The much-awaited Decision on the validity of the “Minimum Wage Directive” by the Court of Justice from November 2025 was reflected and analysed from several different aspects, but in the present commentary, I focus on the Court’s interpretation of the limit set by Article 153(5) TFEU to the Union’s legislative competence. The latter excludes the adoption of measures relating to […] “pay”. Arguably, the Court’s reasoning shrinks the contours of the exclusion of “pay”, thereby limiting the practical reach of Article 153(5) TFEU in a way that invites consideration of whether the intended preservation of nationally retained competences is truly taken seriously by the CJEU.

Overview

In a nutshell, in 2022, the European legislature adopted the “Minimum Wage Directive”, on the basis of Article 153(2), point (b), in conjunction with Article 153(1), point (b) TFEU. The Directive set criteria that Member States should use, with some choice, to guarantee the adequacy of statutory minimum wages. At the time, Denmark and Sweden voted against the adoption of the Directive. None of those States is known for having low incomes, and presumably their economy would not be affected by the Directive. What triggered those States’ disagreement with the Directive was the fact that they hold a strong tradition of collective bargaining, in which wages are negotiated for each sector between unions and employers. Representatives of those countries in the Council had considered that the autonomy of social partners should be preserved, thereby opposing every mandatory regulation at the Union level.

Denmark challenged the validity of the Directive, arguing that wages and trade union law are matters expressly reserved to Member States by Article 153(5) TFEU, and that the legislative procedure under which the Directive was adopted was not in accordance with the Treaty. In fact, matters on point (b) of Article 153, relating to working conditions, should be regulated under the ordinary legislative procedure (set in Article 294), requiring qualified majority in the Council and the co-decision of the Parliament; whereas matters on point (f) of the same provision, relating to the collective defence of the interest of workers, require the adoption of a special legislative procedure consisting of an unanimous decision by the Council and mere consultation with the European Parliament. Both matters were covered by the Directive, and the required legislative procedures were not compatible. Thus, in line with settled case law (see, for instance, Opinion 1/15, para 78), the Directive should not have been adopted as such: the options would be either to abandon regulation on one of the matters or split the subject into two legislative acts, each one adopted through the corresponding legislative procedure.

Advocate General Emiliou agreed with the first part of the argument and proposed that the Court annul the Directive in full, on the grounds that the Union had overstepped its competence. He considered that the Directive interfered directly with wages (AG Opinion, para 95), and hence it violated Article 153(5) TFEU.

The Court did not accept Denmark’s request to annul the Directive in full. Notwithstanding, it decided to declare void some provisions that it considered affected the autonomy of Member States: Article 5(2), which set out the criteria Member States should consider when determining minimum wages (“(a) the purchasing power of statutory minimum wages, taking into account the cost of living; (b) the general level of wages and their distribution; (c) the growth rate of wages; (d) long-term national productivity levels and developments); the part of Article 5(1) referring to paragraph 2 (the removal of which was a necessary consequence of the former); and the final part of Article 5(3), where it was stated that the use, by Member States, of automatic mechanisms for indexation adjustments of statutory minimum wages should not lead to a decrease in the minimum wage. The Court considered that only these provisions of the Directive “[amount] to harmonisation of some of the constituent elements of those wages and, therefore, direct interference by EU law in the determination of pay within the European Union” (CJEU Judgement, para 96 and, to the same effect, para 98).

A take on the Union’s competences

As this brief summary shows, the issue goes to the very heart of the discussion concerning the division of competences between the Union and the States. A discussion that is intensified by the fact that Article 153 excludes wages from the Union’s competence in social matters.

Critics of the AG’s Opinion had suggested that, if the Court followed his proposal, it ran the risk of “precipitating Social Europe into an existential crisis” and would “jeopardise the attainment of a number of social regulatory objectives pursued by the EU Treaty”. As frightening as these arguments may seem, it is important to recall that the powers of the Union do not follow from ideals or well-intentioned purposes, but from clear competence rules inserted into the Treaties, and that these do not operate in a vacuum and should rather be articulated coherently with each other. Traces of the idealism highlighted above can ultimately be seen in the Court’s Decision, when it states that “the ability of the EU legislature to achieve the aims of social policy, as set out in the first paragraph of Article 151 TFEU, and, more generally, to give concrete expression to the social dimension of integration within the Union would be seriously compromised if that legislature were prevented from adopting measures which, in practice, have positive effects or repercussions on the level of pay” (CJEU Decision, para 71). The diagnosis is well identified: the social dimension of Europe is far from being satisfactory. But as long as the Treaties say what they say, that is something we have to live with.

