Remote working has gained popularity in recent years, partially due to COVID-19. However, remote working also raises a number of employment law related issues. For example, which law applies to the employment contract: the law of the country where the employer is located or the country where the employee performs the work? This blog explains the answer to this question.
Choice of law in the employment contract
In principle, a contract is governed by the law chosen by the parties. This choice shall be apparent from the terms of the contract or the circumstances of the case. That being said, the parties’ choice of law may be set aside. This is because the choice of law may not deprive the employee of the protection that the employee would have had under the law that would be applicable had the parties not made a choice of law. As a result, the law of the country for which the choice of law was made is supplemented by the mandatory law of the country which would be applicable if no choice of law had been made.
Determining which (mandatory) law is applicable
In the event that no choice of law is made or the choice of law needs to be supplemented, the employment contract will be governed by:
I. The law of the country from which the employee usually performs the work;
II. The law of the country in which the employee works; or
III. The law of the country from which it appears that the employment contract is more closely connected than with any of the above-mentioned countries. This involves, among other things, the following questions;
- In which country was the employment contract concluded?
- In which country does the employee pay (income) tax?
- In which country is the employee insured for social security, pension and health insurance and disability plans?
- In which currency is the salary paid and what terms of employment apply?
- Where does the employee live, where is the employer located, what is the common habitual residence and what is the nationality of the parties?
- What language is used in the employment contract?
- What is the pre-existing relationship between the parties? Are there multiple agreements with different companies belonging to the same group?
Do you have a question about which law applies to the (employment) contract with a remote employee? If so, please contact one of our lawyers.