Cross border employment issues facing employers and employees

When employers and employees are located in different jurisdictions, cross border issues arise. This article will explore the following three elements:

• What statutory regime applies to the employee’s employment;
• What contract law governs the employee’s contract of employment; and
• What courts have jurisdiction to hear a dispute in respect of an employee’s employment.

What statutory regime applies? 

The Rome 1 Regulation (which is directly enforceable in Ireland) (“Rome 1”) contains the rules for determining the contract law that governs employment contracts. It also provides that employees enjoy the protection of the employment legislation of the country where the employee works, irrespective of the law chosen to govern the contract.

While employers and employees are free to decide what law governs the contract (in relation to suing for breach of contract for example), the parties cannot contract out of the employment law rights that apply in the country in which the employee works.

If, for example, an Irish company has engaged a Polish employee and that employee works remotely from Poland, that Polish Employee has the protection of the statutory employment rights that apply in Poland.

However, that employee may also be able to claim that he/she has some statutory rights in Ireland also depending on the piece of legislation in question.  If a dispute arises, generally it is open to an employee to select the law in the jurisdiction that gives him or her greatest protection.

Conversely the same is true.  An employee employed by a foreign entity but working in Ireland will generally be entitled to the statutory employment rights that apply in Ireland.

What contract law governs the employee’s contract of employment?

While the above section outlines the statutory regime that applies, what happens if there is a contractual dispute between an employer and an employee?  What law governs such a dispute?

As outlined above, Rome I contains rules for determining the governing law of contractual obligations.  It only applies to contracts made on or after 17 December 2009.

Under Rome I, the parties to a contract are generally free to choose the applicable law.

Where the parties have not chosen the law the following rules apply (subject to the exception below):

• The contract shall be governed by the law of the country in which, or from which the employee carries out his/her work.
• If the employee does not habitually carry out the work in or from one country, the contract will be governed by the law of the country in which the business is situated.

The exception to the above is where it appears from the circumstances as a whole that the contract is more closely connected with a different country the law of that other country will govern the contract.

When looking at the test of whether a contract is closely connected to a country, the court can make a wide-ranging enquiry into a number of factors including where the employee and/or employee are based, how the employee is paid, how the employee is managed and the locations from which the disciplinary decisions emanate for example.  This list is not exhaustive.

In summary:-

• Irrespective of the law governing the contract, the statutory regime of the country in which the employee works applies.
• The fact that a country’s law is the law that governs the contract, does not necessarily mean that that country’s court has jurisdiction to hear the claim. What courts have jurisdiction to hear the claim is explored below.

What courts have jurisdiction to hear a dispute in respect of an employee’s employment.

The Recast Brussels Regulation provides special rules that apply to individual employment contracts to protect the employee as the “weaker party” to the contract.

Subject to certain exceptions, it provides that an employee may sue an employer in either:-

• the member state where the employer is domiciled (i.e. where it has its registered office, central administration or principal place of business), or
• where the employee habitually works.

An employer may only bring proceedings against the employee in the courts of the State in which the employee is domiciled.   Even in circumstances where a contract of employment provides that the courts of Ireland have jurisdiction to hear a dispute for example, such a clause is only valid if:

• it is entered into after the dispute to which it applies has arisen; or
• the employee wishes to rely upon such a clause.

Accordingly, the enforceability of an “exclusive jurisdiction” clause in an employment contract can be limited.

Employers should bear these rules in mind if it has a workforce that spans across a number of jurisdictions.

For further information on the above please contact Laura Graham at lgraham@reddycharlton.ie