The decision of the Court of Justice of the European Union (ECJ) on the EU Minimum Wage Directive has reignited the debate on minimum wages in Germany. According to legal experts, the decision of the judge from Strasbourg raises doubts whether the decision to increase the minimum wage on January 1 2026 is legally effective.
The EU minimum wage directive is largely valid. The ECJ ruled on this on Tuesday in response to a lawsuit from Denmark. However, according to the European Court of Justice, the EU has overreached and exceeded its competence in several regulations. The Federal Government’s proposed Minimum Wage Commission and legal regulations to adjust the minimum wage from 2026 were based, among other things, on regulations that have now been declared invalid by the ECJ. The court also ruled that the reference value of 60 percent of the gross median wage, first used by the Minimum Wage Commission under its new rules of procedure, was not a binding requirement for member states.
“There are therefore serious doubts that the minimum wage increase will be legally effective on January 1, 2026. No one should rely on it,” warned Adam Sagan, professor of labor law at the University of Bayreuth. Gregor Thüsing, director of the Institute of Labor Law and Social Security Law at the University of Bonn, said that with the decision, voices justifying an increase in the minimum wage to 14.60 euros per hour in 2027 under European law had “lost ground”.
Sagan: Implement the effective parts of the directive as quickly as possible
With this decision, the minimum wage level remains in national hands, Thüsing praised the decision. Otherwise, accusations of a European-friendly and unhindered interpretation of the law will grow louder. However, this decision received strong criticism from businessmen. By confirming most of the directives, the ECJ has made an “excessive assessment,” complained the general manager of the Confederation of German Employers’ Associations, Steffen Kampeter. In this way, Europe will not be a success story. However, he is confident that Germany’s minimum wage law will not change.
Law professor Sagan sees it differently: German lawmakers should implement effective parts of the minimum wage directive as quickly as possible, Sagan suggests. Action plans are also needed to increase the scope of collective agreements, namely the proportion of employment relationships that apply collective agreements. Based on the reformed minimum wage law, the Minimum Wage Commission can then make new proposals for adjusting the minimum wage, the results of which will not be different from previous proposals.
The EU cannot apply any mandatory criteria
The German Trade Union Federation hailed the fact that the ECJ essentially upheld the EU minimum wage directive and was an “important signal” for a social Europe. The vice-chairman of the Verdi union demanded that the Federal Collective Bargaining Act should now be implemented without restrictions. However, that is not what is meant by a legal dispute.
Based on the ECJ decision, the EU cannot prescribe any criteria to member states that must be taken into account when setting and updating minimum wages. The guidelines include the following minimum criteria: purchasing power of the statutory minimum wage, taking into account the cost of living, the general level of wages and their distribution, the rate of growth of wages and the level and development of long-term national productivity. The ECJ ruled that the EU is also not allowed to implement a ban on minimum wage reductions.
The court, among other things, did not object to the fact that reference values were given for the statutory minimum wages. In contrast to the mandatory criteria – which do not apply according to the decision – the reference values are only control parameters for assessing the adequacy of the legal minimum wage. These guidelines, among other things, set 60 percent of the gross median wage. This brand is very important in the minimum wage debate in Germany. According to the Minimum Wages Commission’s new rules of procedure, a reference value of 60 percent of the gross median wage must be taken into account “as part of the overall assessment” alongside rate developments. The new procedural rules also explicitly refer to the EU Minimum Wage Directive. A reference value of 60 percent is also stated in the coalition agreement. Taking into account the new criteria, a minimum wage of 15 euros can be achieved in 2026, you can read there.
Steps for better “working conditions”, but not “wages”
With a majority of 24 of the 27 EU member states, the EU Council adopted the “Directive on an adequate minimum wage in the European Union” in autumn 2022. Only Denmark and Sweden voted against; Hungary abstained. This directive aims to improve living and working conditions in the EU through an adequate minimum wage. Height remains undefined.
The then-federal government consisting of the SPD, Green Party and FDP, led by Chancellor Olaf Scholz (SPD), defended the EU minimum wage directive in the legal dispute. The Advocate General at the European Court of Justice, Cypriot judge Nicholas Emiliou, recommended in January that Denmark’s measures be accepted in full and that the EU minimum directive be declared null and void in its entirety.
The EU’s social policy competences include the power to take action for better “working conditions”. In contrast, the EU does not have the authority to set “wage” requirements for member countries. This is contained in the EU treaties that regulate the EU’s actions. In its decision, the ECJ emphasized that this does not mean that all wage-related questions are outside the EU. Such an interpretation would be contrary to the EU’s aim to strengthen the social dimension of the EU.
Therefore, there must be a distinction: the EU is not allowed to issue any regulations that directly interfere with wage determination. Likewise, four minimum wage criteria were declared invalid: taking into account purchasing power, the general level and growth rate of wages as well as long-term national productivity levels, requirements were established that had a direct impact on wage levels.
