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Employees working in the EU? – Employers could be at greater risk of litigation from 10 January 2015

Exposure to EU employment litigation increases for non-EU employers from 10 January 2015

From 10 January 2015, multi-nationals with no EU presence, but with employees working in the EU, could potentially be exposed to more employment litigation.

The Brussels I Regulation (Regulation (EU) 44/2001) which regulates EU jurisdictional issues, will be replaced by the “recast” Brussels Regulation (Regulation (EU) 1215/2012).  Whilst the jurisdictional aspects pertaining to employment are similar to the existing Regulation, the recast Regulation contains important changes for non-EU employers, including the extension of the right of employees to sue non-EU employers in the court of a Member State.  This right will apply even if the employer has no place of business, branch or agency in the EU.

EU Jurisdiction on individual contracts of employment – a brief re-cap

The Brussels I Regulation greatly limits exclusive jurisdiction clauses in EU employment contracts and contractually agreed exclusive jurisdiction clauses in employment contracts will only be valid if (1) they are entered into after an employment dispute has arisen or (2) the employee chooses to rely on them.

The Brussels I Regulation applies where the defendant to a claim (regardless of their nationality) is domiciled in any EU Member State.  Its general principle is that a person domiciled in a Member State shall be sued in the courts of that Member State, unless the parties otherwise agree exclusive jurisdiction.  However, as an exception to this general rule, specifically in relation to individual employment contacts, an employee may choose to sue their employer (who is domiciled in a Member State) either:

  1. in the courts of the Member State where the employer is domiciled (i.e. has its statutory seat/registered office; central administration, principal place of business) or in the Member State where there is a branch, agency or establishment (if the dispute arises out of those operations); or
  2. in another Member State where the employee habitually works; or
  3. in the Member State where the business in which the employee is engaged is or was situated (if they do not habitually work in any one country).

Employers do not have the same options as their employees: they can only sue an employee in the courts of the Member State in which the employee is domiciled (although the employer can bring a counter-claim in the court where the employee’s original claim is made).

The recast Brussels Regulation

From 10 January 2015, the Brussels I Regulation will be repealed and the recast Brussels Regulation will apply to all proceedings commenced on or after that date.  The recast Regulation broadly contains the same jurisdictional rules regarding EU employment litigation as set out in the current Regulation but, importantly, extends the ability of an employee to litigate against non-EU employers in the court of a Member State.  Therefore, a dispute can be brought in an EU court, even if the employer has no EU presence but as long as the Member State is where the employee habitually carries out his work or where the employee was engaged or situated.  Therefore, entities not based in the EU (with no branch, agency etc) but with an EU presence will, after 10 January 2015, be potentially exposed to EU employment litigation.

For example, a US business has no EU presence (i.e. no headquarters, place of business,  branch or agency in the EU), save for a number of US nationals who work for the US business in the EU and carry out an essential part of their duties there (i.e. the EU is regarded as the place where they habitually carry out their work).  Those employees have contracts with the US business which contain jurisdictional provisions relating to courts in the US.  From 10 January 2015, those EU based employees will be able to litigate a dispute in the EU, regardless of the US jurisdiction clause and despite the fact that their employer has no ‘formal’ EU presence.

Also of relevance to multinational employers and extending the scope of EU jurisdictional rules is the consolidation of disputes against multiple defendants in different Member States to a court in one Member State (provided they are closely connected).  The aim of this is to avoid the risk of irreconcilable judgments resulting from separate proceedings.  For example, if a dispute relates to contracts issues by different group companies based in different Member States, the claims – provided they are closely connected – can now be heard in the court of one Member State (rather than differing courts across the EU).

As a multi-national employer what do I need to do?

  • Non-EU multi-national employers need to be aware of this additional litigation protection afforded to their employees working with Europe.
  • When preparing any contract of employment carefully consider both the governing law and jurisdiction clauses, bearing in mind the mandatory nature of the Brussels regime within the EU.
  • Ensure across group companies, that there is a point of contact for co-ordination of EU employment disputes, so that these can be consolidated to one EU court, if appropriate; and
  • Finally, governing law and jurisdiction are technical areas of law, so when seconding or engaging any EU based employee seek specialist advice.