More on 'living wages' in public contracts

Payslip iStock 000005826087XSmall 146x219The European Court of Justice (CJEU) has recently ruled on the extent that public authorities can require contractors and their sub-contractors to comply with regional legislation imposing a 'living wage'. David Hansom reports.

The CJEU's latest ruling follows the case of Bundesdruckerei GmbH v Stadt Dortmund.

Background

In April 2013, Stadt Landau ran a procurement relating to postal services. Regional law in Germany required that public service contracts could only be awarded to undertakings which agreed in writing to pay their staff a 'living wage' to perform the relevant services.

Legislation requiring payment of a national minimum wage was not to be introduced until 1 January 2015. Stadt Landau informed RegioPost that, as it had not submitted the required 'living wage' declaration, it would be excluded from the procurement process.

RegioPost appealed, as a result of which the CJEU was asked whether the national legislation is compatible with EU law, and whether contracting authorities are permitted to include such requirements as a 'special condition' in this manner.

Judgment

The CJEU considered that the Public Sector Directive does not preclude national legislation requiring contracting authorities to only award contracts to suppliers who undertake (and whose sub-contractors undertake) to pay their employees who perform the contract a 'living wage'.

The Court also determined that excluding bidders who failed to do so was also potentially compatible with the procurement directives.

The CJEU distinguished this case from Ruffert (Case C-346/06), following detailed analysis of the legislation through which the 'living wage' requirements were imposed on economic operators. It determined that in this case, the legislation was derived from and consistent with EU law (Directive 96/71 on the posting of workers). The CJEU considered that any impediment or restriction on cross-border interest arising from the legislation in this case was justified in order to protect workers.

(Case C 115/14 - RegioPost GmbH & Co KG v Stadt Landau, judgment of 17 November 2015)

Comment

This is a welcome decision for UK contracting authorities looking to build social value and minimum wage provisions into contracts. Such measures should not be adopted on a one-size-fits-all basis, as it is important that the measures are proportionate and relevant to the contract being procured. In practice the risk of complaint or challenge is highest where the provisions have very high scores available in contracts with a cross border interest.

David Hansom is a partner and head of the public sector group at Veale Wasbrough Vizards. He can be contacted on 020 7665 0808 or This email address is being protected from spambots. You need JavaScript enabled to view it..