The European Court of Justice rules on applicable law in cross-border employment relationships
Background
The case before the ECJ concerned an employee employed by a Swiss IT company. The employment contract was expressly governed by Swiss law, but the employee lived and worked exclusively in France.
When the employee was dismissed, the employer followed Swiss procedural rules, which, unlike French law, did not require a pre-dismissal meeting or a statement of reasons in the dismissal letter. The employee argued that the mandatory and more protective French dismissal rules should apply, as France was the employee's habitual place of work.
The ECJ's ruling
The ECJ held that, under Article 6(2) of the Rome Convention, the national court must apply the law chosen by the parties and disregard the more protective mandatory rules of the country where the employee habitually works, provided that the overall circumstances demonstrate that the employment relationship has a closer connection with the country whose law is chosen.
This assessment must be based on all objective factors characterising the employment relationship. Relevant factors include the country in which the employee pays tax, the applicable social security and pension arrangements, the terms governing the employee's remuneration and other conditions of employment.
These factors must be weighed according to their significance rather than merely counted. In the assessment, weight must also be given to whether the relevant factors are mutually agreed upon by the parties rather than imposed unilaterally by the employer.
Our remarks
The judgement illustrates that the country in which employees habitually perform their work is not always decisive for the choice of law in cross-border employment relationships. In cases where the employment relationship as a whole has a closer connection to another country, the law in that country can apply. This applies even if the law applicable in the country where the employee habitually performs work provides better protection.
The judgement in the Hortis-case highlights that employers with cross-border or remote working employees cannot simply rely on a choice-of-law clause if an assessment of all the circumstances shows that the employment contract is more closely connected with another country.