Non-EU employers now more exposed to employment litigation

In an international mobility scenario involving cross-border employment in one or more states, it is probable that at least some of the legislation of the state where the employee works (even if only temporarily) will apply to the employment relationship (these are called mandatory (overriding) rules). This is so even if the employer has no presence in that state and despite any choice of law made by the parties (in this regard, we refer to our numerous previous contributions on this subject: you can find them on our website or we will be happy to share them with you again on request).

However, previously, when it came to appointing jurisdiction (a competent court), the relevant EU Regulation (Brussels I) only applied where the defendant (regardless of nationality) was domiciled in a Member State. Thus, if an employee wanted to sue their employer in the EU, the employer had to have its registered office or at least a place of business in a Member State. That said, EU Directive 96/71 provided that employees could claim in the Member State where the worker was or had been posted, though the directive also only applied to undertakings established in a Member State.

Where the employer had no presence in a Member State, the employee could only sue in the state where the employer was established. Now, since 10 January 2015, companies with no EU presence but with staff working in the EU can be sued by employees under employment litigation in any EU Member State, even if the employer has no branch, agency or other establishment in the EU (based on the Brussels I recast Regulation (Regulation (EU) 1215/2012), which replaces the Brussels I Regulation (Regulation (EU) 44/2001)). For example, employees working for a US-based company that has no EU presence (i.e. no place of business in the EU) have been able, from 10 January 2015, to litigate in the EU, regardless of any (often US) jurisdiction clause and despite the fact that their employer has no EU presence.

An employer not domiciled and not having any establishment in a Member State may now be sued in a court of the Member State where, or from where, the employee habitually carries out their work.

Not only does this mean that an employer foreign to the EU has to defend itself against legal action by its employees before the courts of the EU; it should also be noted that the (EU) rules on determining applicable law provide for the competent court to apply its national law's mandatory overriding rules.

Another consequence of the new Brussels I recast Regulation relates to aspects of simultaneous employment: disputes against multiple employer defendants in different Member States can now be brought before a court in just one Member State (provided that there is a close connection; in practice an employee will sue their employer in the country where they habitually work).

Recommendations:
• Employers not established in the EU need to be aware of this additional litigation route that is available to employees working in the EU.
• When drafting an employment contract, carefully analyse what the governing law will be and act/implement the rules according to the mandatory (overriding) provisions.
• Fix the competent court in the contract before any dispute arises (albeit these jurisdiction clauses are of limited validity, i.e. only if the employee chooses to rely on them).