Not treating a European collective bargaining agreement in the same way as a domestic collective bargaining agreement may be discriminatory according to EC law. Taking industrial action is, in itself, a fundamental right – but to force foreign companies to negotiate salaries without the existence of clear rules on what applies is not justifiable and is in conflict with the proportionality principle. These conclusions can be drawn from the decision of the Court of Justice of the European Communities on 18 December 2007 in the Vaxholm case (Laval un Partneri v Svenska Byggnadsarbetareförbundet).
Background
The Latvian company Laval was contracted in the summer of 2004 to rebuild a school in the Swedish town of Vaxholm outside Stockholm. Laval had a Latvian collective agreement and the Latvian employees were to carry out the work on the terms stated in this Latvia agreement. However, the Swedish union Byggnads opposed the terms on which the work was to be carried out and demanded that a Swedish collective agreement be applied – entailing Swedish minimum wages and other employment benefits. Laval refused to sign a Swedish collective agreement. Byggnads then announced a blockade and industrial action which came into effect on 2 November 2004. The Swedish Electricians Union also supported Byggnads blockade with sympathy actions. Laval was declared bankrupt in March 2005 and another construction company – with a Swedish collective agreement – completed the work instead.
Laval brought action before the Swedish Labour Court and claimed (i) that the industrial action should be declared unlawful, and (ii) that the union organizations should be obliged to pay damages to Laval.
The Swedish Labour Court turned to the Court of Justice of the European Communities for a preliminary ruling. The issue at hand was whether the right to take industrial action within the framework of the Swedish collective agreement system is consistent with provisions of EC law on the free movement of services.
The decision of the Court of Justice of the European Communities
Discrimination: The ECJ deems that national rules are discriminatory if they do not respect that a company, with employees stationed abroad, already has a collective agreement in its home country.
The Swedish rules allow industrial action against companies which do not fall under Swedish legislation. The purpose of the rules is to give union organizations an opportunity to encourage all employers on the Swedish labour market to apply wages and other employment terms which are equivalent to the Swedish standards. The rules are also intended to create conditions for sound competition on equal terms between Swedish companies and businesses from other member states. However, the ECJ does not deem any of these arguments to relate to the concern for “public order, safety or health”, which is why the discrimination in question is not justified.
Unreasonable negotiation requirements: The ECJ also establishes that the right for the union organizations to take industrial action may mean that companies formed in other member states may feel forced to conduct negotiations for an undetermined period, and only then be informed which minimum salary to pay. In the light of this, the ECJ deems such an act to constitute a restriction in the freedom to provide services.
A restriction in the freedom to provide services may only be accepted if it has a legitimate purpose which is consistent with the EC-treaty and if it is justified by “an imperative concern for the public interest”. If this requirement is fulfilled, the restriction must be proportionate.
The ECJ means that the right to take industrial action in order to protect the employees against possible social dumping is in itself based on an “imperative concern for the public interest”.
But irrespective of this, the industrial action was taken in order to force a signing of a collective agreement. According to the ECJ, this was deemed to be going too far. It is unreasonable to demand that a foreign company be able to understand the meaning of a Swedish collective agreement and to foresee the costs. Thus, the proportionality principle was set aside.
Note: Currently, the Labour Court cannot provide information on when we can expect a decision from the court. However, a preparatory hearing is planned for 14 May 2008. |