Cross-border employees must bring claim in the country they essentially work

An employee living in Salzburg, Austria, entered into an employment contract to work as a cleaning assistant in Munich, for a German company. However, she was never assigned any work although she remained contactable by phone and ready to work. She was later terminated by the company.

A couple of months later, the employee brought a claim against the company for outstanding salary payments, leave payments and other amounts corresponding to three months of employment. She attempted to file the claim against the company in Austria, but the company disagreed and instead maintained that the claim should be submitted in Germany.

As a result, the Austrian court referred the question to the European Court of Justice which then had to determine if the claim had to be brought in Germany, as the “habitual place of work”, although the employment contract was concluded in Austria and the employee had never performed any work.

Habitual place of work is decisive even if no work has been performed

The main rule is that employees can bring their claim in the country where a company is domiciled or, where the work is habitually carried out in fact performs the essential part of his or her duties, and if there is no such place, where the company that engaged the employee is situated.

Traditionally, the habitual place of work is the place where the employee in fact performs the essential part of his or her duties. Among several questions, the European Court of Justice therefore had – for the first time – to interpret if it was possible to consider Germany as the “habitual place of work” when no work had ever been performed by the employee – or if it was Austria, the place where the employee had been prepared to work throughout the employment.

According to the European Court of Justice, the decisive factor had to be the intention of the parties as described in the employment contract. This approach would provide the highest degree of predictability, because the place of work in the employment contract as a main rule always would be easy to identify. Because the employee had been employed to perform the essential part of her work obligations in Munich, Germany, her claim therefore as a main rule had to be brought there.

IUNO’s opinion

IUNO recommends that companies are aware that this judgement emphasizes the importance of defining the habitual place of work in an increasingly international environment. This is because the judgement shows that it does in principle not play a role where an employment contract is negotiated and signed. What is decisive is where the essential part of the work is to be carried out, according to the employment contract, irrespective of any contrary national rules.

Our recommendation applies across the Nordics. Contrary to Sweden, Denmark has opted out of this legal framework. However, the conclusion still applies because of a parallel agreement with the EU which makes the legal framework applicable in Denmark. The judgement is also relevant to Norway, due to the Lugano Convention. This is because the purpose of the Convention is to achieve a uniform level of rules as to where a claim must be brought as well as recognition and enforcement of judgements, provided that there has been no change from the rules in the Convention.

[European Court of Justice in case C-804/19 of 25 February 2021]