The Hague Netherlands

Place of work determines applicable law

Which national law is applicable when it comes to international employment contracts? Is this the country of the employer, employee, or the country where the organisation is located?

The Rome Convention determines the law applicable to contractual obligations entered into between 1 September 1991 and 17 December 2009. Both this convention, as well as its modernized successor, the Rome I regulation, contain special rules for individual employment and employment contracts.

How is the country of law decided upon?

In first instance, as is laid out in the Rome Convention, the applicable law concerning employment contracts is the law chosen by the parties. However, the employee cannot be deprived of protection in the absence of a choice of law. In the case the parties did not make a choice of law, there are several elements which can determine the applicable law. The Rome Convention incorporates materially the same rule to sub paragraphs a) and b) but it does not prescribe an order between the two.

The contract shall be governed by the law of the country:

a) in which, or from which, the employee habitually carries out his/her work.
b) where the place of business through which the employee was engaged is situated.
c) when it appears from the circumstances that the contract is more closely connected to a country other than that indicated in paragraphs a or b, the law of that other country shall apply (rule of exception).

Modernization by the European Court of Justice
In 2013, in two cases concerning the transport and maritime sector, the court ruled that sub-paragraph b) only becomes relevant when it is not possible to determine the applicable law using the criterion of the place “where the employee habitually carries out his work”. This criterion must be interpreted broadly, which is especially relevant in relation to the transport and the maritime sector, as employees often work in many different countries in these sectors.

Indicators include the place where from the employee embarks the means of transport and whereto he returns afterwards, the place where he takes instructions, where he organizes his work and/or where tools are stored.

Only if these indicators do not allow the determination of the applicable law, does b) apply: the law of the place of business of the employer. Only procedural facts are to be taken into account when determining the place of business, not factors related to the work of the employee. Furthermore, the place of business must have a permanent character.

Killing two birds with one stone
With the ruling above, the court has given an important interpretation to the Rome Convention, as well as to Rome I. Firstly, the Rome Convention is now modernized, as a fixed order must be deemed to exist between sub-paragraph a) and b). Secondly, it seems reasonable that the indicators which are to be taken into account when applying sub-paragraph a) and b) are also applicable in relation to Rome I.

Furthermore, a third ruling is expected, as the Dutch Supreme Court has posed prejudicial questions concerning the rule of exception. Hopefully, this ruling will introduce even more clarity in relation to the Rome Convention and Rome I. To be continued.

Please, do not hesitate to contact us if you have any questions.

Update article: December 2017