On November 11, 2025, the Court of Justice of the European Union (“ECJ”) ruled on Case C-19/23, partially upholding Denmark's appeal against Directive (EU) 2022/2041 on adequate minimum wages in the EU. The ruling is an important benchmark for the limits of the Union's competence in the field of labour law and in particular – labour remuneration.
The directive aims to establish a European framework for promoting collective bargaining and creating procedures for Member States to set and update statutory minimum wages. In addition, the act provides for criteria to be taken into account when assessing their “adequacy”.
Denmark challenges the directive, arguing that it violates Article 153 (5) TFEU, according to which matters of “remuneration” and the right of association are excluded from the competence of EU legislative activity. The complaint argues that the directive goes beyond what is permissible because, instead of establishing procedural mechanisms, it actually influences the content and level of the minimum wage.
At the heart of the dispute are parts of Article 5 of the directive, which introduce a mandatory list of criteria that Member States must use when setting and updating minimum wages. The criteria included at least the following elements: (a) the purchasing power of statutory minimum wages, taking into account the cost of living; b) the general level of wages and their distribution; c) the rate of wage growth; and d) long-term levels and trends in national productivity. The provision in question also limits the effect of automatic indexation mechanisms by prohibiting them from leading to a reduction in the minimum wage.
At the national level in Bulgaria in 2023, the Labor Code (“LC”) established a mechanism for automatic indexation of the minimum wage, with Article 244 of the LC laying down that “the minimum wage for the country for the following calendar year shall be determined by September 1 of the current year at 50 percent of the average gross wage for a period of 12 months, which includes the last two quarters of the previous year and the first two quarters of the current year”. According to paragraph 3 of the same article, the minimum wage determined in this manner “may not be lower than that determined for the previous year”, which in practice ensures compliance with the directive’s requirement that indexation must not lead to a reduction of the remuneration.
With its decision, however, the ECJ effectively repealed the provisions by virtue of which the directive:
(i) imposes on Member States with statutory minimum wages the above criteria to be observed in the procedures for setting and updating minimum wages, and;
(ii) prohibits reduction in statutory minimum wages where national legislation provides for an automatic indexation mechanism.
Beyond these parts of Article 5, the directive remained in force, with the ECJ emphasizing the procedural nature of the remaining provisions - including those on collective bargaining, monitoring, and access to information.
The decision has practical implications for countries with mechanisms for automatically determining the minimum wage, such as Bulgaria. The lifting of the ban on reducing the minimum wage in the event of automatic indexation removes one of the aspects of the directive that most directly restricts national legislators.
The ECJ emphasizes that Member States retain their exclusive competence to det
ermine the level of the minimum wage and whether to apply a statutory minimum wage at all. At the same time, it confirms the validity of the other mechanisms in the directive that improve the procedural framework for minimum remuneration without affecting its level.
