Applicable Law on Employment Contracts

It is now seven years since Romania joined the European Union.  When Romania joined her laws and courts then became subject to the body of law already in place as set up by the EU and the European Court of Justice.  This moved many aspects of Romanian law out of the domestic arena into the wider jurisdiction of European law.

This has meant that to many Romanian law firms now had to consider not only local law but also EU law.  Thus the question of EU law and its application has become important in the field of employment contracts where employees are now seconded from other EU countries to work in Romania and vice-verso.  Romanian law firms who deal with international clients are often faced with these questions concerning jurisdiction and applicable law and have to understand the balance between local law and the application of EU law.

As the seconded employee will be sent to the third country in the EU, under their existing contract there will be ramifications not immediately thought of.  One of the problems often faced is the question of which law will govern such a contract and the employment if a dispute arises when the secondee is working away from their home country.  The Rome convention addressed this problem in Article 6 (2) whereby it stated that if no choice of law clause is inserted in the contract then the contract is to be governed (a) by the law of the country where the employee habitually carries out his work, or (b) if the employee does not habitually carry out his work in any one country, the law of the country in which the place of business through which he was engaged is situated.

Recently there was a case decided by the European Court of Justice on the construction of this Article.  The case was brought in relation to an employee who was employed by a German company which had many branches throughout Europe including the Netherlands.  The employee had worked for the German company for a continuous period of over eleven years in the Netherlands.  Her contract stated that mandatory laws of Germany applied to the contract but did not expressly choose a governing law.  When a dispute between the employer and the employee arose The Netherlands courts, in the absence of any choice of law clause, asked the European Court of Justice for its decision as to how they should decide the relevant law.

The court found that even though the employee worked in the Netherlands and had done so for eleven years in all the circumstances of the case the court of the Netherlands could disregard Dutch law and apply the relevant German law.

The case is a timely reminder that the courts when considering such a case must take into account all the circumstances of the employment, not only where the work was carried out.

The facts of this case underline the fact that for Romanian lawyers and employees they must remember that this ruling will apply to Romanian employment contracts where a Romanian employee is sent abroad and no choice of law clause is inserted in the relevant employment contract.

About Nicholas S Hammond

Nicholas is an English solicitor who has been practising in Romania since 1990. He has been a partner in a number of law firms in Romania as the principal partner. Hammond and Associates trading as Hammond Partnership is the culmination of many years experiance.

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