EUCJ, C-64/12

The Rome Convention (the Convention) applies to contracts concluded prior to 17 December 2009, contracts concluded from that date are subject to the provisions of the Rome I Convention (EC 593/2008). The Convention is in force in all EU member states, and empowers parties to a contract to choose the country whose laws will apply to that agreement (Article 3). Article 6(2) states that where such an express choice has not been made in relation to an employment contract the contract will be governed “a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated, unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country”.

The case concerned Ms Boedeker a German national employed by Schlecker, a German cosmetics and healthcare retailer. Boedeker initially worked in Germany from 1979 until 1994, she then entered into a new employment contract under which she commenced work in the Netherlands, working there until 2006 when her role there was abolished. Schlecker then offered her a different position in Germany under the same contractual terms; Boedeker lodged a complaint against her employer’s unilateral change to her place of work, but accepted the new post in Germany. However, several days later she declared herself unfit to work, and proceeded to initiate various actions against Schlecker before the courts in the Netherlands. Boedeker’s employment contract did not have a choice of law clause indicating which country’s laws should govern a dispute arising in relation to the agreement. Boedeker claimed that the law of the Netherlands should be declared applicable to her employment contract because she had habitually performed her employment duties in the country. It was evident that the law of the Netherlands offered the claimant better employee rights than those that would be accorded to her under German law.

The Netherlands Supreme Court referred the case to the ECJ for a preliminary ruling to ascertain which law should apply to the contract. It queried in particular, whether a national court could disregard the law of the country where the work in performance of the contract had habitually been performed, if all the other circumstances relating to the contract signalled that the law of a different jurisdiction should apply. In his opinion Advocate-General Wahl emphasised that the operation of Article 6 of the Convention has to satisfy two requirements: the need for adequate employee protection and the need for legal certainty. As such, although Article 6 aims to protect employees it is not necessarily essential for courts to apply the law that is most favourable to the worker when there is a governing law dispute. The ECJ reasoned that German law could be declared applicable to Boedeker’s contract by virtue of the close connection her contract had with the country. The Court considered that key indicating factors of this connection included; Boedeker’s German pension arrangements, her residency in Germany, her German social security payments, the fact her wages, had prior to the introduction of the Euro, been paid in German Marks, the inclusion mandatory provisions of German law in her contract, and Schlecker’s registration as a German company.

The Court ruled that Article 6(2) of the Convention must be interpreted as meaning that, even where an employee carries out the work in performance of the contract habitually, for a lengthy period and without interruption in the same country, the national court may, under the concluding part of the provision, disregard the law of that country, if it appears from the circumstances as a whole that the contract is more closely associated with another country. As a result, it would be open to the national courts to decide whether German law could displace Netherlands law as the applicable law to the contract.

The case illustrates that the inclusion of a governing law clause in employment contracts is of paramount importance, not least in respect of employees performing international roles. A curious issue raised by the case is the fact Boedeker continued to make social security payments in Germany despite the length of her assignment overseas, the facts in this dispute are particularly unusual because generally such an arrangement would only be acceptable for a maximum five year period. Clearly employee location plays a pivotal role in determining the applicable law in the absence of a specific contractual provision; however the ECJ has erred on the side of practicality allowing priority to be given to a different jurisdiction if the contract overall has a closer connection with another country.