BEERG Commentary on Collective Bargaining...

Following several rounds of negotiations, the European Council, representing Member States, and the European Parliament have agreed a compromise text on an Adequate Minimum Wage Directive. The text can be read here.

While the Directive sets a framework to ensure that EU Member States, either through statute or through collective bargaining, have arrangements in place to guarantee adequate minimum wages, it also places an obligation on Member States to promote collective bargaining as the optimum way of negotiating wages.

As most BEERG/HR Policy member companies pay well in excess of national minimum wages, what the new Directive requires of Member States as regards minimum wage laws will not be of major concern.

However, the new stress on the promotion of collective bargaining in the Directive raises questions about what this could mean in practice and what actions EU Member States might take. This paper looks at these issues.

At the outset it should be stated that the Directive in setting a framework for minimum wage consideration in Member States is highly controversial as Article 153 of the Treaty explicitly says that the European Union has no competence when it comes to issues of pay. Clever legal language has been found to somehow square this circle. However, there is a considerable chance that the legality of the Directive will be challenged in the European Court. The Court is fiercely independent, as its decisions to strike down the EU/US data transfer agreements, Safe Harbor and Privacy Shield show. It could well find that the Directive is ultra vires, no matter what arguments the Commission’s lawyers advance in its defense.

Collective Bargaining: Best Approach to Negotiating Wages?

The Directive says that countries where collective bargaining is the dominant way of setting wages have fewer low-paid jobs that other countries. However, the relationship between job creation, the quality of jobs created, and pay levels is governed by a multiplicity of factors, including wider social norms and values, and cannot simply be reduced to one variable, collective bargaining, as the Directive appears to suggest.

Nonetheless, based on the assertion that collective bargaining is “good”, the Directive mandates that the governments of Member States should draw up actions plans to promote collective bargaining where less than 80% of the workforce have their wages and conditions of employment settled by such agreements. Road maps to reach 80% should, preferably, be drafted after the government has consulted the social partners. 

To be clear, the Directive is not calling for national action plans to boost union membership to 80% of the workforce. It wants action plans to push collective bargaining coverage to 80%­ -- a different matter.

This note argues that there are only two ways in which collective bargaining coverage can be boosted to over 80% from current numbers (see tables in the appendix):

1. Sufficient numbers of workers join unions to bring coverage up to 80% and their unions have sufficient economic leverage to oblige employers to bargain collectively, or
2. Governments push employers and unions to engage in either cross-industry or sectoral collective bargaining underwritten with a commitment that governments will then make such agreements legally binding through the use of erga omnes[1] measures.

The problem with (1) is that there is no evidence that there is pent-up demand on the part of workers to join unions and that the only reason they are not doing so is because of some unspecified obstacles, which governments can find ways of removing. Workers may well approve of unions in principle. They are just not joining them in practice. 

The problem with (2) is that, again, there is no evidence that employers who currently do not engage in cross-industry or sectoral collective bargaining would be eager to do so in the future. On the contrary, recent years have seen employers leave employers’ associations to be free to negotiate arrangements suitable to their own circumstances. It is the long-term decline of sectoral bargaining than party explains the decline in coverage that the Directive notes and regrets.

Even if employers were obliged to engage in such bargaining, as the Directive itself makes clear there can be no pressure on the parties to come to an agreement. Negotiations can always end in failure. Given these considerations, it is difficult to see how any action plan to hit an 80% target can be made to work in practice. 

As already noted, much of the language on the Directive gives the impression that all parties are agreed that collective bargaining is “a good thing.” This is far from the truth.

The merits or otherwise of collective bargaining is ideologically highly contested. Collective bargaining touches on decisions about the distribution of wealth generated by enterprises and on decisions about how the enterprise is to be structured and managed to generate that wealth. 

Such ideological divisions will make the drafting of any road maps or actions plans difficult and divisive. We do not expect that national governments will find this easy. Ireland, for instance, has a working group in place composed of employers, unions, and government, chaired by a highly respected academic, looking at these issues. It would appear to be a long way from any significant consensus, even if common ground can be found on some smaller issues. 

In Central and Eastern Europe unions are distrusted by much of the population because the role they played in the Communist system. It will be difficult to erase this suspicion, even if there was the political will to do so.

What The Directive Says

Appendix 1 of this document contains the texts from Recitals 25 and 26 of the Directive, as well as Article 4, these contain the key provisions on collective bargaining.

Recitals are the prologue to the Directive and set out the thinking behind its legal provisions. Recitals themselves are not legally binding, but they can be taken in consideration by courts and tribunals in interpreting the Directive. So, let us look at Recitals 25 and 26, in turn.

In a measure which promotes collective bargaining as the optimum way to set wages and working conditions you might reasonable expect there to be some comment on why there is a “context of declining collective bargaining coverage” (Recital 25). If you want to solve a problem it is best to identify the reason for the problem in the first place. But that might force the legislators to admit the fact the workers simply do not want to join unions, even if they think well of them. There are no laws in Europe holding them back from doing so. Nor is there evidence of widespread “union busting,” even if some such “busting” is attempted from time to time.

