Advocate General Recommends Annulment of Directive on Adequate Minimum Wage

Recent EU legislative developments include an unexpected opinion by the Advocate General of Court of Justice of the European Union who called for the annulment of EU Directive 2022//2041 on Adequate minimum wages in the EU (the AMW Directive).

What is the AMW Directive?

The EU adopted the AMW Directive in 2022. The practical impacts of the AMW Directive include:

1. A framework for setting and updating statutory minimum wages: Member States with statutory minimum wages are required to have a sound governance framework in place to set and update them. This should include clear criteria, indicative reference values to guide the assessment of their adequacy, and measures to effectively involve social partners in their setting and updating. Statutory minimum wages will need to be updated at least every two years (or every four years for countries with an automatic indexation mechanism). Ireland’s Low Pay Commission fulfils this requirement.
2. Promoting and facilitating collective bargaining on wages: All Member States should take measures to promote the capacity-building of social partners to engage in collective bargaining on wage-setting. In addition, Member States where the collective bargaining coverage rate is below 80% need an action plan to promote collective bargaining. Ireland has a relatively low level of collective bargaining coverage by European standards and it remains to be seen how the state will comply with the requirement to develop an action plan to promote collective bargaining.
3. Improved monitoring and enforcement of minimum wage protection: All Member States must collect data on minimum wage coverage and adequacy and report to the Commission every two years. They should also ensure that workers, where their rights are not respected, have access to effective, timely and impartial dispute resolution mechanisms, and are protected from any adverse consequences resulting from their complaints.

Decision of Advocate General

The Advocate General (AG) issued an opinion in January 2025 recommending to the Court of Justice of the European Union (CJEU) that the AMW Directive be annulled.

Background

As statutory monthly minimum wages vary widely across EU Member States, the European Commission identified ‘the lack of clear and stable criteria to set and update minimum wages’ and ‘the insufficient involvement of social partners’ as being among the factors causing insufficient protection of workers by adequate minimum wages across the European Union.

In response to those concerns, Article 1(1) of the AMW Directive seeks to establish a framework for

1. the adequacy of statutory minimum wages
2. promoting collective bargaining on wage-setting, and
3. enhancing effective access of workers to rights to minimum wage protection where provided for in national law and/or collective agreements.

This framework is designed to contribute to the overarching aim of ‘contributing to upward social convergence and reducing wage inequality.’

Denmark and Sweden

Denmark and Sweden voted against the adoption of the AMW Directive on the basis that it could threaten their existing national models of autonomous labour relations. The Danish government, backed by Employers’ associations and trade unions, and subsequently the Swedish government, instituted legal proceedings arguing that the AMW Directive is incompatible with EU law.

AG’s Opinion

The AG’s opinion supported the Danish and Swedish arguments and proposed the full annulment of the AMW Directive. The AG’s position was not anticipated as the directive had been carefully examined by the European Parliament, the Council, and the European Commission. The AG proposed that the Court of Justice annul the AMW Directive in full on the ground that it is incompatible with Article 153(5) Treaty on the Functioning of the EU as it legislates in the area of ‘pay’ which is excluded from the EU’s competence.

Potential Impact of Annulment

The CJEU is not bound to follow the AG’s opinion, but it is clear that the court will have to consider if the AMW Directive effectively shifts authority to regulate ‘pay’ to the EU which is expressly forbidden from doing so under Article 153(5) of the Treaty on the Functioning of the EU. While annulments of entire directives are rare, the decision of CJEU in the coming months is one to watch as whatever the outcome, Ireland as an EU Member State will need to adhere to whatever wage setting mechanisms the court approves.