European Union: Minimum Wage Directive Survives Cliffhanger CJEU Ruling

The CJEU has ruled on Denmark’s challenge to the EU Minimum Wage Directive, confirming its validity but striking down two provisions that interfered with national wage‑setting powers. The judgement clarifies the limits of EU competence while preserving the Directive’s role in strengthening worker protection across the Union.

 

Background

In late 2022, the European legislator adopted the Directive on adequate minimum wages in the European Union.

The Directive acknowledges that all Member States provide minimum wage protection, though through different mechanisms. Some rely primarily on statutory or administrative provisions, while others base protection almost entirely on collective bargaining agreements. The Directive explicitly seeks to respect these national traditions.

Studies have shown that collective bargaining systems often provide sufficient protection for low‑paid workers, ensuring a decent standard of living. By contrast, statutory minimum wages in several Member States remain comparatively low. A 2018 study revealed that in nine Member States, the statutory minimum wage did not provide a sufficient income for single workers to maintain an adequate standard of living. Moreover, not all workers in the Union are effectively protected by minimum wage thresholds, with some earning below the legal minimum in practice.

 

Objectives of the Directive

The Directive sates it does not seek to harmonise minimum wages across the Union, nor to impose a uniform mechanism for their determination. Instead, it says it pursues the following objectives:

• Improve access for workers to minimum wage protection
• Respect the Member State autonomy and the role of social partners
• Promote collective bargaining on wage setting, recognising its practical effectiveness
• Increase collective bargaining coverage, with a target of 80%
• Facilitate the right to collective bargaining without imposing obligations on union membership

To achieve these goals, the Directive establishes minimum standards for national systems. Member States must ensure:

• Adequacy of minimum wages (ensuring a decent standard of living)
• Use of objective and transparent criteria in wage setting
• Action plans where collective bargaining coverage falls below 80%
• Rules on variations and deductions that are legitimate, proportionate, and justified
• Periodic review of minimum wages (every two years without automatic indexation, every four years with indexation)

 

The Danish Challenge

Denmark requested the annulment of the Directive in its entirety, arguing that it constituted a direct interference with national competences on wage regulation, contrary to the explicit exclusion of EU competences regarding wage and the right to association in Article 153(5) TFEU.

The Danish model is characterised by autonomous collective wage bargaining, with sectoral agreements covering a large majority of workers. Any EU harmonisation of statutory minimum wages, even without prescribing wage levels, was perceived as a potential weakening of this system. The powerful Danish social partners were absolutely not a fan of the Directive. Initially, also Sweden requested the annulment but later dropped its case.

 

The Court’s Ruling

On 11 November 2025, the Court of Justice of the European Union delivered a judgement concerning this Directive in Case C‑19/23, Denmark v Parliament and Council.

The Court confirmed that the Directive is largely valid, but annulled two provisions that amounted to direct interference in national wage‑setting competences:

1. Statutory criteria for wage setting (Article 5(2)): Member States were required to take into account factors such as purchasing power, overall wage levels, wage growth, and productivity when setting the minimum wage or changing it. The Court held that this provision effectively harmonised elements of statutory minimum wages and thus constituted an impermissible interference
2. Prohibition on lowering minimum wages through negative indexation (Article 5(3)): The Directive prohibited automatic indexation mechanisms from resulting in a reduction of minimum wages. The Court found this to be a direct intrusion into national wage‑setting rules.

For the remainder, the Directive stands. The Court emphasised that provisions promoting collective bargaining do not interfere with the right of association, as Member States are not obliged to ensure increased union membership.

 

Procedural Note

Denmark also argued that the Directive was adopted on an incorrect legal basis, claiming that unanimity in the Council was required due to its impact on collective representation and defence. The Court rejected this argument, confirming that the Directive was validly adopted by qualified majority.

 

Conclusion and Importance of the Judgement

The Minimum Wage Directive remains in force, with only two provisions annulled. The Court has clarified that the Union may not intervene directly in the determination or adjustment of minimum wages, but it may establish minimum standards and framework conditions to strengthen worker protection. The Directive thus continues to balance European ambition with national autonomy, serving as a key instrument in the pursuit of adequate minimum wages across the Union.

In light of the very limited part of the Directive that is annulled, the judgement can be seen as a victory for the EU Commission but also for the European Trade Union Confederation and other stakeholders that were fearing that the full annulment of the Directive would strike a significant blow to the expansion of EU policy and to the support that the EU is currently offering to encourage collective bargaining.

The Court has found a delicate balance between the legal aspects regarding the competence of the EU and the social and political importance of the Directive. The fact that it took many years for the Court to come to a conclusion highlights the difficulty of finding such a balance. If the Directive would have been annulled, this would have been the first time  that this  happened in the history of the EU. As the Directive is already transposed by the member states, the consequences for the resulting national rules would also be unclear. With this judgement, the CJEU has chosen not to create a situation of massive legal uncertainty. The EU Commission will now just have to propose a correction, replacement or deletion of the annulled provisions.