Foreign companies with temporary activities in Sweden have become more and more common. Since collective agreements need to be signed to be applicable, Swedish trade unions face a tough task in negotiating with many employers from other countries, not always willing to conclude an agreement with Swedish levels of pay and other benefits. And as mentioned above, if there is no collective agreement laying down the level of wages to be paid, there is no other regulation concerning fair pay to fall on, not even a legislative minimum wage.
The importance of the Laval case
A Latvian company, Laval, was commissioned with the task of refurbishing a school in the municipality of Vaxholm in Sweden. The Latvian workers were employed by Laval, but the company refused to sign a collective agreement with the The Swedish Building Workers' Union, Byggnads. In order to be valid, the subcontracting agreement signed earlier stipulated that a Swedish collective agreement be signed with a Swedish union. The negotiations broke down during autumn 2004 and the Swedish union Byggnads decided on a blockade against Laval in order to accomplish the signing of a collective agreement on wages and other conditions of work. Laval then chose to bring action in the Labour Court regarding the lawfulness of the industrial action.
Laval maintained that the blockade which the Swedish Building Workers' Union, Byggnads, initiated with the backing of the Electricians' Union, Elektrikerna, was unlawful according to EU law. Laval, sponsored by the the Confederation of Swedish Enterprise, was of the opinion that the right to strike in Sweden was an obstacle that made it more difficult for the company to implement the right of free movement. Laval considered that it was sufficient to apply the wage conditions of the Latvian collective agreement, signed after Byggnad's demand for a Swedish agreement.
The Swedish Labour Court submitted questions to the European Court of Justice, ECJ. The first question concerned the Swedish labour market model according to which the union and the employer share responsibility for the labour market. The question was whether this is compatible with EU legislation concerning foreign companies operating in another EU country on a temporary basis.
The ECJ confirmed that the Swedish labour market model is not an obstacle to the free movement of labour. The ECJ also stated that the conditions required of foreign companies must be so clear that the salary costs for posted workers can be calculated in the home country. Thereby, the decision also implies a limitation of the free right to negotiate. As regards the possibility to supersede the foreign agreements
and replace them with Swedish agreements for work carried out in Sweden, the ECJ considered that Swedish labour legislation discriminates against foreign companies.