Entrepreneurs who send their employees to another EU Member State to provide services under a contract with a customer (client), have an obligation to provide these employees with the same working conditions as those enjoyed by employees in this Member State, including minimum wage. So, for example, if a Czech entrepreneur sends employees to provide services in Germany, it must provide these employees with the German minimum wage.
This obligation arises from Directive 96/71/EC of the European Parliament and of the Council concerning the posting of workers in the framework of the provision of services (hereinafter “Directive”) and also applies for the performance of cross-border public contracts.
Some contracting authorities therefore require contractors to undertake to pay their employees at least minimum wage in the respective country in the actual conditions of the tender, and also require that all subcontractors comply with this same obligation.
This is precisely the requirement that was raised by the City of Dortmund in tender conditions for the public contract for the digitalisation of documents and conversion of data for the city’s town planning department. However, Bundesdruckerei GmbH disagreed with this condition, and the dispute had to be decided by the EU Court of Justice in its judgement of 18 September 2014 in case no. C-549/13.
The contractor protested against the contracting authority’s requirement arguing that the employees used in the performance of this public contract would be providing services in their home country (in this case Poland), not Germany. It therefore considered the requirement to pay German minimum wage to Polish employees working in Poland as an unjustified requirement that only increased costs for foreign contractors and subcontractors and thereby reduced the attractiveness of the contract for these contractors.
After reviewing the case, the Court fully agreed with the contractor and concluded that such a tender condition was in contravention to European law.
Certain conclusions can therefore be drawn from the Court of Justice judgement for both contracting authorities and contractors.
Contracting authorities may include an express requirement for compliance with the minimum wage in a specific country in tender conditions, however, this requirement must be limited to those cases where the respective employees will be working in the territory of that country only.
In contrast, contractors have an obligation to provide their employees with minimum wage in a foreign country, only if employees provide services in the territory of this foreign country.
Similar conclusions apply not only for services, but also for the delivery of goods or services, where the criterion for determining the appropriate minimum wage is not the country in which goods or services are delivered to the contracting authority, but the country in which the employees produced the goods or did their work.
For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.