Thursday, May 28, 2015

Road Haulage Industry Wages Under the European Spotlight

Pressure on German Government Over Minimum Wage Legislation
Shipping News Feature

EUROPE – GERMANY – The European Commission has decided to launch an infringement procedure against Germany concerning the application of the Minimum Wage Act to the road haulage sector, which sees the country enforce its newly introduced pay standard to foreign companies that provide services within German borders, something covered in our article in February. Following an exchange of information with the German authorities and a thorough legal assessment of the German measures, the Commission has sent a Letter of Formal Notice to Germany, the first step in the infringement procedure.

Germany is the 22nd country in the EU to introduce a minimum wage requirement, with the regulation entering into force on January 1, 2015 and set at €8.50 per hour. Whilst fully supporting the introduction of a minimum wage in Germany, the Commission considers that the application of the Minimum Wage Act to all transport operations which occur on German territory restricts the freedom to provide services and the free movement of goods in a disproportionate manner.

In the months since Germany passed the Minimum Wage Act, freight operators from surrounding countries have made heavy and prolonged protests against the enforcement of the act and, at the end of January, the country suspended the application to foreign truckers, until European rules on the matter have been clarified.

The application of German measures to transit and certain international transport operations can in the Commission's view not be justified, as it creates disproportionate administrative barriers which prevent the internal market from functioning properly. The Commission considers that more proportionate measures are available to safeguard the social protection of workers and to ensure fair competition, whilst allowing for free movement of services and goods.

The German authorities now have two months to respond to the arguments put forward by the Commission, in the letter of formal notice. Companies outside Germany in certain sectors, including transport are obliged to notify the German customs authorities via specific forms provided by the German authorities. The country’s customs authorities are considered competent for controlling the execution of such notifications. Penalties for a breach of these notification obligations can be as high as €30,000, and up to €500,000 in cases where the remuneration paid does not comply with the German law.

The Commission supports the introduction of minimum wage in Germany, which is in line with its social policy commitment, however as Guardian of the Treaties, the Commission says that it must also ensure that the application of the national measures is fully compatible with EU law, notably the posting of workers directive (Directive 96/71/EC), ‘transport acquis’ and the Treaty principle of freedom to provide services, the free movement of goods, and having regard to the principle of proportionality.

It will be interesting to see how Germany defends a position it considers socially responsible and levelling the playing field for native HGV drivers, yet which poorer members of the European Union undoubtedly view as protectionism by a richer neighbour keen to protect its market from the penetration of foreign competition.