On 11 November 2025 the Grand Chamber of the Court of Justice of the European Union (CJEU or the Court) rendered its decision (the Decision) on an action for annulment brought by Denmark regarding the Directive (EU) 2022/2041 on adequate minimum wages (the Directive). The latter aims to establish a framework for setting an adequate minimum wage in every Member State. It came into force on 14 November 2022, the transposition deadline being 15 November 2024.

The purpose and main aspects of the Directive

The Directive requires Member States that do not have an adequate minimum wage set in any way (neither statutory, nor by collective bargaining), to provide for a statutory minimum wage. More specifically, the Directive provided in Article 5(2) for a list of four mandatory criteria that Member States were required to take into account when setting and updating their statutory minimum wages; those should include (i) the purchasing power of statutory minimum wages, taking into account the cost of living, (ii) the general level of wages and their distribution, (iii) the growth rate of wages, and (iv) the long-term national productivity levels and developments.

At the same time, Article 5(3) stipulates that Member States may additionally use an automatic mechanism for indexation adjustments of statutory minimum wages, provided that the application of that (indexation adjustment) mechanism does not lead to a decrease of the statutory minimum wage.

The Directive does not oblige Member States which rely on collective bargaining to provide for a statutory minimum wage. Instead, it requires them only to strengthen their collective bargaining systems. Hence, Member States with less than 80% collective bargaining coverage should create action plans that boost collective bargaining.

Denmark’s claim for annulment

Denmark had challenged the validity of the Directive (altogether, or at least certain parts of it) mainly based on the grounds that the EU had exceeded its authority by regulating matters of “pay” and “the rights of association”, which are explicitly excluded from the EU’s  competences by Article 153(5) of the Treaty on the Functioning of the European Union (TFEU).

CJEU decision of 11 November 2025

The CJEU upheld the Directive's validity in general, arguing that its primary purpose was to improve working conditions and to promote collective bargaining, not to determine the level of pay.

The CJEU clarified the scope of the exclusion of the EU’s legislative powers for "pay" under Art. 153(5) TFEU by establishing that this exclusion covers measures amounting to "direct interference by EU law in the determination of pay," but not any measure that simply has a link to pay.  Regarding matters concerning the "right of association”, which are also excluded from the EU’s legislative powers under Art. 153(5) TFEU, the CJEU interpreted this exclusion as relating to the freedom to form, join, or dissolve organizations like trade unions, but distinguished it from the right to collective bargaining. 

However, the CJEU did identify specific provisions within Article 5 of the Directive that crossed the line to direct interference with the Member States’ prerogative to regulate the determination of pay. It ruled that Article 5(2) of the Directive, which mandates that Member States' procedures for setting minimum wages must include at least four specific elements, amounted to a harmonization of the "constituent elements" of those wages and therefore directly affected wage levels. It argued that by requiring Member States with statutory minimum wages to take into account mandatory, specific criteria (such as, purchasing power, general wage level, and wage growth) when setting those wages, the Directive effectively amounted to harmonising the constituent elements of pay. Similarly, the Court found that the clause in Article 5(3) of the Directive preventing any automatic indexation mechanism from leading to a "decrease of the statutory minimum wage" also constituted direct interference with pay determination.

The CJEU therefore issued a partial annulment of the Directive: It annulled (i) Article 5(2) of the Directive, which listed mandatory criteria for setting statutory minimum wages, and in consequence also (ii) the reference to that paragraph in the fifth sentence of Art. 5(1) of the Directive, and (iii) the part of Article 5(3) stating "provided that the application of that mechanism does not lead to a decrease of the statutory minimum wage." The remainder of the action brought by Denmark was dismissed, leaving the rest of the Directive in force.

Consequences of the Decision

Employers should follow the ongoing implementation across the EU, as well as the local reactions to the Decision. The Directive continues to oblige the Member States to work towards high coverage rates for collective agreements.

It is also worth noting that the Decision is likely to add momentum to the already controversial debate on the German Minimum Wage Act. In its most recent adjustment proposal, the German Minimum Wage Commission relied on its new rules of procedure („Geschäftsordnung (GO) der Mindestlohnkommission vom 21. Januar 2025“), which provide that, when setting the minimum wage under the German Minimum Wage Act, the Minimum Wage Commission considers as part of a holistic assessment, (i) wage developments in collective bargaining agreements, (ii) the reference value of 60% of the gross median wage of full-time employees in accordance with Article 5(4) of the Directive, and (iii) the criteria set out in Article 5(2) of the Directive. By annulling Article 5(2) of the Directive, the CJEU has struck down precisely those adequacy criteria which the rules of procedure of the German Minimum Wage Commission incorporate for determining the German statutory minimum wage. This is likely to intensify legal and political debate on the future direction and robustness of the German minimum wage framework.

There are already doubts as to whether the German Minimum Wage Commission was permitted to include the criteria of the Directive in its new rules of procedure and to base its decision on the reference value of 60% of the gross median wage. This is because the Minimum Wage Act neither provides for the criteria under Art. 5(2) of the Directive nor a 60% gross median wage reference value. Rather, the German Minimum Wage Act (in Section 9 (2)) stipulates that the Minimum Wage Commission shall, within the framework of an overall assessment, examine what level of minimum wage is appropriate to contribute to adequate minimum protection for employees, enable fair and functioning competitive conditions and not jeopardise employment, and that the Minimum Wage Commission should base its determination of the minimum wage on past developments in collective agreements. However, the decision of the Minimum Wage Commission has no external effect. The decisive factor is rather whether the Federal Government's regulation, which makes the Minimum Wage Commission's decision binding, is effective. Although there may be doubts in this regard, employers are well advised to continue to observe the statutory minimum wage in Germany as failure to comply with the minimum wage set may result in punishment as an administrative offence and a fine. In this respect, it is advisable to wait and see what action the German legislator takes.

No impact on the Pay Transparency Directive

It is worth noting that the Decision is not expected to have a spillover effect on the Pay Transparency Directive (EU) 2023/970 (the PTD), which also regulates elements of pay, albeit on a different Treaty basis: Art. 157(3) TFEU provides for the right of the European Parliament and of the European Council to adopt measures to ensure the application, inter alia, of the principle of equal pay for equal work or work of equal value. The limitations under Art. 153(5) TFEU do not directly apply in this context. Article 4(4) of the PTD also provides for certain mandatory criteria with an (indirect) impact on pay decisions by stipulating that pay structures shall enable the assessment of whether workers are in a comparable situation in regard to the value of their work on the basis of objective, gender-neutral criteria which shall include skills, effort, responsibility and working conditions. However, these criteria set minimum standards for determining whether jobs are of equal value and do not directly interfere with pay setting. Also, the PTD does not interfere with the right of association as further clarified by the CJEU in the above-mentioned Decision. Therefore, the Decision discussed herein has no impact on the PTD and the Member States’ obligations to transpose the PTD. Nevertheless, there remains a legal debate in Germany concerning the relationship between collective bargaining autonomy and EU law requirements under the PTD (as becomes apparent also in the German expert commission report addressed to the German legislator with proposals on the transposition of the PTD in Germany – cf. our briefing on the expert commission report.)