A recent decision of the Court of Justice of the European Union (CJEU) looks at the application of Article 6 of the Rome Convention to an employment contract, in the absence of a governing law clause.* The Court held that the governing law of an employment contract under Article 6 of the Rome Convention is not always that of the country where the employee works.Even where an employee has worked in that country for a long uninterrupted period, it is open to a national Court to decide that the applicable law is that of another country with which the contract is more closely connected.
The case is a useful reminder of the importance of inserting into an employment contract a governing law clause, particularly in the circumstances where this might vary to a country whose mandatory rules apply.Given the increasingly multinational and international aspects of employees' roles, it makes it all the more appropriate to do so.
The claimant here was a German national employed by the respondent company. The company was a German retailer with a number of branches throughout the EU. She worked for a period in Germany. She then worked for a branch of her employer in the Netherlands for approximately 12 years until her role there was abolished. The employer then offered her an alternative position back in Germany under the same contractual terms. The claimant lodged a complaint against the unilateral change to her place of work and brought these claims in the Dutch Courts.Her employment contract did not have a governing law clause and she claimed that the law of the Netherlands should apply because she had performed her employment duties in that country for a number of years prior to the point where the dispute arose. Her employment rights position was significantly more favourable in the Netherlands, than under German law.
The Dutch Court referred the matter to the CJEU to determine which law should apply to the contract. The CJEU looked at Article 6 of the Rome Convention and noted that its purpose was to satisfy two requirements:
- the need for adequate employee protection; and
- the need for legal certainty.
The Court noted that whilst Article 6 aims to protect employees, it is not mandatory for the Courts to apply the law that is most favourable to the worker when the governing law is in dispute. In this case, it was open to the national Courts to determine that German law was the more applicable law. It held that as a result of the close connection her contract had with Germany, that German law should be the applicable law. Factors which influenced this determination included the claimant's German pension arrangements, her residency in Germany, her German social security payments and the inclusion of mandatory provisions of German law into her contract.
Given the number of employees carrying out roles with an international dimension, the case reiterates the need for insertion of an express governing law clause for the purposes of attaining legal certainty.