EU May Not Regulate Member States’ Minimum Wages at Substantive Level, CJEU Rules

Quick Hits

• The Court of Justice of the European Union (CJEU) clarified that the EU may not set requirements for the specific level of minimum wages but may only establish procedural and transparency standards.
• National collective bargaining autonomy and the member states’ competence for wage setting remain safeguarded by the judgment.
• For companies in Germany, implementing the remaining procedural and transparency requirements will likely mean more documentation, closer monitoring, and additional internal compliance processes in practice.

The Case: Denmark and Sweden Before the CJEU

In the proceedings before the CJEU, Denmark and Sweden brought an action against the EU Minimum Wage Directive, arguing that it violates the EU’s division of competences. Both countries have strong, comprehensive collective bargaining systems. There is no statutory minimum wage there—wages are determined exclusively between trade unions and employers’ associations.

Directive (EU) 2022/2041 does not provide for an EU-wide minimum wage, but it does contain detailed requirements on how member states should set and update minimum wages. Denmark and Sweden now fear that this undermines national collective bargaining autonomy and the competence for wage setting. The CJEU had to decide whether the directive exceeds the EU’s competences and interferes with national wage setting.

Court Decision: CJEU Draws a Clear Line on Competence

The CJEU held that the EU partially exceeded its competences with the Minimum Wage Directive because Article 153(5) of the Treaty on the Functioning of the European Union (TFEU) expressly prohibits the EU from legislating on pay. However, the directive remains valid in those parts that are limited to procedural requirements, transparency, and the promotion of collective bargaining, in particular reporting obligations and the involvement of the social partners. By contrast, provisions aimed at harmonizing the components of minimum wages or prescribing how minimum wages are set and updated are void, as they constitute an impermissible interference with national wage setting.

The CJEU’s reasoning is that, under the express intention of EU law, determining the level and the criteria for calculating the minimum wage is reserved exclusively to the member states, and the EU has no competence to interfere with these core areas of national wage policy. The directive may therefore only set EU-level minimum standards for procedures and transparency but may not influence the concrete wage level or its calculation. The CJEU thus essentially follows the arguments of Denmark and Sweden as well as the CJEU’s advocate general.

Key Takeaways

The CJEU sets clear limits on minimum wage policy and clarifies the division of competencies between the EU and the member states. The EU may not set requirements for the specific level or calculation of the minimum wage; it may only prescribe procedural standards and transparency rules. National collective bargaining autonomy and the member states’ competence for wage setting thus remain safeguarded. For Germany, this means that the decision-making power over the level and adjustment of the minimum wage remains exclusively with the national legislature and the Minimum Wage Commission.

The currently applicable minimum wage is €13.90 gross (since January 1, 2026), and will increase to €14.60 gross as of January 1, 2027.

Ogletree Deakins’ Berlin and Munich offices and Cross-Border Practice Group will continue to monitor developments and will post updates on the Cross-Border and Wage and Hour blogs as additional information becomes available.

Anna Maria von Lieres und Wilkau is an associate in the Berlin office of Ogletree Deakins.

Pauline von Stechow contributed to this article as a research assistant in the Berlin office of Ogletree Deakins.

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