Application of a foreign law to an employment contract: conditions and limits

In a ruling issued on 9 July 2015, the Court of Cassation states that French law may override the foreign law chosen by the parties. Review of the law applicable to international employment contracts.

An example of the application of the Rome Convention to employment contracts

In this case, an employee signed two “international” employment contracts. The first employment contract, which was signed in Madrid with a Spanish foundation, was drawn up in Spanish and subject to Spanish law. The second, which was signed in Brussels with a Belgian employer, was governed by Belgian employment regulations. The employee sometimes travelled to Belgium and sometimes to Spain, but lived in France and customarily carried out her work in Paris.

The employee brought her appeal against the termination of her two employment contracts (terminated in accordance with the rules applicable in Spain and Belgium) before the French courts, claiming that French employment law should have been applied in her situation. The Paris Court of Appeals rejected the case, ruling in particular that there was no evidence of fraud on the part of the employers and that the employee had sufficient knowledge of the Spanish language to understand the terms of her employment.

This ruling was overruled by the Court of Cassation. On the basis of the Rome Convention of 19 June 1980, the Supreme Court ruled that since the employee executed her contract primarily in France, the judges, before dismissing the claimant’s appeal, should have verified whether the provisions of Belgian and Spanish law were “more protective than the mandatory provisions of French law” that would have been applicable in the event of no choice having been made by the parties.

In fact, the freedom given to the parties to define the law applicable to the international employment contract was subject to significant limits.

Highly regulated freedom

Both the Rome Convention and the EC regulation “Rome I”, which replaces it for employment contracts signed after 17 December 2009, establish the principle of free choice, by the parties to an international employment contract, of the law applicable to the employment relationship.

This choice may be explicit or implicit. It is even possible to have certain contractual clauses (e.g. disciplinary power, termination, etc.) governed by one law and other clauses (e.g. terms of employment, annual leave, etc.) by another.

However, overriding mandatory provisions may not be impaired and the employee may not be deprived from the protection provided by the mandatory provisions of the law that would be applicable in the event of no choice being made.

If the parties do not choose any specific law to govern his employment relationship, in principle it will be the law of the country in which, or from which, the employee “customarily carries out his work” that applies.

Consequently, an employee who customarily carries out his work in France may request that the provisions of the foreign law designated by their employment contract be overridden in favour of the mandatory provisions of French law, if the latter are more favourable to the employee.

In this regard, the category of employees who customarily carry out their work in France must not be confused with that of employees who are on a temporary secondment. For the latter, according to the Rome I regulation, the customary place of work remains, in principle, their country of origin. However, employees on secondment in France still benefit from specific guarantees since their employers must comply with a core set of mandatory protective regulations (term of employment, minimum salary, individual freedoms, right to strike, etc.).

A restrictive set of laws that cannot be overridden

The “mandatory provisions” of French law that may be applied to international employment contracts are those from which employers and employees cannot by-pass by agreement.

Thus, the rules relating to the redundancy process, term of employment, health and safety, and termination of a fixed-term contract, instituted by the French Labour Code are considered as “mandatory” provisions.

In this regard, in many cases it has been ruled that French rules relating to redundancy are more protective for employees than the foreign law chosen by the parties, in particular because of procedural guarantees offered to employees.

French courts have therefore put aside the provisions of German law (CA Douai, 31 May 2011), Swiss law (CA Colmar, 9 June 2009) and UK law (CA Reims, 3 February 2010), which had been invoked to terminate an international employment contract executed in France, ruling that French redundancy law should have been applied. In each of these cases, the employees concerned were thus compensated in line with French law for the damage incurred as a result of their redundancy, irrespective of whether the termination of the employment contract was lawful or not from the foreign law’s point of view.

Consequently, foreign employers who hire employees to carry out their work primarily in France must be extremely careful if they decide to subject the employment contract to any other law than French law. They must, for the entire term of the employment relationship and on its termination, verify whether the mandatory provisions of French law will have to be applied, notwithstanding any reference to a foreign law in the contract.

Caroline Froger-Michon, Partner and Guillemette Peyre, Associate