REGARDING: POSSIBLE INFRINGEMENT OF EUROPEAN UNION LAW

TO

MR. NICOLAS SCHMIT

EUROPEAN COMMISSIONER

FOR JOBS AND SOCIAL RIGHTS 

REGARDING: Possible infringement of European Union Law

DEAR COMMISSIONER SCHMIT,

In the light of the Commission Communication on strengthening social dialogue in the European Union (COM 25.01.2023) 40 final) and the Proposal for a Council Recommendation on strengthening social dialogue in the European Union (COM(2023) 38 final), announced on 25 January 2023 in our capacity of employers' organisations, recognised as a representative at a national level in the Republic of Bulgaria, the undersigned Bulgarian Industrial Association – union of the Bulgarian business (BIA), Bulgarian Industrial Capital Association (BICA), Bulgarian Chamber of commerce and industry (BCCI) and Confederation of Employers and Industrialists in Bulgaria (KRIB) express herewith serious concerns about the latest amendments to the national labour legislation, which in our view contradicts main elements of Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union (the Directive).

On 1 February 2023, the National Assembly of the Republic of Bulgaria adopted a Law on Amendment to the Labour Code (LC), which provides for the Council of Ministers to determine the minimum wage for the country annually by 1 September of the current year "in the amount of 50 per cent 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". The minimum wage determined in this way cannot be lower than the minimum wage established for the previous year (Art. 244 of the LC).

The law was promulgated in the State Gazette No. 14 of 10 February 2023.

The position of the employers' organisations on the implementation of the Directive, expressed in the "Analysis of the current state of wages in Bulgaria - conclusions and recommendations" of the Economic and Social Council (ESC)[1]; opinions shared in the National Council for Tripartite Cooperation and written positions submitted to the National Assembly were completely ignored by the National Assembly. Based on a joint request of the social partners, the Ministry of Labour and Social Policy has set up a task force to discuss the implementation of the Directive needed to be taken into account.

The adopted law is not aligned with the objectives and spirit of the Directive and the International standards in the field, undermines and renders the social dialogue meaningless in the area of minimum wage negotiation and erodes the role of the social partners on a key issue for them.

In our opinion, the new text of Art. 244 LC contradicts the requirements of the Directive since:

(1)    the procedure established in the LC for determining and updating the statutory minimum wage for the country is not based on national criteria, which take into account the elements specified in recital (28) Art. 5, para. 2 of the Directive; The impact on SMEs has not been taken into account, in line with recital 39, which requires Member States to avoid imposing unnecessary financial restrictions "in particular if they hold back the creation and development of SMEs". To achieve this, Member States are encouraged to assess the impact of their transposition measures on SMEs to ensure that they are not disproportionately affected. 

In the motives of the adopted law, it is explicitly stated that it is proposed to "link the amount of the minimum wage to the reference values under the Directive on adequate minimum wages of the European Union". According to the movers of the legislative changes, "for the purpose of assessing the adequacy of minimum wages, the Directive proposes that the Member States use reference values of 50 or 60 % of the average gross wage". It is also stated that a two-year deadline has been provided for transposing the Directive into national legislation. However, given the rising prices and inflation, faster implementation of the Directive is necessary. According to the initiators, there is no reason to wait for the transposition period, especially in its part on the minimum wage.

(2)    the adopted mechanism completely renders the role of the social partners meaningless in the sense of recitals (6), (26), Art. 7 of the Directive, namely:

• selection and application of the criteria for the determination of the level of the statutory minimum wage;
• selection and application of the indicative reference values referred to in Article 5(4) of the Directive for the assessment of the adequacy of statutory minimum wages;
• the updates of statutory minimum wages; 

The adopted text determines the outcome of applying potential socio-economic criteria, making their discussion meaningless. The law used as a single criterion only one of the many sample reference values the Directive recommends. And it does it inaccurately, as it compares minimum wage to gross average wage, not net to net or gross to gross wage. Comparing minimum wage with gross average wage is particularly inadequate for Bulgaria, as there are remnants of the planned economy legislation, i.e. administratively introduced mandatory additional payments for the length of service, which are determined by internal wage policies in other countries' enterprises, following their capabilities.

Another part of the adopted law's reasoning is an alarming signal to use, namely that the Directive requires Member States to draw up national action plans for labour force coverage with collective bargaining if it is below 80%. According to the members of the Parliament that initiated the legislative change, "in Bulgaria, collective bargaining is significantly below 80%, which means that ways (including legal ones) to increase its scope should be sought". Since the Parliament adopted the discussed law on the last working day of the 48th National Assembly, we have serious concerns that with the election of the new National Assembly, legislative proposals may be introduced that would once again eliminate basic principles of the social dialogue.

DEAR COMMISSIONER SCHMIT,

The adopted legislative change violates the principle of direct applicability of EU law, which determines the automatic applicability of the norms of EU law after they enter into force into effective law to all subjects of this law. The issue of applying the principle of direct applicability of directives was clarified in the case C-129/96 Inter-Environment Wallonie.[2], as subsequently confirmed in several other rulings of the Court[3]. The court concludes that while the deadline for the transposition of a directive is running, member states must refrain from adopting provisions that could jeopardise the achievement of one or more of the objectives of a directive and significantly compromise the achievement of the result prescribed by the Directive.

We appeal to you with an urgent request that the European Commission's services initiate talks with the Bulgarian state's representatives, during which the objectives and spirit of Directive (EU) 2022/2041 on adequate minimum wages in the European Union are discussed.

The undersigned employers' organisations will file a complaint regarding a member state violating EU law. We hope the Commission will take official action to bring Bulgarian legislation in line with EU law.

Enclosures:

1. Draft bill on Amendment and Supplement to the Labor Code, No. 48-254-01-27/21.10.2022 (in Bulgarian)

2. Excerpt from State Gazette No. 14 (in Bulgarian and unofficial translation to English) 

Dobri Mitrev

President of Bulgarian Industrial Association (BIA)

Vasil Velev

President of Bulgarian Industrial Capital Association (BICA) 

Tsvetan Simeonov

President of Bulgarian Chamber of Commerce and Industry (BCCI)

Kiril Domuschiev

President of Confederation of Employers and Industrialists in Bulgaria (KRIB)

***

[1] The ESC developed the Analysis at the request of the Council of Ministers. It contained a separate section presenting the position of the social partners on the implementation of the Directive in Bulgaria. The document is available here: https://esc.bg/wp-content/uploads/2022/11/ESC_4_027_2022.pdf

[2] C-129/96 Inter-Environnement Wallonie ASBL vs Région Wallonne

[3] Ruling on case C-491/01; Ruling on case C-212/04; Ruling on case C-422/05