First, the interpretation of the legal basis for the exercise of competence should be articulated with the limits to that competence set out in the Treaties. The fact that the Treaty provides for different legislative procedures in Article 153 is indicative of the importance of these matters for the Member States. On top of this, Article 153(5) adds, rather incisively, that the action of the Union “(…) shall not apply to pay (…)”. Specifically, although the current and legal meaning of the expression “working conditions” might reasonably include “wages”, the fact that that specific aspect of the “conditions” is excluded from the Union’s legislative competence cannot be overlooked.

Recalling its previous case law, the Court stated:

The “exclusion of competence [under Article 153(5)] must be construed as covering measures – such as the equivalence of all or some of the constituent parts of pay and/or the level of pay in the Member States, or the setting of a minimum guaranteed wage at EU level – that amount to direct interference by EU law in the determination of pay within the European Union. On the other hand, it cannot be extended to any question involving any sort of link with pay” (CJEU Judgement, para 69).

Given that the Directive relates to “adequate wages” and that the Court apparently considered it to be subject to the second part of the statement just quoted (as a question involving merely a “sort of link with pay”, thus within the Union’s competence), it is hard to guess which measures in relation to pay would “amount to direct interference by EU law in the determination of pay” precluding EU decision. If “adequate wages” is not directly related to “pay”, then what language is the Court speaking? Is the Court suggesting that Article 153(3) should be so narrowly interpreted that only acts that fixed the exact amount of the wage would be excluded from the Union’s competence?

The suggestion that exceptions to the Union’s competence, such as that of Article 153(5) TFEU, should be interpreted strictly, which is implied in the reference the Court makes to Impact (see, in particular, para 68), is also questionable. An interpretation technique such as this should be used with caution and requires a previous definition of what the general rule is. In my view, both the formulation of the principle of conferral (Article 5 TEU) and the specific classification of social policy as a shared competence (subject to the principle of subsidiarity) lead to the conclusion that, by default, competence pertains to the Member States and that it is the Union’s competence that needs to be justified (see, also Article 286 TFEU). After all, Member States retain the Kompetenz Kompetenz). Thus, Article 153(3) intends merely to preserve what is, originally, a States’ competence.

As it happens, the Court required the removal of Article 5(2) of the Directive, which listed the criteria that Member States should include when fixing the minimum wage. Apparently, that decision goes in the right direction, since it leaves discretion for Member States to decide which criteria should be considered for that purpose, and is consistent with the limitation of the Union’s action discussed above. However, it is worth noting that the removal does not eliminate the risk of competence creep. As the Advocate General has already suggested (para 82), it’s not hard to imagine the Court being seized in the future with a question concerning the interpretation of the concept of “adequate minimum wages”. In that respect, the Court’s assurances that the concept will not be given an autonomous (European) meaning (para 90 of the decision), and the reference to the limit of Article 51(2) of the EU Charter for that purpose (para 93), are somewhat contradicted by the record of the Court – it will suffice to mention Fransson, where the Court considered the EU Charter applicable even when Member States were not implementing EU law, but simply acting “within the scope of EU law”. Is it not possible, following that caselaw, that in the future the Court considers that, given the adoption of the Directive, national legislation on minimum wages can now be considered to fall within EU law, and hence subject to conformity with the EU Charter?

Safeguarding the rule of law within the EU itself

Finally, Advocate General Emiliou has correctly framed the question in the following fundamental terms:

“[H]ow competences are distributed between the Member States and the European Union is a question of a constitutional nature, which (…) is essential to a European Union based on the rule of law” (para 36 of the AG opinion).

The rule of law principle has been at the forefront of debate in light of risks emerging in some Member States. The Court of Justice has been particularly active in addressing the crisis, taking on the role of guarantor of the values of the EU.

It is important not to forget, though, that the rule of law is not addressed only to Member States. Rather, the rule of law is expressly recognised in Article 2 TEU as a founding and binding value of the Union itself. Furthermore, legality is widely understood as a core dimension of the rule of law, insofar as it requires public power to be exercised only on the basis of and within the limits of law. From this perspective, the principle of conferral may in fact be considered a specific expression of the principle of legality in the EU constitutional order.

Conclusion

None of what has been said is meant to ignore the need for a social policy and the fundamental rights of workers. These are, of course, important substantive dimensions of the rule of law principle. But if one is to take the division of competences seriously, the conclusion would then be that a political decision from Member States is necessary for that purpose, in order for the social policy to be fully complete.