The State Administration approves municipalities' use of social clauses

A new statement from the State Administration clarifies the legality of labour clauses within municipal law. 

Danish municipalities often wish to use their purchases of goods, services and construction works to promote a number of social considerations, e.g. by inserting clauses in the agreements that the supplier must meet requirements concerning e.g. the number of apprenticeships, that the goods are manufactured in a certain way or requirements in relation to pay and employment terms. Such clauses are often called social clauses.

In particular, the kind of clause containing requirements for the pay and employment terms offered by the supplier to its employees has attracted attention. Such clauses, which are often called labour clauses or ILO clauses, have given rise to considerations in relation to the unwritten public policies on the local government mandate and also in relation to EU regulation.

On 22 October 2013, the State Administration issued an informative statement clarifying the labour clauses in relation to the local government mandate:

On 6 June 2013, the Copenhagen City Council decided to insert labour clauses in its procurement contracts. These clauses obligate the municipal supplier to ensure that the pay and employment terms are not less favourable than those applying where the task is performed. The reason for Council's decision was that the State Administration  had provided this opportunity in a statement.

In its statement, the State Administration refers to the statement of the Ministry of Economic and Business Affairs of 3 May 2013 concerning fair trade clauses in procurement contracts etc., and the State Administration states that the Ministry re-defines and specifies the limits of the local government mandate.

In the actual statement, the State Administration relies on the legal view of the Ministry's statement and, consequently, such labour clauses cannot be considered illegal.

It is important to note that the statement of the State Administration only concerns the municipal angle.

Further, social clauses must be drafted so that they comply with EU law. This implies e.g. that the procurement rules must be observed, and that the use of social clauses must not directly or indirectly result in discrimination against suppliers from other EU member states.

If you have any questions to the above, please contact attorney Rikke Søgaard Berth or attorney Andreas Christensen.

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Rikke Søgaard Berth

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Andreas Christensen

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