Market globalization has increased the complexity of labor relationships, which often entail signing employment contracts that include an international component. For the purposes of this post, an “International Employment Contract” refers to an employment contract with at least one international component, i.e., either the company and/or employee entering into the agreement are foreign, or the services are rendered abroad.

These international components may have an impact on the rules applicable to the employment contract. This post analyzes the criteria which should be considered to determine the relevant law. In case of conflict, once the international judicial jurisdiction has been determined in favor of Spanish labor courts, the following question must be answered:

Which is the applicable law?

This issue is key, as determining one or other law as applicable will establish the rules that solve the conflict. Consequently, the applicable law may significantly change the outcome of the conflict.

Please note that Spanish labor courts will determine the law applicable to an International Employment Contract according to Spanish conflict rules. The Spanish conflict rule that determines which is the law applicable to an individual employment contract is specified in section 8 of “Regulation number 593/2008 of the European Parliament and of the Council of June 17, 2008, on the law Applicable to contractual obligations” (“Rome I Regulation”).

This section establishes the following criteria for determining applicable law:

Primarily, the law chosen by the parties. This choice must be made expressly according to the terms of the contract or the circumstances of the case. Consequently, freedom of choice is the first criterion when determining the law applicable to an International Employment Contract. However, because employees are presumed to require reinforced protection, Rome I Regulation does not refer to freedom of choice in absolute terms.

Thus, under this Regulation, such a choice of law may not deprive the employee of the protection afforded by provisions that cannot be repealed by agreement or those under the law that, in the absence of choice, would have been applicable pursuant to the other criteria in section 8.

When (i) there is absence of choice of law by the parties or, (ii) the parties have chosen a law in relation to the provisions that cannot be repealed by agreement, applicable law will be:

  • That of the country in which (or, subsequently, from which) the employee regularly renders services.
  • Where the applicable law cannot be determined according to the above criteria, the law of the country where the place of business of the company that hired the employee is located.
  • Finally, if it appears that the contract is more closely connected with the law of a country other than those that result from applying the above criteria, the law of this country will apply.

Regardless of the above, in the framework of employee displacements within transnational rendering of services in companies located in the EU or an EEA State, under Directive 96/71/CE, displaced employees will be entitled to the minimum rights regarding working conditions foreseen in the State where they have been temporarily relocated.

In Spain, Act 45/99 incorporates into the Spanish legal system the provisions of Directive 96/71/CE, recognizing as minimum working conditions to which employees are entitled, among others, those related with: (i) working time, (ii) salary, (iii) equal treatment and non-discrimination, (iv) employment of minors, (v) prevention of occupational hazards, (vi) non-discrimination of temporary nd part-time employees, and (vii) free association, unionization and right to strike.

In conclusion, when entering into an International Employment Contract, it is advisable to carry out a detailed analysis of the international components of the contract in order to clarify the applicable law and the rights of the employees in case of conflict.

Authors: Manel Fresco and María Arlá

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