In today's globally interconnected world of work, cross-border issues play an increasingly prominent role – particularly for corporates with a multi-jurisdictional presence in the European Union. However, in view of the United Kingdom's impending departure from the European Union, questions of structuring in this context have taken on new meaning across the board.

When drafting employment agreements which relate to several EU jurisdictions, it may be advisable to determine the applicable law in advance. The possibility of selecting which legal context should apply offers parties a certain level of autonomy; however, this is not unlimited.

The freedom to determine the applicable law stems from the freedom of choice principle (Articles 3(1) and 8(1) of EU Regulation 593/2008/EC (Rome I)). The employment contract is fundamentally subject to the law selected by the parties. The choice of law may be made expressly or implicitly.

However, the freedom of choice principle is limited by the favourability principle, which states that the choice of law must not deprive the employee of the protection afforded to them by provisions that cannot be derogated from under the law that would objectively apply (Article 8(1) Sentence 2 of Rome I). These mandatory employee protection requirements are characterised by the fact that they aim to protect the employee as the inferior party. Whether or not requirements are mandatory is determined by the principles of the jurisdiction to which they belong.

Mandatory standards within the meaning of Article 8(1) Sentence 2 of Rome I include, for instance:

  • the equality principle;
  • provisions governing employee inventions;
  • protection against unfair dismissal;
  • assumption of contracts in the case of business transfers;
  • principles of protection relating to youth work;
  • maternity protection; and
  • provisions governing working hours.

The law selected in the contract remains fundamentally applicable, but this may be superseded by the objectively applicable law more favourable to the employee, thus potentially resulting in a mixture of laws.

The choice of law is thus unlimited only insofar as the law selected is the one that would also apply in objective terms.

For further information on this topic please contact Anja Glück or Hans-Peter Löw at Allen & Overy LLP by telephone (+49 69 2648 5000) or email (anja.glueck@allenovery.com or hans-peter.loew@allenovery.com). The Allen & Overy LLP website can be accessed at www.allenovery.com.

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