Choice of Law in International Employment

The Court of Justice of the European Union (CJEU) has recently issued a judgment addressing which country’s laws apply to an employment between a driver and the transport company, Locatrans.

The Employment

The case originated from court proceedings in France, where the employee filed a lawsuit against his former employer to contest the termination of his employment.

The employee argued that he was covered by mandatory protective rules under French law. The transport company was established in Luxembourg, and the employee’s employment agreement stated that the employment was governed by Luxembourg law. It also stated that the employee carried out transport operations in Germany, the Benelux countries, Italy, Spain, Portugal, and Austria.

In practice, the employee had worked in several countries, but during the last part of the employment, he had worked more than 50% of the time in France. The company had therefore also registered the employee with the French social security system.

The Rome Convention

Under the Rome Convention, the parties are free to choose the law governing their agreement. However, a choice of law cannot deprive an employee of the protection afforded by the mandatory rules of the country whose laws would have applied if no choice of law had been made.

The Rome Convention contains two specific connecting factors used to determine whether the chosen law (in this case, Luxembourg law) must be supplemented by mandatory rules from another country (in this case, France). The starting point is the country where the employee habitually carries out the work (the “place of work”). If it is not possible to determine a habitual place of work, the employee is protected by the mandatory rules of the country where the business that hired the employee is located.

The Rome Convention also contains an exception: the connecting factors do not apply if, from the circumstances as a whole, it is clear that the employment is more closely connected with another country.

The case at the CJEU

The referring French court had asked the CJEU to clarify which factors may be considered when assessing whether the employment as a whole has a closer connection to another country. Specifically, the question was whether the French court could place weight on the fact that the employee had performed most of his work in France during the final part of his employment. Additionally, the question was whether registration with the French social security system could be considered relevant.

The CJEU held that the last habitual place of work and the obligation to be registered with the French social security system were objective elements characterizing the employment — and that these elements could and should be taken into account. With these clarifications, the CJEU referred the case back to the French court.

Littler’s Remarks

The CJEU’s judgment shows that an employee may be protected by mandatory rules in another country, even if the employment contract includes a choice-of-law clause. Employers must therefore be aware that an employee performing work in several countries may be protected by the laws of multiple jurisdictions, depending on the employee’s connection to those countries.

The assessment of the relevant connection must be carried out on a case-by-case basis and must be based on a range of factors that characterize the employment. These factors must be objective in order to ensure the Convention’s requirements of legal certainty and predictability. The judgment shows that the most recent place of work and registration for social security are objective factors that characterize the employment. In an earlier judgment, the CJEU also established that registration with an occupational pension scheme must likewise be considered when assessing the relevant connection.