Clarkslegal LLP - Solicitors in Reading and London

Legal Updates

Public procurement: can bidders who refuse to pay minimum wage be excluded?

10 December 2015 #Public Procurement #Dispute Resolution #Outsourcing & Supply Chain


Clarkslegal, specialist Public Procurement lawyers in London, Reading and throughout the Thames Valley.

In the recent case of RegioPost GmbH v Stadt Landau in der Pfalz, the European Court of Justice has decided that excluding a bidder from a tender who had failed to complete a declaration confirming that it would pay minimum wage to its workers did not constitute a breach of European public procurement law. 

The case concerned a tender for a framework agreement for postal services run by the City of Landau, Germany.  The tender documents stated that the successful tenderer must comply with provisions of regional legislation which imposed a minimum wage for employees engaged in public contracts of at least €8.70 per hour (at the time, there was no national minimum wage in Germany, although one has since been introduced).  Tenderers were required to submit a declaration with their bids, undertaking on behalf of themselves and any subcontractors, to comply with the legislation and pay their employees the minimum wage.

RegioPost submitted a bid, but did not complete the declaration.  Although the deadline for bids had passed, Landau contacted RegioPost and gave it a further opportunity to provide the declaration, advising that its bid would be excluded if it did not.  RegioPost did not comply and accordingly its bid was excluded.  RegioPost then issued proceedings challenging Landau’s decision, asserting that the requirement that bidders must submit a declaration interfered with the freedom of tenderers to provide services within the EU.

The German court referred the issue to the European Court of Justice, asking it to decide:

  • Whether it is permissible for a public authority to impose a requirement in a tender that bidders must undertake to pay employees minimum wage in accordance with national or local legislation;
  • Whether it is permissible to exclude from the procurement process any bidder who refuses to give such an undertaking.

The main argument put forward by RegioPost was that imposing an obligation on bidders to pay local minimum wage is unfair to companies situated in other member states where wage costs are lower, as it means those companies are deprived of their competitive advantage.  If such requirements were permissible, it was said that this would discourage companies in other member states from bidding.  The argument was something of an abstract one, as in fact RegioPost and all of the other bidders involved in the particular tender were German companies.

The ECJ decided that neither imposing a minimum wage requirement in the tender nor excluding any bidder who failed to comply was a breach of European law.  In answer to the first question, the court said that the relevant European procurement directives specifically permit public authorities to impose conditions governing the performance of a contract if they concern social, environmental or health and safety considerations.  The purpose of the German regional minimum wage legislation was to protect workers, and a minimum wage requirement was found to be justified by this objective. 

In answer to the second question, the ECJ said that excluding RegioPost was an appropriate and proportionate response by Landau, especially in light of the fact that they had been given an additional opportunity to comply with the requirement to provide a declaration after the deadline for the tenders had passed.

Although the legislation the ECJ was considering in this case has since been superseded, the case provides useful guidance on both the conditions public authorities can impose when running tenders and when it is appropriate to exclude bidders for non-compliance.

For further information about this or any other Public Procurement matter please contact Clarkslegal's public procurement team by email at contact@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

Read more articles

Emma Butcher

Emma Butcher
Senior Solicitor

E: ebutcher@clarkslegal.com
T: 0118 953 3932
M: 07799 212 511

Contact

Public Procurement team
+44 (0)118 958 5321