As noted earlier, it would also force legislators to answer the question why employers are quitting cross-industry or sectoral bargaining arrangements.

The suggestion in the final sentence of Recital 25 that all would be well if union representatives could just turn up and talk to workers is to fall into the trap of thinking that unions can be “sold” to workers just like any other service, rather than workers deciding themselves to join unions because they come to realise that it is in their interest to do so. Certainly if, as defined in national law and practice, a certain number of workers want to talk to a union official that should be facilitated. But that is different to given union officials the unilateral right to turn up unannounced any time they want.

It is worth noting that Recital 25 contains a “get out of jail card” for governments as any proposed measures must be “in accordance with national law and practice”. It can be anticipated that “such law and practice” will be used to rule out measures that are not “native” to the jurisdiction.

Turning to Recital 26 the key sentence to note is: 

“Member States’ collective bargaining coverage rates vary significantly owing to a number of factors, including national tradition and practice and their historic contexts.” 

Of course they do because different countries see things differently and act accordingly. Where tradition and practice has not favoured union membership or collective bargaining how are government expected to overcome this? Importing labour relations practices from elsewhere never really works.

Obliging workers to join unions, as happened in the past with closed shops where union membership was a requirement to get the job in the first place or attempting to push industries into cross-industry or sectoral collective bargaining arrangements will not work in today’s world. Workers and employers want to be free to make their own decisions about how best to conduct the relationship between them. 

The days when “someone” knew best what was in the interests of employers and workers is long gone and is not coming back.

Article 4, it sets out the legal obligations placed on Member States when it comes to the promotion of collective bargaining. 

The language in Article 4 is flexible enough to accommodate even the most minimal of initiatives. It can be read as implying that hitting 80% should be seen as an aspiration, rather than a set-in-stone target. There does not appear to be any time limits involved. An open-ended “aspiration” is unlikely ever to be achieved.

It is also worth asking the question that if governments involve employers and unions in the determination of national minimum wages, whether through legislation or collective agreements, can the EU impose further obligations to improve on the minimum wage through the promotion of collective bargaining arrangements? Is this not interference in the autonomy of the social partners in this field? And if the purpose of collective bargaining is not to provide for wages in excess of the minimum wage, then what is it purpose? Is this not the EU getting involved in the process of wage setting, even if by the back door?

Union Membership and Collective Bargaining Stats

Before commenting further on this it is worthwhile setting out some facts and figures on union membership and collective bargaining across the EU as they currently stand. In Appendix 2 of this document you will find two tables setting out (a) the percentage of the workforce covered by collective bargaining and (b) the Union Membership percentage, in each of the 27 EU member states. 

As can be seen from Table 2, collective bargaining coverage ranges from 98% in France to 10% in Greece. Union membership runs from 8% in France to 74% in Finland. Keep in mind also that probable around two-thirds of all union members work in the public sector. Some union numbers also include retired members.

But, as can be seen in Table 2, these numbers can be viewed in another way, as there are two forms of labour relations that give high bargaining coverage: the “legally representative” model, of which France is the exemplar, and the membership model represented by Finland. 

These models are deeply rooted in the histories, traditions, and cultures of the countries concerned. Are they exportable to other countries? Probable not. They are too contingent on context to work elsewhere.

So, the questions to be answered are these: How do you get collective bargaining coverage to 80% or above

• in the absence of laws that recognize unions without members as legitimate representatives of workers, and in the absence of erga omnes provisions to legally extend collective agreements to entire sectors? 
• If workers simply do not want to join unions?
• If employers are resistant to engaging in cross-industry or sectoral collective bargaining?

You can bring horses to water, but you cannot make them drink.

Article 4.1 (a) talks about promoting

… the building and strengthening of the capacity of the social partners to engage in collective bargaining on wage setting, in particular at sector or cross-industry level; 

First, see above on the resistance of employers to engage in multi-employer bargaining.

Second, how are you to define “sectors” in today’s economy? Where does a TikTok, Uber, or Facebook fit? Many of these businesses see their competitive advantage in “doing their own thing.” They have no desire to collaborate with competitors. 

No doubt, these and many other questions will be the subject of intense debate over the next few years as Member States look to transpose the new Directive into national law. We will keep you informed about these debates as best we can.

However, Member States may well find that the Directive is a last gasp attempt to impose yesterday’s model on tomorrow’s economy and simply will not work. 

But at least the EU Commission and Parliament can say to those who campaigned for this Directive: we have given you what you asked for. Now, you make it work in the Member States. We did our job. Now, you do yours.

