Scotland on Sunday today reports a dispute between the Scottish government and local authoities. The Scottish Government has instructed local authorities to ensure that they require contractors to pay a living wage of £8.25 per hour. The local authorities have responded that they are not legally permitted to do so, and point to guidance from the Scottish Government that tells them they can’t (it’s in paragraph 18). To my horror, I have to say that the local authorities are right.
The problem goes back to the European Court of Justice, which has taken the view that any attempt to impose minimum conditions constitutes a restraint of trade and interferes with the freedoms of the contractor. In Rüffert v Niedersachsen, 2008 C‑346/06, they judged that national governments could not use contracts to enforce collective wage agreements. (The Advocate General had suggested that this should be subject to protecting the rights of workers – the Court disregarded that part of his legal advice.) Bundesdruckerei v Stadt Dortmund 2014 C549/13 states that the minimum wage of one country cannot be exported to another country by default. The Scottish Government Guidance refers to the second case, possibly because the reasoning in it seems to support the general argument, but Rüffert is more generally framed, and so more important.
Taken literally, both cases refer explicitly to firms providing services from another member state. That seems to imply that (a) personal services, which in their nature have to be delivered person to person in a specific place, might call for different criteria and (b) the rules may not apply in the same way to firms based in the member state issuing the contract. Neither prospect, however, offers much direct consolation. The fact is that the ECJ, like the US Supreme Court notoriously did in Lochner v New York, has taken a stand in favour of the rights of commercial providers and against the rights of workers and governments. This is bad for the economy, bad for the law and bad for Europe.