The intertwining between private international law, which is fundamentally of a private nature, and labour law, which incorporates both public and private law elements, is becoming increasingly significant. This development is founded on the increased demand for foreign workforce, as well as on the contemporary shift towards remote working arrangements. As these trends continue, the intersection of these two legal fields is gaining prominence, necessitating careful consideration of how cross-border employment relationships are regulated within this evolving landscape.
This article seeks to explore practical considerations on the specifics implied by international labour agreements, highlighting the impact that the governing law may have on the employment relationship.
- Choice of law
The underlying principle is straightforward: the general conflict of laws rules established by private international law are equally relevant to individual employment contracts that involve an international aspect. Typically, this cross-border element arises from the fact that the parties to the employment contract (i.e., the employer and the employee) are based in different countries or have connections to different legal jurisdictions. As a result, the applicable law in such agreements shall be determined as per the same core principles used for other private legal relationships with an international dimension.
In most jurisdictions, parties to an individual labour agreement are generally permitted to select the law that will govern their agreement. This is typically achieved through the inclusion of an express choice-of-law clause within the contract itself. Such autonomy allows the parties to determine, in advance, which legal system will regulate their rights and obligations under the employment relationship.
- Rome I Regulation and limited party autonomy
In the European Union (the “EU”), the determination of the applicable law is governed primarily by the provisions of Regulation (EC) no. 593/2008 (“Rome I Regulation”). Article 8 of the Rome I Regulation (which replaced Article 6 of the Convention no. 80/934/EEC on the law applicable to contractual obligations, “1980 Rome Convention”) establishes the framework for determining the law applicable to individual labour agreements within the EU. According to paragraph 1 of Article 8, the parties to a labour agreement are permitted to select the law which will govern their contractual relationship. However, this autonomy is not absolute.
Rome I Regulation expressly provides that such a choice of law shall not result in the employee, recognised as the weaker party in the labour relationship, being deprived of the protection afforded by “provisions that cannot be derogated from by agreement” under the law that would have applied in the absence of a choice, as determined by paragraphs 2, 3, and 4 of Article 8 (i.e., the law of the country in which/from which the employees habitually carries out their work in performance of the contract, the law of the country where the place of business through which the employee was engaged is situated or the law of the country more closely connected with the agreement).
- The extent of employee’s protection: meaning of “provisions that cannot be derogated from by agreement”
The phrase “provisions that cannot be derogated from by agreement” is of particular significance and is subject to interpretation. To shed light on this topic, we refer to the case law of the Court of Justice of the European Union (hereinafter, referred to as “CJEU”), and the drafting history of this provision.
In the joined cases of DG and EH v. Gruber and Sindicatul Lucrătorilor din Transporturi, DT v. Samidani, the labour agreements were concluded in Romania, while the employees habitually performed their work in Italy. The central issue was whether the Italian minimum wage rules constituted non-derogable provisions, thereby entitling the employees to the Italian minimum wage notwithstanding the contractual choice of Romanian law. The CJEU, heavily influenced by the Opinion of the Advocate General, held that the determination of whether a provision is non-derogable must be made by reference to the law that would have applied in the absence of a choice of law. It is for the national court to interpret its own legal system to ascertain whether a particular provision is mandatory. As a consequence, CJEU deemed that the minimum wage rules of the country where the employee has habitually carried out his or her activities (in this case, Italy), can, in principle, be classified as “provisions that cannot be derogated from by agreement under the law that, in the absence of choice, would have been applicable”.
The Advocate General clarified that only those mandatory rules of the law that would otherwise apply and which afford greater protection to the employee will take precedence over the law chosen by the parties and only in those specific respects. The chosen law will, in this case, continue to govern all other aspects of the employment relationship. Nevertheless, the application of such provisions is not automatic as it requires a comparative assessment of the level of protection provided by each legal system.
In the Report on the 1980 Rome Convention, the meaning of “mandatory rules of the law which would be applicable under paragraph 2 in the absence of choice” was explained in the same sense: if the law that would have applied in the absence of the choice made by the parties provides employees with greater protection than the law chosen by the parties, the chosen law remains generally applicable, but any higher protections from the law under 1980 Rome Convention will override the chosen law where relevant. These mandatory rules are not limited to the labour agreement itself, but also include public law provisions, such as those relating to industrial safety and hygiene. Furthermore, in case the law designated as per former Article 6 would make collective bargaining agreements binding, employees retain those benefits even if another law is chosen for their individual agreements.
Issues such as unfair commercial practices or social security generally fall outside the scope of this notion, as these are governed by separate legal regimes, whereas the overriding effect covers more favourable provisions on unfair dismissal and unlawful discrimination, rules concerning working conditions, equal treatment, special protection for certain categories of employees and other core rights. The determination of which law is more favourable must be made concretely in each case, by comparing the relevant groups of norms. Under Romanian law, for instance, the following matters are generally deemed mandatory and shall override the similar provisions of the chosen law, in case the Romanian law provisions would be deemed more generous: guaranteed minimum gross wage; overtime pay; protections against unfair dismissal; special protection against dismissal, including notice periods; equal treatment and non-discrimination; working time and rest periods, annual leave; working conditions; protection for pregnant women and parents.
As a general tendency across Europe, similar categories of employment law provisions are widely considered to be of a mandatory nature. This reflects a broader European commitment to safeguarding fundamental employee rights and ensuring minimum standards of protection in the workplace.
To conclude, where a labour agreement contains a choice-of-law clause, the court must determine whether the law that would otherwise apply contains non-derogable provisions that are more favourable to the employee. If so, those provisions will apply to the extent that they offer greater protection, as resulting from on a case-by-case comparison regarding each relevant element, while the chosen law will govern the remainder of the contract.
By Cristina Tudoran, Partner, and Maia Dragomir, Associate, Filip & Company
