewed, they guarantee to posted workers, employees posted to another Member State as the German Government asserts, a level in the course of a provision of services the of social protection identical in substance minimum wage laid down (for construction to that enjoyed by workers in the con- workers) in a collective agreement which is struction industry who are established in universally binding in that Member State is Germany'. not contrary to the provisions of Article 59 et seq. of the Treaty.

49. It has been held by the Court that 46. I therefore take the same view as the 'Community law does not preclude German and Portuguese Governments and Member States from extending their legis- the Commission, that what determines lation, or collective labour agreements whether a national law gives rise to an entered into by both sides of industry, unjustified restriction is not the legislative relating to minimum wages, to any person intent, as expressed in an explanatory who is employed, even temporarily, within memorandum or otherwise, but the effects their territory, regardless of the country in which the law actually produces, through which the employer is established, and, its operative provisions, on the freedom to moreover, that Community law does not provide services. prohibit Member States from enforcing those rules by appropriate means'. 7

of such rules would be neither necessary Portugaia is obliged by Portuguese law to nor proportionate to the objective pursued, continue to pay its workers during such namely the protection of the workers con- periods. cerned'. 8 Hitherto, the Court has acknowl- edged the existence of such circumstances only in the case of an 'undertaking estab- lished in a frontier region, some of whose employees may, for the purposes of the provision of services by the undertaking, be 53. In its reply to a written question from required, on a part-time basis and for brief the Court, the German Government states periods, to carry out a part of their work in that 'there is no discrimination against the adjacent territory of a Member State foreign construction firms posting other than that in which the undertaking is employees to Germany as alleged by the established'. 9 defendant in the main proceedings'. It submits that Portugaia 'misunderstands the legal nature of the construction supple- ment. With the evolution of the law of collective bargaining, the supplement has gradually lost its original function of com- pensating for specific forms of hardship and has today become, quite irrespective of 51. It must be noted, however, that the its origins, a fixed component of the wage national court does not cite any such packet'. exceptional circumstances in its order for reference. It simply refers to the fact that Portugaia is subject to the obligation to pay the minimum wage. But that, by itself, is not contrary to Article 59 et seq. of the Treaty. 54. However, the fact is that the referring court made no reference to the composition of the minimum wage, which, according to Portugaia, gives rise to a breach of Article 59 et seq. of the Treaty. The same applies, moreover, to Portugaia's argu- ments based on the difference in limitation periods for claims on unpaid wages, on the 52. As mentioned above (paragraphs 26 fact that the wage level is not justified by and 27), Portugaia makes the further point comparison to wage levels in other indus- that the way the minimum wage is made up tries and on the fact that the criminal places it at a disadvantage vis-à-vis German sanctions do not apply to German employers. It refers to supplements com- employers. prised in the minimum wage which are designed, inter alia, to compensate for loss of earnings in certain periods when German employers do not have to pay wages. Yet 55. Since the referring court has not asked 8 — Mazzolati, cited above, paragraph 30. the Court whether those matters are 9 — Mazzolali, cited above, paragraph 31. capable of constituting a breach of

60. As the Court has held, '[i]t must be acknowledged that the public interest relat­ ing to the social protection of workers in 57. In any event, if a question concerning the construction industry and the monitor­ Community law arises in connection with ing of compliance with the relevant rules the aforementioned supplements, which it may constitute an overriding requirement is for the national court to assess, it may be justifying the imposition on an employer established in another Member State who provides services in the host Member State 10 — Case C-377/88 SAFA [1990] ECR I-1, paragraph 20. See also Case C-412/96 Kaimam Liikenne ană Pohjolan Liikenne [1998] ECR I-5141, paragraphs 23 and 24. 11 — See Case 311/84 CBEM [1985] ECR 3261, paragraph 10, and Case 299/84 Neumann [1985] ECR 3663, paragraph 12 — Arblade, cited above, paragraphs 43 to 47. 12. 13 — Arblade, cited above, paragraph 50.

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of obligations capable of constituting the EC Treaty where a domestic employer restrictions on freedom to provide services. can pay less than the minimum wage laid However, that is not the case where the down in a collective agreement declared workers employed by the employer in universally binding by concluding a collec- question are temporarily engaged in carry- tive agreement specific to one undertaking ing out works in the host Member State and (and enjoying precedence) whereas this enjoy the same protection, or essentially is — at least in fact — not possible for a similar protection, by virtue of the obli- non-German EC employer proposing to gations to which the employer is already post workers to Germany. subject in the Member State in which he is established''.14

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outcome of the main proceedings'. Accord- service provider from another Member ing to the German Government, 'the refer- State would be unable to do so. ring court raises the abstract risk of dis- crimination merely as a hypothetical possi- bility'. As far as it was aware, 'in the sectors in which foreign employers are required to abide by collective agreements in relation to the minimum wage and paid leave funds, 67. The Portuguese Government submitted there are no undertaking-specific collective no observations on the second question. agreements in force which stipulate more favourable employment terms from the perspective of the German employers con- cerned than those imposed by the AEntG'.

Analysis

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70. That is not the case here, however. enjoying precedence) whereas this is — at least in fact — not possible for any non- German EC employer when he plans to post workers to the Federal Republic of Germany'. 71. It is apparent from the order for reference that Portugaia challenges the requirements imposed on it by the AEntG in relation to payment of the minimum wage, claiming that those requirements are contrary to Article 59 et seq. of the Treaty. 74. The answer to the question whether In that light, it cannot be the case that a this situation is contrary to Article 59 et question which concerns a possible differ- seq. of the Treaty must be in the affirm- ence in the means available to German ative, since any discrimination against employers and foreign employers to avoid employers from the State of origin vis-à-vis those requirements 'bears no relation to the those of the host State is prohibited. actual nature of the case or the subject- matter of the main action'.

72. Likewise, it cannot be concluded that 75. According to the third paragraph of the second question is inadmissible on the Article 60 of the Treaty, 'the person pro- ground that there is, as far as the German viding a service may, in order to do so, Government is aware, no undertaking-spe- temporarily pursue his activity in the State cific collective agreement in force which where the service is provided, under the stipulates more favourable employment same conditions 17 as are imposed by that terms from the perspective of the German State on its own nationals'. employer concerned than those imposed by the AEntG.

78. I suggest the following answers to the questions referred by the Amtsgericht Tauberbischofsheim:

(1) Article 59 of the EC Treaty (now, after amendment, Article 49 EC) et seq. is to be interpreted as meaning that a national measure extending to foreign service providers and their posted employees the minimum wage provisions imposed by collective agreements in the construction industry, declared universally binding, is justified by overriding requirements relating to the social protection of the employees, irrespective of the fact that the measure is also aimed at achieving other objectives.

(2) The third paragraph of Article 60 of the EC Treaty (now, after amendment, the third paragraph of Article 50 EC) precludes a situation in which an employer established in another Member State cannot — at least in fact — pay less than the minimum wage laid down in a collective agreement declared universally binding by concluding a collective agreement specific to one undertaking (and enjoying precedence) whereas it is possible for a host State employer to do so.

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