Latest procurement caselaw: workforce implications
On 18th September 2014 the European Court of Justice provided a judgment in Bundesdruckerei GmbH v Stadt Dortmund [C-549/13], also known as the “Dortmund” case (find judgment here).
This decision is of interest for contracting authorities seeking to add social value, or include social considerations, through procurement. It follows the decisions in Ruffert v Land Niedersachsen [C-346/06] and Laval un Partneri Ltd v Svenska Byggnadsarbetareforbundet [C-341/05].
After the Ruffert and Laval cases, where workers are to be posted to a particular member state for performance of a contract, procurement conditions can be imposed. However they must comply with the Posted Workers Directive (96/71/EC) and they require payment of a universally applicable “minimum wage” established by statute or by way of collective agreement. Such wage requirements would need to be universally applicable, otherwise they would constitute an unjustified restriction infringing rights of freedom to provide services under Article 56 of the Treaty on the Functioning of the EU. These principles are set out in the new public procurement Directive 2014/24/EU, to be implemented by mid-April 2016.
The Dortmund case looked at a different scenario – requirements to pay a “minimum wage” in the context of performance by a sub-contractor in another member state. The ECJ confirmed that it was contrary to Article 56 to mandate that the German “minimum wage” be paid by a contractor to its employees, when the place of performance of the sub-contracted works was Poland.
The above cases have seriously hindered efforts to introduce “living wage” considerations in EU public procurements. The Dortmund case shows how care is needed when imposing contractual requirements setting employment conditions in public procurement. The situation as a whole would benefit from early European Commission clarification. For example, the new Directive 2014/24/EU, states that whilst member states should “take relevant measures to ensure compliance with obligations” [such as those established under the above cases] “….this should in no way prevent the application of terms and conditions of employment which are more favourable to workers”. Oddly on the other hand, the obligations work in many ways to prevent the application of more favourable terms and conditions!