Introduction

Is collective bargaining, a demonstration of the widely recognised rights to freedom of association and freedom to join a union, exempt from European Economic Area (EEA) competition law and free movement principles? Early case law from the European Court of Justice (ECJ)(1) indicates that collective bargaining falls outside Article 101 of the Treaty on the Functioning of the European Union, but Holship, a recent judgment from the European Free Trade Association (EFTA) Court(2) is a timely reminder that the exception from antitrust scrutiny is limited. Collective action that goes beyond legitimate collective bargaining or is ill-served by the strike action at issue may be illegal (and cause the union to be liable to the employer) when it infringes EEA competition and free movement rules.

Case law

The case law shows that a trade union may infringe EEA antitrust and free movement rules as follows:

  • In Holship picketing a shipping company using employees not employed by the union's administrative office was found illegal where the union action sought to protect only union workers to the detriment of non-union workers regardless of the pay and conditions enjoyed by non-union workers.
  • In Viking Lines(3) boycotting the reflagging of vessels (to move their country of establishment) was found illegal where:
    • the union's anti-reflagging policy applied regardless of the labour conditions in the new host country; and
    • there was no consideration of whether less restrictive means of collective bargaining could have achieved the same labour rights protection without frustrating intra-EEA freedom of establishment.

Decision

The Norwegian dockers' union collective bargaining agreement (the 'framework agreement') required that dockers employed by the union's office be prioritised for port work at the Port of Drammen. Holship used its own employees for dock work on its vessels. The union picketed Holship employees to force Holship to abide by the framework agreement.

Competition law

The EFTA Court, consistent with previous EU case law, noted that competition law is not applicable to collective bargaining agreements where:

  • the agreement has been entered into following collective bargaining between employers and employees; and
  • the agreement pursues the objective of improving conditions of work and employment.

However, it held this exception to be narrowly formulated,(4) and in the present case the second condition was not met. The priority clause sought to guarantee dockers employed by the union's office permanent employment and a certain wage. The boycott sought to protect this system in order to preserve the market position of the office. The court considered that because the union engaged in the management of an undertaking (ie, the office), there was a combination of a business objective with the core tasks of a trade union. In addition, the framework agreement protected only union workers to the detriment of non-union workers, and disregarded the protection applicable to non-union workers. In particular, as a result of the boycott non-union workers were barred from dock work and risked losing their employment if their employer were forced to abide by the framework agreement.

Therefore, the framework agreement and boycott was subject to competition law.

The court also suggested that the boycott could constitute abuse of dominance. The relevant market might be limited to the port of Drammen (which would suggest dominance by the unions' office) or part of a wider market including other ports (in which case the relative volume of traffic via Drammen would need to be considered).

The abuse of any such dominant position might arise from the union's administrative office:

  • obliging port users to obtain all or most of their requirements for loading and unloading services from it; and
  • charging disproportionate prices.

On the present facts, possible abuse of dominance was not considered further, as the self-employed status of the dockers meant that there was clearly an agreement between independent undertakings, to which the prohibition on anti-competitive agreements applied. Often, however, unionised labour will take the form of employees and there will be no "agreement between undertakings" on which to focus prohibition.

This case demonstrates that, regardless of whether analysed as an agreement between self-employed 'undertakings' or as the unilateral act of a dominant union on behalf of its employed members, competition concerns may arise.

Free movement

The court then considered EU free movement principles, following the EU Viking Lines case law. Free movement rules apply not only to measures directly attributable to the state, but also to rules of a regulatory nature devised by private bodies such as professional associations or, as in this case, a union's collective action. To conclude otherwise would lead to discrimination between EEA states depending on whether labour was regulated by state measures or private collective union rules.

The boycott and framework agreement were held to be a restriction on freedom of establishment, discouraging or even preventing the establishment of companies from other EEA countries. Holship would be obliged to pay the fees for dock work carried out by union dockers, rather than using its own employees for its vessels.

Restriction on free movement can be justified by a public policy goal where the restriction is proportionate and necessary to achieve that goal. The protection of workers is a legitimate public policy goal,(5) but the framework agreement and boycott were not limited to that objective and the court considered that they went beyond what was necessary or proportionate. The framework agreement protected only union workers to the detriment of non-union workers, regardless of the level of protection granted to non-union workers. The court added that the boycott could affect Holship's fundamental rights, such as the negative right to freedom of association (ie, the right not to be compelled to join an association).

Comment

This decisions shows that the exception of collective bargaining from the antitrust rules is limited. Although collective bargaining agreements can lawfully seek to improve workers' conditions and pay, they cannot seek to prevent any competition from non-union workers.

The case serves as a reminder that union activity is vulnerable not only to competition law, but also to free movement principles. It builds on the prior ECJ case law in Viking Lines, where the ECJ found that:

  • collective actions restricted employers' right to freedom of establishment; and
  • could be justified only if the union action was justified by the objective of protecting workers and did not go beyond what was necessary to achieve that objective.

In particular, the case concerned the international seamen's trade union which had required its members to boycott any ship which re-established itself ('reflagging') in another state. The ECJ found that this boycott was contrary to the EU freedom of establishment and could not be justified by reference to the protection of workers since the boycott applied regardless of whether:

  • the local union (in that case, Finland) could have sufficiently protected members' interests through less restrictive means other than organising an international boycott to prevent employees in other countries accepting employment with that ship; and
  • the new country of establishment had similar or higher social protection laws.

Free movement and competition principles are increasingly used to challenge union conduct. In 2013 IAG (the parent company of British Airways and Iberia Airlines) sued a Spanish trade union for its conduct in striking to prevent IAG establishing a low cost carrier, alleging that this constituted an unjustified breach of IAG's freedom of establishment.(6)

Dock pool schemes similar to those at issue in Holship are used in many EEA countries. In 2013 the European Commission brought an action against Spain for having a similar dock pool scheme. In 2014 the ECJ found that the obligation on cargo-handling companies in Spanish ports to register with a 'pool company', hold shares in that company and prioritise those workers constituted an unlawful restriction on freedom of establishment.(7) The commission recently referred Spain to the ECJ for failing to comply with this judgment.(8)

For further information on this topic please contact Bill Batchelor or Tarik Draidj at Baker & McKenzie by telephone (+32 2 639 36 11) or email (bill.batchelor@bakermckenzie.com or tarik.draidj@bakermckenzie.com). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.

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