A recent European Court of Justice (" ECJ") decision provides a useful reminder of the rules that apply in determining which laws govern the employment relationship of employees working across
A recent European Court of Justice (" ECJ") decision provides a useful reminder of the rules that apply in determining which laws govern the employment relationship of employees working across borders. It also highlights the importance to employers of clearly documenting the nature of such relationships.
Ms Boedecker worked for Schlecker, which is engaged in the retailing of cosmetics, healthcare and household products. Ms Boedecker had initially worked for Schlecker for 15 years in Germany, before working in the Netherlands for a further 12 years. Ms Boedecker was told in 2006 that her role in the Netherlands was to be abolished and she was offered a new role in Germany. At all times, Ms Boedecker had lived in Germany, paid German taxes and had been provided with German managed benefits. Her contract of employment did not expressly state the choice of governing law.
Ms Boedecker was not happy with the new role offered and brought a claim under Netherlands law and she was awarded compensation by the Netherlands court. However, Schlecker appealed and the case was referred to the ECJ to decide whether Netherlands law or German law should apply under the Rome Convention.
Where the parties to a contract had not selected a choice of law, the ECJ confirmed that the correct approach was first to look at the relationship between the contract of employment and the country where the employee habitually carries out her work. It noted that it was not disputed between the parties that over the course of performing her duties, Ms Boedecker had habitually carried out her work in the Netherlands for approximately 12 years without interruption. As this point was not disputed, at first blush, it appeared that the applicable law under the rules of the Rome Convention was the law of the Netherlands.
Yet this was not the end of the story. The ECJ found that under the Rome Convention the Court must then go on to consider whether that employment contract was more "closely connected" with another country. Importantly, the ECJ found that in determining the law of the country in which the contract is most closely connected, it was not necessary to ensure that this automatically resulted, in all cases, in the application of the law most favourable to the worker. If such an interpretation had been required then the applicable law would have been the Netherlands since it was accepted that this was more favourable to Ms Boedecker.
Although the ECJ did not expressly say so in its Judgment, once this case has been referred back to the Courts in the Netherlands, the only possible interpretation in this case will be that German law will apply. The reason why this is so is because the ECJ clearly states in its Judgment that the referring court in the Netherlands had already found that the employment contract was more closely connected with Germany. This finding effectively trumped the fact that Ms Boedecker had habitually worked in the Netherlands.
The facts of this case were highly unusual. By asserting that the law of Netherlands should apply, Ms Boedecker was arguing for a finding that Schlecker had terminated her contract of employment. This was because Netherlands law more strictly regulated unilateral changes introduced by employers than under German law. A finding that German law applied resulted in the continuation of Ms Boedecker's employment.
A final interesting point is what implications this case will have when it comes to interpreting mandatory rules of law. Under the Rome Convention, even where the parties make a choice of law, this cannot have the effect of depriving employees of mandatory rules of law. In the UK, mandatory rules of law include rights arising under the Employment Rights Act 1996 and the Equality Act 2010. The rules for determining which mandatory rules apply are the same rules as apply where no choice has been made about the applicable law. So, for example, in this case, if the parties had chosen the law of the Netherlands as the applicable law, Ms Boedecker would still not have been deprived of protection of mandatory rules under the law of Germany because on the application of the rules under the Rome Convention, it would have been shown that there was a closer connection with that country. What this case opens up then is the theoretical possibility that an employer might influence the choice of mandatory rules which will apply by the way in which it engages, rewards and treats its employees. On the facts of this case, if Ms Boedecker had chosen the law of Germany as applicable, Ms Boedecker would be subject to German rules both for the choice of law and for the mandatory rules even though Ms Boedecker spent all of her time working in the Netherlands. While the facts of this case were highly unusual, this might be potentially useful in other contexts where an employer routinely sends employees to work in another jurisdiction but worries about the cost of complying with the rules in that country if and when that relationship breaks down.
Ms Boedecker worked for Schlecker, which is engaged in the retailing of cosmetics, healthcare and household products. Ms Boedecker had initially worked for Schlecker for 15 years in Germany, before working in the Netherlands for a further 12 years. Ms Boedecker was told in 2006 that her role in the Netherlands was to be abolished and she was offered a new role in Germany. At all times, Ms Boedecker had lived in Germany, paid German taxes and had been provided with German managed benefits. Her contract of employment did not expressly state the choice of governing law.
Ms Boedecker was not happy with the new role offered and brought a claim under Netherlands law and she was awarded compensation by the Netherlands court. However, Schlecker appealed and the case was referred to the ECJ to decide whether Netherlands law or German law should apply under the Rome Convention.
Where the parties to a contract had not selected a choice of law, the ECJ confirmed that the correct approach was first to look at the relationship between the contract of employment and the country where the employee habitually carries out her work. It noted that it was not disputed between the parties that over the course of performing her duties, Ms Boedecker had habitually carried out her work in the Netherlands for approximately 12 years without interruption. As this point was not disputed, at first blush, it appeared that the applicable law under the rules of the Rome Convention was the law of the Netherlands.
Yet this was not the end of the story. The ECJ found that under the Rome Convention the Court must then go on to consider whether that employment contract was more "closely connected" with another country. Importantly, the ECJ found that in determining the law of the country in which the contract is most closely connected, it was not necessary to ensure that this automatically resulted, in all cases, in the application of the law most favourable to the worker. If such an interpretation had been required then the applicable law would have been the Netherlands since it was accepted that this was more favourable to Ms Boedecker.
Although the ECJ did not expressly say so in its Judgment, once this case has been referred back to the Courts in the Netherlands, the only possible interpretation in this case will be that German law will apply. The reason why this is so is because the ECJ clearly states in its Judgment that the referring court in the Netherlands had already found that the employment contract was more closely connected with Germany. This finding effectively trumped the fact that Ms Boedecker had habitually worked in the Netherlands.
The facts of this case were highly unusual. By asserting that the law of Netherlands should apply, Ms Boedecker was arguing for a finding that Schlecker had terminated her contract of employment. This was because Netherlands law more strictly regulated unilateral changes introduced by employers than under German law. A finding that German law applied resulted in the continuation of Ms Boedecker's employment.
A final interesting point is what implications this case will have when it comes to interpreting mandatory rules of law. Under the Rome Convention, even where the parties make a choice of law, this cannot have the effect of depriving employees of mandatory rules of law. In the UK, mandatory rules of law include rights arising under the Employment Rights Act 1996 and the Equality Act 2010. The rules for determining which mandatory rules apply are the same rules as apply where no choice has been made about the applicable law. So, for example, in this case, if the parties had chosen the law of the Netherlands as the applicable law, Ms Boedecker would still not have been deprived of protection of mandatory rules under the law of Germany because on the application of the rules under the Rome Convention, it would have been shown that there was a closer connection with that country. What this case opens up then is the theoretical possibility that an employer might influence the choice of mandatory rules which will apply by the way in which it engages, rewards and treats its employees. On the facts of this case, if Ms Boedecker had chosen the law of Germany as applicable, Ms Boedecker would be subject to German rules both for the choice of law and for the mandatory rules even though Ms Boedecker spent all of her time working in the Netherlands. While the facts of this case were highly unusual, this might be potentially useful in other contexts where an employer routinely sends employees to work in another jurisdiction but worries about the cost of complying with the rules in that country if and when that relationship breaks down.