The ruling is seen as an important milestone in defining the competences between Brussels and the EU countries. The judgment confirms that social policy can partly be shaped at the European level, but wage formation remains essentially a national matter.
The ruling of the European Court of Justice clarifies the scope of European social legislation. The Court ruled that the EU has not exceeded its powers with its minimum wage directive, but did strike down two provisions that intruded too far into national wage formation.
The case was brought by Denmark, supported by Sweden. Both countries argue that wage negotiations belong to the national domain and that European institutions should not interfere. Their complaint targeted the 2022 directive, which aims to guarantee 'appropriate minimum wages' in all EU countries.
The Court partly sided with Denmark. The judges annulled two specific provisions: one that set criteria for calculating and adjusting minimum wages, and one that prohibited wage reductions through automatic indexation. According to the Court, both rules directly concern the establishment of wages – a national competence.
The rest of the directive remains fully effective. EU countries are encouraged to promote collective negotiations between employers and employees and ensure that wages contribute to a decent standard of living. The Court emphasized that this does not constitute direct interference in national systems.
The annulment of the two provisions means that the EU cannot impose uniform criteria for the level of minimum wages. EU countries thus retain more freedom to determine themselves how they calculate and adjust wages, for example through indexation systems or collective labor agreements.
For countries with automatic wage indexation – such as Belgium and Luxembourg – this means they continue to decide independently on the application of those systems. At the same time, the general objective of the directive remains: improving employees' purchasing power and reducing wage disparities within the EU. The Court ruled that this objective fits within the Union’s mandate to promote social cohesion.