[1] Erma omnes means a law which takes an agreement negotiated between unions and employers and makes it legally binding on all employers and workers either across specific sectors, or across the economy as a whole, whether or not employers are members of the employers’ association that negotiated the agreement or workers are members of the union(s). 

July 20, 2022

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Appendix 1 – Legislation:

Recital 25: 

“In a context of declining collective bargaining coverage, it is essential that the Member States promote collective bargaining, facilitate the exercise of the right of collective bargaining on wage setting and thereby enhance the wage setting provided by collective agreements to improve workers’ minimum wage protection. Member States have ratified ILO Convention 87 on the Freedom of Association and Protection of the Right to Organise and Convention 98 on the Right to Organise and Collective Bargaining. The right to bargain collectively is recognised under these ILO Conventions, under ILO Convention 151 on Labour Relations (Public Services) and 154 on Collective Bargaining, as well as under the Convention for the Protection of Human Rights and Fundamental Freedoms and the European Social Charter. Articles 12 and 28 of the Charter of Fundamental Rights of the European Union guarantee respectively the freedom of assembly and association and the right of collective bargaining and action. According to its Preamble, the Charter reaffirms these rights as they result, in particular, from the Convention on the Protection of Human Rights and Fundamental Freedoms and the Social Charters adopted by the Union and by the Council of Europe. Member States should take, as appropriate and in accordance with national laws and practice, measures promoting collective bargaining on wage-setting. Such measures might include, among others, measures easing the access of trade union representatives to workers.”

Recital 26: 

“Member States with a high collective bargaining coverage tend to have a low share of low-wage workers and high minimum wages. Member States with a small share of low wage earners have a collective bargaining coverage rate above 80%. Similarly, the majority of the Member States with high levels of minimum wages relative to the average wage have a collective bargaining coverage above 80%. Therefore, Member States with a collective bargaining coverage rate below 80% should adopt measures with a view to enhancing such collective bargaining. Member States with a collective bargaining coverage below a threshold of 80% should provide a framework of enabling conditions for collective bargaining, and establish an action plan to promote collective bargaining to progressively increase the collective bargaining coverage rate. In order to respect the autonomy of social partners, which includes their right to collective bargaining and excludes any obligation to conclude collective agreements, the threshold of 80% of collective bargaining coverage should only be construed as an indicator triggering the obligation to establish an action plan. That action plan should be reviewed, at least every five years, and, if needed, revised on a regular basis. The action plan and any updates should also be notified to the Commission and be made public. Member States might decide on the appropriate form of the action plan. Such action plan might have been adopted prior to the entry into force of this Directive, provided that it contains actions to effectively promote collective bargaining and fulfils the obligations under this Directive. The action plan should be established either after consultation with social partners, by agreement with them or agreed between them following their joint request. Member States’ collective bargaining coverage rates vary significantly owing to a number of factors, including national tradition and practice and their historic contexts. This should be taken into account when analysing progress towards a higher collective bargaining coverage particularly with regard to the action plan provided for in this Directive.”

Article 4:

“Promotion of collective bargaining on wage setting

1. With the aim to increase the collective bargaining coverage and to facilitate the exercise of the right to collective bargaining on wage setting, Member States, with the involvement of the social partners, in accordance with national laws and practice, shall:

(a) promote the building and strengthening of the capacity of the social partners to engage in collective bargaining on wage setting, in particular at sector or cross-industry level; 

(b) encourage constructive, meaningful and informed negotiations on wages between social partners, on equal footing, where both parties have access to appropriate information in order to carry out their functions in respect of collective bargaining on wage-setting; 

(c) take measures, as appropriate, to protect the exercise of the right to collective bargaining on wage setting and to protect workers and trade union representatives from acts that discriminate against them in respect of their employment on the grounds that they participate or wish to participate in collective bargaining on wage setting.

(d) for the purpose of promoting collective bargaining on wage-setting, take measures, as appropriate, to protect trade unions and employers’ organisations participating or wishing to participate in collective bargaining against any acts of interference by each other or each other’s agents or members in their establishment, functioning or administration.

2.In addition, Member States shall, where the collective bargaining coverage rate is less than a threshold of 80%, provide for a framework of enabling conditions for collective bargaining, either by law after consultation of the social partners or by agreement with them. These Member States shall also establish an action plan to promote collective bargaining, either after consultation with social partners, by agreement with them or agreed between them following their joint request. The action plan shall set out a clear timeline and concrete measures to progressively increase the rate of collective bargaining coverage, in full respect of the autonomy of social partners. The action plan shall be reviewed regularly and updated if needed, either after consultation with social partners, by agreement with them or agreed between them following their joint request. In any event it shall be reviewed at least every five years. The action plan and any update thereof shall be made public and notified to the Commission.”

Appendix II – Union membership + Collective Bargaining

Table 1:

Table 2.

Source: The data for both tables, is taken from:  http://www.worker-participation.eu/ Note that the tables were prepared by BEERG and the comments in the second table are ours.