Our Housing team are delighted following a formal tender procurement process to have been appointed to three lots under the new multi-million-pound legal services framework for The Riverside Group.
In this case, the contracting authority (City of Dortmund) included a requirement in its EU tender process that the chosen contractor comply (and crucially, that its subcontractors comply) with the local minimum wage required of Dortmund under legislation introduced by the state of North Rhine Westphalia known as the “TVgG-NRW”. One of the bidders (Bundesdruckerei) proposed to use a subcontractor to perform all of the services that were the subject of the procurement. A key point was that the subcontractor was registered and based in Poland, and the work would be undertaken in Poland, meaning the subcontractor’s workers were not by law entitled to the benefit of German employment rights. Bundesdruckerei asked Dortmund to waive the minimum wage requirement. Dortmund refused on the grounds that it considered it was bound to include it by the laws it was governed by.
The ECJ recognised that the requirement to pay a minimum wage could be considered a “special condition” relating to the performance of a contract within the meaning of Article 26 of the Public Procurement Directive. Article 26 allows contracting authorities to impose “special conditions relating to the performance of a contract, provided these are compatible with Community law… [which] may, in particular, concern social and environmental considerations”.
However, because Article 26 requires that any such special condition must itself be compatible with Community Law, the ECJ considered that Article 26 is ‘trumped’ by the general “free movement” principle in Article 56 of the EU Treaty. This was because Article 56 makes paramount the freedom to provide services within EU member states and prohibits restrictions on that freedom. In the light of this, the ECJ concluded that imposing a national minimum wage on an employer in another member state “constitutes an additional economic burden that may prohibit, impede or render less attractive” the provision of services between an employer in one member state and a customer in another and, as such, it was an unlawful restriction on the freedom to provide services.
A previous case  had already decided that, if there is no reason to believe that workers on a public contract are in need of greater protection than those in the private sector, imposing a national measure such as a minimum wage through a public contract was “not appropriate”.
In this case, the ECJ followed that logic and concluded that, if the cost of living in member state “A” is lower than in member state “B”, then there is no need to pay workers in member state “A” a wage that would enable them to live in member state “B”.
It may be questionable whether the ECJ is correct in thinking that employee rights are sufficiently protected by each member state’s national laws to ensure an adequate and equivalent standard of living across member states. This judgment nevertheless concludes that a contracting authority cannot impose a minimum wage on workers that are employed and posted in another EU member state. The conclusion we must draw appears to be that a minimum wage as a requirement cannot be included in a European procurement exercise.
This calls into question the aspirations of many contracting authorities within the UK to pay not just the minimum wage, but a ‘living wage’, to workers under contracts where these are procured under the EU rules. If you cannot specify the payment of the legal minimum wage, how can you justify specifying a ‘higher’ bar that is not based on law or national agreement? And without prejudging the structure that bidders will propose in response to a procurement process, bidders may choose to use subcontractors based and working in another member state.
Contracting authorities must exercise caution in the requirements they impose upon bidders. While it might be lawful, for example, to require each bidder to comply with the law in the member state in which they are based, doing so would have little impact other than to reaffirm what they would anyway be obliged to do. And while the minimum wage might protect workers within the UK, the law does not yet stretch to a ‘living’ wage. This case now brings into question whether EU procurement can be used to seek better working conditions for workers without infringing the fundamentals of EU freedom of movement.
 Bundesdruckerei GmbH –v- Stadt Dortmund, Case C-549/13 18/09/14
 Directive 2004/18/EC, reflected in England & Wales by the Public Contracts Regulations 2006
 Rüffert v Land Niedersachsen, Case C-346/06  ICLR 467 (ECS)
For more information
For more information please contact:
Gayle advises on all aspects of EU procurement, including achieving social value through public spending. Richard More also advises on EU procurement issues particularly in the construction and IT sectors.
Necrotising Fasciitis, more commonly known as the ‘flesh-eating disease’, is a significant medical condition that requires urgent treatment.
Many of us who have been following the unfolding Inquest, are not surprised that the Coroner found gross and significant failures on the part of those caring for him.
Transferring out of SHPS will not be suitable for every housing association. So what should housing associations do?
In all the action to remove defective cladding, leaseholders have been the elephant in the room. Whilst social landlords might have adopted a wait and see approach private landlords do not have that luxury.
We welcome the Labour Party’s commitment to doubling the size of the co-operative economy. We wholeheartedly support the ambition to grow this vitally important part of the economy.
It was first referred to in the Charities Act 2006 (which was subsequently replaced by the Charities Act 2011) but it has finally been announced that charitable companies are able to convert to a charitable incorporated organisation (“CIO”).
The Private Members Bill Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill 2017-19 now has Government support and was debated at second reading on Friday 19 January 2018.
In short - yes. This is a common question in personal injury or clinical negligence claims and has recently come before the High Court in judicial review proceedings.
GDPR The General Data Protection Regulations (GDPR) will come into force on 25 May 2018 and bring changes to the rules governing data protection and the requirements placed on organisations which control or process personal data.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.