The law applicable to individual employment contracts*

 Introduction

Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I) provides for special rules in order to determine the law applicable to individual employment contracts (Art. 8). Similarly to rules under Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I bis), these provisions, derogating from the general discipline, have the aim of protecting the worker as weak party to the contract.

The notions of “employee” and “employment contract”

The Rome I Regulation, like the Brussels I bis Regulation, does not provide for “employee” or “employment contract” definitions.

However, the Court of Justice of the European Union has provided for some clarifications on this: – The essential feature of an employment relationship is the situation whereby a person performs, for a certain period of time, in favour of another person and under the direction of the latter, services in return for which he/she receives remuneration (judgment of 3 July 1986, C-66/85, Lawrie-Blum, EU:C:1986:284; judgment of 23 March 2004, C-138/02, Collins, EU:C:2004:172). – The employment contracts are characterized by a lasting bond between the employee and the business of the employer which is linked “to the place where the activities are pursued, which determines the application of mandatory rules and collective agreements” (judgment of 15 January 1987, C-266/85, Shenavai, EU:C:1987:11; judgment of 15 February 1989, C-32/88, Six Constructions, EU:C:1989:68).

Pursuant to the Report by Mr P. Jenard and Mr G. Möller on the 1988 Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, despite the absence of an autonomous notion, the employment contract can be considered as presupposing a dependency bond of the worker towards the employer.

Art. 8 of the Rome I Regulation provides for the criteria for determining the law applicable to employment contracts having cross-border elements.

The law agreed upon by parties

Pursuant to Art. 8, para. 1, the employment contract is generally governed by the law agreed upon by the parties. By virtue of the aims of the protection of the weaker party pursued by the law, this choice cannot deprive the employee of the protection afforded to him/her by the rules which are not allowed to be derogated conventionally on the basis of the law that would have been applicable in the absence of choice.

The country in which or, failing that, from which the employee habitually carries out his/her work
Paragraphs 2, 3 and 4 of Art. 8 provide for a series of drop-down criteria, among which there is a hierarchical relationship. Art. 8, para. 2, sets out as the main connecting factor the ” the country in which or, failing that, from which the employee habitually carries out his work”. In the event that this activity is connected with a plurality of countries, it is necessary to refer to the one “from which” the worker carries out his/her work. The “habitual” carryout of a work activity refers to the country in which the employee, in performance of his contract, fulfils the substantial part of his/her obligations towards the employer. The Court of Justice of the European Union has indicated some useful criteria for identifying the country of habitual work performance, which include: – the actual workplace; – the nature of the activity carried out; – the elements that characterize the employee’s activity; – the country in which or, failing that, from which the employee carries out his/her activity, or an essential part of it, or receives instructions on his/her tasks and organizes his/her work activity; – the place where the work activity tools are placed; – the place where the employee is required to present himself/herself before carrying out his/her duties or to return after having completed them; (judgment of 15 March 2011, C-29/10, Koelzsch, EU:C:2011:151; judgment of 15 December 2011, C-384/10, Voogsgeerd, EU:C:2011:842). The criterion of the country where the work activity is habitually carried out has priority over the others and must be interpreted in a broad sense (Koelzsch judgment).

The country where the place of business through which the employee was engaged is situated (Art. 8, para. 3)
The criterion of the place of business through which the employee was engaged can only be used if it is not possible to determine the country in which or, failing thins, from which the employee habitually carries out his/her work. In the Voogsgeerd judgment, the Court of Justice of the European Union provided some indications on the application of this criterion: – the notion refers exclusively to the place of business that hired the employee and not to the one to which the employee is connected for the actual performance of his/her tasks. The relevant elements for the purpose of determining this location are only those relating to the procedure for concluding the contract, in written or verbal form, such as the publication of the employment announcement or the conduct of the employment interview; – a “place of business” does not necessarily have to have a distinct legal personality and could be, for example, an office, provided it has a certain degree of stability and, in principle, belongs to the undertaking that hires the employee and forms an integral part of its structure; – the headquarter of an undertaking other than that which, formally, results from the contract as an employer, can be classified as “place of business” pursuant to Art. 8, para. 3, of the Rome I Regulation to the existence of objective elements which show a concrete situation that diverges from that which emerges from the terms of the contract. This is particularly the case in the event that the “substantial” place of business is connected to the formal employer – for example if the two companies have the same director – even if the management power has not been formally transferred to them.

The “closest connection” with a different country (Art. 8, para. 4)
In the event that the set of circumstances shows that the employment contract has a closer connection with a country other than the one identified in application of the criteria referred to in paragraphs 2 and 3, the latter’s law applies. In applying this clause, according to the reasoning by the Court of Justice of the European Union (judgment of 12 December 2013, C-64/12, Schlecker, EU:C:2013:551) it is necessary to take into particular consideration: – the country in which the employee pays taxes on the income from his/her work activity; – the country where the employee is registered in the social security system and in the various pension, sickness insurance and invalidity schemes; – all the circumstances of the case, such as the parameters relating to salary determination and other working conditions.

Directive 96/71/EC on the posting of workers in the context of the provision of services

Directive 96/71/EC relating to the posting of workers in the context of the provision of services – implemented in Italy by the Legislative Decree No 72/2000, then transfused into Legislative Decree No 136/2016, implementing Directive 2014/67/EU, concerning the application of Directive 96/71/EC, provides for a framework of harmonized rules relating to the regulation of the posting of workers from one Member State to another in the context of a cross-border provision of services. Pursuant to Art. 8, para. 2, of the Rome I Regulation, the circumstance for which the worker temporarily carries out his/her work in another country is not sufficient to change the country of habitual work activity. This provision applies to cases of temporary posting of workers. The Directive offers additional protection to the worker, without derogating from the Rome I Regulation or the previous Rome Convention, mentioned in Recitals 7-11 of the Directive. The Directive indeed establishes some mandatory provisions (see, in particular, the minimum protection standards referred to in Art. 3, para. 1, and the “core issue” of rules explicitly referred to in Recital 14) and the rules of the State of posting for implementation of the same may prevail over the rules of the State where the work is normally performed (Recital 34 of the Rome I Regulation). In this regard, the Court of Justice of the European Union clarified how the application of the domestic rules of the host Member State to established providers, as potentially damaging to the freedom to provide services, can only take place in the case of rules justified by mandatory reasons of general interest and applicable to all persons, whether natural or legal, carrying on an activity in the territory of the host Member State, if this interest is not protected by the rules the respect of which the provider is obliged to in the Member State in which he/she is established. The interests at stake include the protection of workers (judgment of 23 November 1999, C-376/96, Arblade, EU:C:1999:575; judgment of 15 March 2001, C-165/98, Mazzoleni, EU:C:2001:162).

Giulio Monga

Note – This document is subject to the warning set out here.

*The English translation is provided for by the Aldricus Editorial Board; the original version by the author, in Italian, is available in this portal in the corresponding Italian section.