Rüffert v Niedersachsen

Article 49 EC – Freedom to provide services – Restrictions –Directive 96/71/EC – Posting of workersin the context of the provision of services – Procedures for the award of public works contracts – Social protection of workers

The Dirk Rüffert case has important consequences for trade unions. It focuses on the right of public authorities, when awarding contracts for work, to demand that tendering companies commit themselves to pay wages that are in line with rates already agreed through collective bargaining in the place where the work is done, or whether this amounts to a restriction on the freedom to provide services under Article 49 of the EC Treaty.

Circumstances in the case: the company Objekt und Bauregie GmbH & Co secured a contract for building work in Germany, which it subcontracted to a Polish firm, with an undertaking that it would ensure compliance with wage rates already in force on the site through collective agreement. The contract was withdrawn when it was discovered that the 53 posted workers were in fact earning 46.57% of the applicable minimum wage for the construction sector, and the Niedersachsen authority demanded costs. The company took legal action as a result.

The German Court of Appeal referred the case to the European Court of Justice (ECJ) on 18 July 2006 in order to determine whether public procurement rules in Niedersachsen are incompatible with the freedom to provide services in the EU. The Court suggested that Article 49 of the Treaty prohibits the demand to pay wages “that are at least at the level of the wages that are foreseen on the basis of the collective agreement that applies to the place where the work is done”, because these may be higher than the minimum wage that would otherwise be applicable, and more in general this kind of public procurement obligation would prevent foreign service providers from competing on the basis of lower wages.

Outcome: The ECJ's ruling, announced on 3 April 2008, found that the restriction on the freedom to provide services resulting from the obligation to pay the collectively agreed wage rates was not justified by the objective of ensuring the protection of workers.

The ETUC condemned this decision as destructive and damaging, amounting to an open invitation for social dumping, and warned that it could fuel public opposition to the internal market. More details of the ETUC reaction are available below (press releases).