If an employee habitually works in one country but the employment contract chooses the law of another, do the more protective mandatory rules of the workplace automatically apply? Or can the chosen law still prevail if the employment relationship is more closely connected with the country of that chosen law? The Court of Justice of the European Union had to answer these questions in a recent judgment that we analyse below.
ILF’s Hungarian member, Smartlegal Schmidt&Partners summarizes this issue in the article.
- Facts
Hortis (“Employer”), a company incorporated under Swiss law hired JA (“Employee”) as a manager. The Employee resided in France and habitually carried out his work there, while the employment contract was governed by the Swiss law.
In January 2012, the Employer dismissed the Employee in accordance with the formalities required by Swiss law. Unlike French law, Swiss law did not require a pre-dismissal interview or the dismissal letter to state the reasons for termination.
- Procedure in France
The Employee challenged his dismissal before the Paris Labour Tribunal. Although that court accepted jurisdiction, it dismissed the Employee’s claims.
The Employee filed an appeal against the above decision, and the Paris Court of Appeal reversed the first-instance judgment holding that the dismissal lacked any real and serious justification and ordered the Employee to pay damages to the Employee. The appellate court declared French law to be the only law applicable to the dispute. Given that the place of performance of the work was in France, based on Article 6 of the Rome Convention[i], the choice of law could not deprive the Employee of the protection afforded to him by the mandatory rules of the French law such as the requirement of the pre-dismissal interview and the obligation for the dismissal letter to state reasons.
The Employer brought an appeal against the above judgment before the Court of Cassation. According to the Employer the Court of Appeal wrongly failed to examine whether Swiss law was applicable because the employment contract is more closely connected with Switzerland. In support of that argument, the Employer relied on several circumstances, including that the Employee was paid a generous salary in Swiss francs into a Swiss bank account, was member of Swiss social insurance schemes, benefited from a Swiss tax regime applicable to employees working is Switzerland and had a Swiss email address and mobile telephone number.
The Court of Cassation was uncertain of the application of Article 6 of the Rome Convention, therefore it decided to stay the proceedings and refer his questions to the Court of Justice of the European Union.
- The CJEU’s decision
The CJEU had to answer the below questions:
- The first question to be decided by the CJEU was practically whether the law of the country with which the employment contract is more closely connected may be the law chosen by the parties leading to the result that the more protective rules of the law which would be applicable in the absence of a choice shall be disregarded.
- The second question to be decided by the Court was basically whether, when determining the country most closely connected with the employment contract, national courts must take into account or disregard connections resulting from the parties’ choice of law.
- The closer connection exception may point back to the chosen law
Relying on its earlier case-law the Court identified the steps of determining the applicable law to the employment contract:
- First, based on the parties’ freedom to choose the applicable law, the law chosen by the parties in accordance with Article 3 of the Rome Convention shall apply.
- Though, the parties’ freedom to choose the applicable law is limited as the employee cannot be deprived of the protection afforded by the mandatory rules of the law that would have applied in the absence of a choice.[ii][iii]Therefore, the national court must in a second step determine which law would by applicable if the parties had made no choice, which may be (1) the law of the country where the employee habitually carries out his work or (2) in the absence of such country, the law of the country in which the place of business through which he was engaged is situated.
- Third, the court must examine whether the employment contract is nevertheless more closely connected with another country than other than that identified on the basis of the above two connecting factors. If this was the case, the court shall disregard the connecting factors and apply the law of that other country[iv]
The CJEU confirmed that the law of the country with which the employment contract is most closely connected may be the law of the country chosen by the parties. This is supported by the earlier case-law of the Court. In Locatrans[v]the Court has already held that national courts shall give priority to the law chosen by the parties where the employment contract is more closely connected with the country of that law. The Court also reiterated that the objective of Article 6 of the Rome Convention is to provide adequate protection for the employees, which can be achieved if the law applied to employment contract is the law of the country with which the contract is more closely connected. This should not necessarily result in the application, in all cases, of the law most favourable to the employee.[vi]
Accordingly, if the contract is more closely connected with the country of the chosen law, that law must prevail even if the mandatory rules of the employee’s habitual place of work would offer greater protection. In the present case it means that if the French court finds the employment relationship more closely connected with Switzerland than with France, Swiss law must apply and the more protective mandatory rules of French law must be disregarded.
- Is the choice of law a connecting factor when deciding about closer connection?
The CJEU reiterated its earlier case-law based on which in order to determine the country most closely connected with an employment contract, the courts shall take account of all the elements which define the employment relationship. Among the particularly relevant factors, the Court referred to the country in which the employee pays taxes on the income from his activity and in which he is covered by a social security scheme and pension, sickness insurance and invalidity schemes. The courts must consider the parameters relating to salary determination and other working conditions.[vii]
As regards the parties’ choice of law, the Court drew an important distinction. The mere fact that the parties chose the law of a particular country cannot, by itself, be treated as a connecting factor. Otherwise, the parties could effectively determine the objectively closest connection simply through their contractual choice, which would undermine the protective purpose of Article 6 of the Rome Convention.
However, the national court must take into account the objective elements arising during the performance of the employment contract as a consequence of the chosen law. The court shall weigh up, on the basis of their importance and relevance, each element and assess which appears to be the most significant. Importantly, the national court must examine, whether those factors are the result of mutual agreement or whether they were imposed on the employee by the employer, in order to guard against the employer misusing the connecting factors of the employment contract.
- Summary
In the Hortis judgement, the CJEU confirmed that the employee’s habitual place of work, although a central connecting factor, is not necessarily decisive. Even where the employee works habitually in one country and that country offers more protective mandatory employment rules, those rules may ultimately be excluded if the employment contract is objectively more closely connected with another country, including the country whose law the parties chose.
At the same time, the judgment does not give employers a shortcut through a choice-of-law clause. The clause itself does not prove a closer connection. What matters is the objective reality of the employment relationship: taxation, social security, salary arrangements, working conditions and other meaningful links, assessed according to their weight rather than their number.
For cross-border employers and employees, the message is therefore clear: a choice-of-law clause matters, but the actual organisation and performance of the employment relationship may matter even more.
In this article we analysed the judgment C-768/24 of the CJEU.
Written by Anita Vereb
SMARTLEGAL is a team of agile business & litigation lawyers in Budapest, Hungary, helping international corporate clients and individual entrepreneurs doing business in Hungary. For more information please visit our website at this link.
[i] 80/934/EEC: Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 („Rome Convention”)
[ii] Article 6 1. of the Rome Convention
[iii] judgment of 11 December 2025, Locatrans, C‑485/24, EU:C:2025:955
[iv] Judgment of 12 September 2013, Schlecker, C-64/12, EU:C:2013:551
[v] judgment of 11 December 2025, Locatrans, C‑485/24, EU:C:2025:955
[vi] Judgment of 12 September 2013, Schlecker, C-64/12, EU:C:2013:551
[vii] Judgment of 12 September 2013, Schlecker, C-64/12, EU:C:2013:551