8 Colum. J. Eur. L. 389 (2002)

Catherine Barnard. Senior Lecturer in law, University of Cambridge, Fellow of Trinity College.

Simon Deakin. (B.A. 1983, Ph.D. 1990, Cambridge), Robert Monks Professor of Corporate Governance and Fellow of Peterhouse, University of Cambridge.

There has been a tension between the goal of the harmonization of social policy and the free-market aims of European integration since the very early days of the formation of the European Community in the 1950s. The Treaty of Rome left virtually all matters relating to labor legislation and welfare state expenditure levels within the competence of the individual Member States. The decision to do this was based on a mixture of beliefs: skepticism toward market-failure type arguments for harmonization; optimism concerning the capacity of the common market to generate convergence on wages and incomes of its own accord; and confidence in the strength of political pressures within member states for the maintenance of effective labor standards and welfare state systems. As we shall see, only a few social policy provisions with limited effects were included, emphasizing the need to improve working conditions and cooperation between states. Distinct sections of the Treaty provided the legal basis for adopting measures for the establishment of the common market. Specific provisions on equal pay and paid holiday schemes, designed to protect French industry against unfair competition (or “social dumping”), were also included.

At the same time, the Member States accepted the need to cede sovereignty in the economic sphere. As a result, the Treaty of Rome gave the organs of the Community sweeping powers to adopt the measures necessary to promote economic integration. Free movement of goods, capital and workers, freedom of establishment, and freedom to supply services were guaranteed by core Treaty provisions. These were backed up by the power to harmonize national legislation where necessary for the functioning of the common market and internal markets. Finally, an interventionist competition policy was put in place to root out restrictive practices and deal with abuses of dominant position in markets.

The potential conflict between transnational economic liberalisation and national autonomy over social policy was either not noticed, or was simply left unresolved. Subsequent Treaty amendments, which saw the adoption, at the time of the Single European Act in 1986, of the principle of respect for the working environment and the further expansion of the Community’s competence in the social policy field achieved at the Maastricht and Amsterdam summits, were also silent on this fundamental question.

Over the past five years, these issues have come to a head. On the one hand, the European Court of Justice, invigorated by what many see as its historical role in building the single market, has contemplated an increasingly ambitious program of “negative harmonization” in the field of social policy, as elsewhere.8 This has seen the Court willing to address, if not yet fully to resolve, the relationship between social policy and market construction, within the context of the free movement and competition policy rules of the Union. On the other hand, the harmonizing role of Directives has been clarified as a result of a growing body of case law and doctrine devoted to rationalizing their role within a nascent federal order. Contrary to the preemptive effect of federal labor legislation in the US system, social policy Directives in the EU possess a flexibility of application that is captured by the idea of “reflexive harmonization.” This allows Member States considerable leeway in the social policy sphere, while aiming to prevent what are perceived to be some of the more deleterious effects of a “race to the bottom.”

In this paper, we wish to examine the distinctive nature of European approaches to the harmonization of employment and social law. In section 2, we examine the reach of the principles of free movement and competition law in social policy, the area of “negative harmonization.” In section 3, the focus is on the “positive harmonization” of the social policy Directives, looking at the different approaches adopted by the Community to harmonization in the social sphere. In particular, we examine the renvoi between the diverse national systems and the creation of Community legislation.