The directive, adopted in October 2022, pursues two main objectives. First, it seeks to increase the coverage rate of collective bargaining in those Member States where coverage is below 80%. To that end, it requires these Member States to create enabling conditions for collective bargaining and, where necessary, adopt action plans to promote it.
Second, in Member States where statutory minimum wages exist (that is, in all Member States except Austria, Denmark, Italy, Finland and Sweden, where minimum wages are set through collective agreements), the directive establishes that these statutory minimum wages must be set and updated on the basis of clearly defined criteria. The directive then lists some minimum criteria which must be included, such as the cost of living in the country concerned. The directive therefore does not aim to harmonise statutory minimum wage levels across the EU, but merely to create a framework ensuring that they are adequate in each Member State.
Denmark — supported by Sweden — brought an action before the Court of Justice seeking annulment of the directive. It argued, among other things, that the directive infringes the division of competences between the Union and the Member States set by the Treaties since article 153(5) TFEU expressly excludes “pay” and “the right of association” from the EU’s competences in the field of social policy.
In its judgment of 11 November 2025, the Court only partially agreed with Denmark. It held that the exclusion of EU competence in those two areas does not automatically extend to every issue that is in some way connected with pay or the right of association, but only to cases of direct interference by EU law in the determination of pay or in the exercise of the right of association.
The Court nevertheless recognised that establishing a list of minimum criteria that Member States must take into account when setting statutory minimum wages constitutes such direct interference, and therefore annulled that provision of the directive.
It also annulled the clause requiring Member States that use automatic indexation mechanisms for statutory minimum wages (such as Belgium, France, Luxembourg, the Netherlands, and Malta) to ensure that those mechanisms cannot lead to a reduction in the minimum wage. This “non-regression” clause was likewise considered to be an infringement of the exclusion relating to “pay” provided for in Article 153(5) TFEU.
What are the effects of the Court’s ruling?
In recent years — and particularly in 2025 — many Member States have adjusted their statutory minimum wages using benchmarks promoted by the directive, which recommend setting them at around 60 % of the gross median or 50 % of the gross average wage. This approach has helped make wage floors fairer in relation to overall earnings, fulfilling the directive’s first aim of relative adequacy. Yet the second dimension — ensuring that minimum wages guarantee a decent standard of living — remains unevenly addressed across the Union.
The Court’s annulment of the provision requiring governments to consider “the purchasing power of statutory minimum wages, taking into account the cost of living” is unlikely to strengthen this second dimension. Without that binding criterion, Member States have less incentive to align minimum wages with real living costs, and the connection between nominal wage growth and actual living standards may weaken.
In practice, however, most Member States already apply these principles in their national wage-setting frameworks, incorporating cost-of-living and wage-distribution factors into domestic legislation. It is therefore improbable that they will amend their laws merely because the obligation has been removed at EU level.
Finally, the annulment of the non-regression clause on automatic indexation will have limited effect. Only a few countries — notably Belgium, France, Luxembourg, the Netherlands, and Malta — use automatic indexation mechanisms, and in those systems downward adjustments have never occurred. The ruling therefore leaves existing national practices essentially unchanged.
In conclusion, although the Court struck down two specific provisions, the Directive on Adequate Minimum Wages remains largely intact. The judgment clarifies the boundary between EU competence and Member States’ autonomy in wage-setting: the Union may set procedural standards to ensure transparency and fairness in wage-setting, but it cannot determine pay levels. For Member States, this ruling confirms both their discretion in determining wages and their obligation to maintain frameworks that promote adequacy and collective bargaining as part of the EU’s broader objective of upward social convergence. Dennis Radtke, the Parliament’s rapporteur on this dossier, called the ECJ ruling “an important clarification – and, above all, good news for collective bargaining coverage in Europe”.