Case C-522/12, Isbir – cleaning German functional equivalence from EU collective minimum rates of pay? [judgment 2013, ECLI:EU:C:2013:711]

For the purposes of Directive 96/71, on the posting of workers in the framework of the provision of services, can an employer be said to have paid the hourly minimum rate of pay under a collective agreement where he pays less than that amount but makes other payments to the employee?

Facts
Mr Isbir is a cleaner. He works for DB Services, a company belonging to German railway’s corporate group Deutsche Bahn. A difference of opinion arose as to how much Mr Isbir should have been paid in the twelve months between 1 July 2007 and 30 June 2008.

The terms of his contract of employment are governed by a couple of collective agreements. Under a collective wage agreement for the corporate group of Deutsche Bahn, he was paid 7.56 euro an hour. He received a one off ‘company results’ payment. Thus, in the contested time-period, a payment of 600 euro was made in August 2007, and a further adhoc payment of 150 euro was made in January 2008. From April 2008, his hourly pay was increased to 7.90 euro.

He was also paid 13.29 euro a month – his employer’s ‘capital generating’ contribution towards the employee being able to save some money, say for the purposes of buying a life insurance policy.

However, his contract of employment also fell within the scope of the sectoral collective agreement for cleaning buildings. This collective agreement is important because it had been declared binding erga omnes. Thus, the terms of this agreement are applicable to all employing companies and employed employees across the entire sector. The terms apply irrespective of union membership or whether the bodies representing the companies, or the unions representing their members, formed a part of the sectoral collective bargaining process.

Under the erga omnes collective agreement, the claimant would have been paid a higher hourly rate. He would have received the sum not of 7.56 euro an hour but of 7.87 euro an hour. And from 1 March 2008, his hourly rate of minimum wage should have been not 7.90 euro an hour but 8.15 euro.

Mr Isbir brought a claim against his employer for 734 euro. He added that the employer’s savings contribution, and the two one-off payments relating to company performance, should not be considered to be forming part of the minimum rates of pay.

His employer refused to accept Mr Isbir’s interpretation of the law, and submitted that these payments formed part of hourly rate of pay laid down in the binding erga omnes collective agreement – indeed, the employer claimed he had in fact paid more than was due under the collective agreements.

The Bundesarbeitsgericht noted that its own case law turned on whether there was a ‘functional equivalence’ in the payment. That is to say, was there an obligation which the employer considered to be compensation for something which the employee had done and which had been done as an obligation under the collective agreement? If so, then the employer’s contributions which formed part of the employee’s pay were to be considered as compensation brought under ‘the minimum rates of pay’. And employer contributions did not necessarily need to be calculated on an hourly basis.

The Bundesarbeitsgericht struggled in part with the CJEU’s judgment in Case C-341/02, Commission v Germany. In that case the CJEU had confirmed that bonuses in respect of the 13th and 14th salary months were constituent elements of the minimum wage. From this it could be inferred that allowances and supplements that do not alter the relationship between the worker’s ‘service’ and the consideration he receives, form part of the minimum wage. However, in paragraph 29 of the judgment the CJEU also made plain that fixed amounts which were not calculated on an hourly basis were not to be considered as forming elements of the minimum rate of pay. Paragraph 43 of the judgment was also problematic when it came to classifying the employer’s contribution to the employee’s savings.

Question 1 was concerned with whether the one-off payments formed a component of the minimum rate of pay, and the answer to this depended on whether there could be said to be some form of compensation for the work done.

Question 2 was really concerned with the employer’s contribution towards the employee’s savings. Here, it might be said that there was no functional equivalence. Such a payment was not a directly related compensation for the work performed by the employee. Instead, this sort of payment was intended to encourage the employee to accumulate capital over an extended period of time, and these payments were supported by the state for the purposes of its social policies.

Questions Referred
According to the Curia website, the Bundesarbeitsgericht has asked:

1. Is the expression ‘minimum rates of pay’ in Article 3(1), first subparagraph, point (c) of Directive 96/71/EC to be interpreted as referring to the consideration of the employer for the work done by the worker which should be discharged according to the law, regulation or administrative provision or the universally applicable collective agreement referred to in the opening sentence of Article 3(1) of the directive only and exclusively by the collective minimum wage (‘usual work’), meaning that it is only those employer payments which reward that usual work and which must be available to the worker at the latest on the date when they are payable within the respective wage payment period which can be counted towards the fulfilment of the obligation to pay the minimum rate of pay?

2. Is the expression ‘minimum rates of pay’ in Article 3(1), first subparagraph, point (c) of Directive 96/71/EC to be interpreted as precluding national provisions or practices according to which payments by an employer are not be to regarded as part of the minimum wage and therefore cannot be counted towards fulfilment of the entitlement to the minimum wage, if the employer makes those payments on the basis of a collective agreement-based obligation,
- and the payments, according to the intention of the parties to the collective agreement and of the legislature, have capital-generating objectives for the workers,
and to that end,
- the monthly payments by the employer to the employee are for long-term purposes such as contributions towards savings, the construction or acquisition of a residence or capital life insurance, and
- are subsidised by allowances and tax breaks from the State, and
- the worker is entitled to access those contributions only after several years have elapsed, and
- the level of the contributions in the form of a fixed monthly sum is dependent only on the agreed working time and not on the salary paid (‘capital-generating contributions’)?