On 17 November 2023, the Dutch Supreme Court (hereinafter: Supreme Court) ruled again on the question which law is applicable with regards to an employment contract of Hungarian drivers in international road transport. This judgment was prompted by a cassation complaint against the judgment of the Arnhem-Leeuwarden Court of Appeal. Previously, the Supreme Court gave some guidance as to how the lower courts had to answer this question. The Supreme Court actually did so in the same case that was then heard by the Court of Appeal in ‘s Hertogenbosch. After reading this update, you will know which connecting factors are of particular importance in determining whether the law of a country other than the usual country of employment applies.
Facts of the case
Ten Hungarians are employed as international truck drivers by a Dutch company. They have entered into a written employment contract with a Hungarian transport company. This Hungarian company has a Dutch sister company and a Dutch parent company. The employment contracts do not contain an express choice of applicable law, nor was the collective labour agreement for professional freight transport declared applicable. However, the drivers argue that Dutch (collective labour agreement) law applies and claim wages according to Dutch standards, informing their employer that, at least temporarily, they will not respond to calls for work. Thereupon, the drivers were dismissed with immediate effect.
In 2017, the ‘s Hertogenbosch Court of Appeal ruled that the Posting of Workers Directive did not apply, that Hungarian law applied to the drivers’ employment relationship with Silo-Tank because Hungary was their “usual country of work or, in any case, the country with which the employment contracts were most closely connected” within the meaning of European and internationally applicable law. The Court of Appeal also referred to the Schlecker judgment of the European Court of Justice of the European Union (hereinafter: the Court of Justice).
The Supreme Court overturned this judgment of the ‘s Hertogenbosch Court of Appeal because the court had failed to include in its assessment each of the points that, according to European case-law, must be taken into account in particular when determining the usual country of work. The Supreme Court then referred the case to the Arnhem-Leeuwarden Court of Appeal for further consideration. Now, however, cassation complaints have been filed again, challenging the judgment of the Arnhem-Leeuwarden Court of Appeal.
Usual country of work
The first complaint concerns the criterion of the ‘habitual country of work’. According to Article 8(2) of the Rome I Regulation, the employment contract is governed by the law of the country in which the work is habitually performed. The criterion of the habitual country of work is determined, also in the light of the Koelzsch judgment of the Court of Justice, which provides a framework for assessment focused on the transport sector, on the basis of all the elements characterising the activity, as well as the place where the employee performs the main part of his obligations towards his employer. Particularly important here are the place from which the employee carries out his transport assignments, receives instructions for his assignments, and organises his work. The same goes for the place where instruments of work are located, it is a particularly important aspect of the relevant facts and circumstances. The court must also check in which places the transport is mainly carried out, in which places the goods are unloaded, and to which place the employee returns after his assingments. However, this enumeration of factors is not exhaustive.
The first complaint – in brief – is that the court did not sufficiently adhere to this framework of review. The court had in fact given weight to the circumstance that the instruction for the transport assignments were given from The Netherlands and that the work was organised from The Netherlands as well. The Supreme Court ruled that this was based on an incorrect view of the law, because the decisive factor was precisely from where the employee received his instructions and where he (the employee) organised his work. Thus, it was not, or at least not without more compelling arguments, decisive where the employer issued his instructions and where he (the employer) organised his work.
Another complaint concerned the fact that the drivers had to hand in their holiday slips in The Netherlands. Against this, the Hungarian transport company argued that holiday requests had to be submitted to them and that occasional forms submitted at other places were forwarded to them. Moreover, the notifications of illness were made in accordance with Hungarian law. Taking this into account, the Supreme Court ruled, the Court of Appeal could not establish without further substantiation that the notifications of illness and requests for leave (also) took place in The Netherlands.
Closer ties than usual country of employment
Sometimes, the law of a country other than the usual country of employment may still apply. This can happen when that other country has a closer connection to the employment contract. In making its assessment, the court should take into account all circumstances characterising the employment relationship, with particular importance being attached to the country in which the employee pays taxes and levies on income from work, as well as in which country he is affiliated to social security and the various pension, health insurance, and disability schemes. The court should also take into consideration circumstances such as the criteria regarding the determination of salary and other conditions of employment, the Supreme Court said in its ruling.
If the court finds that there is a country with a (manifestly) closer connection than the habitual country of employment to the employment contract, this requires a specific justification from the court. It must show why, in all the circumstances, there is such a manifestly closer connection with that country that justifies making an exception to the principle of applicability of the law of the habitual country of employment. A finding that wages are actually determined in a place outside the usual country of employment is not in itself sufficient. The consideration that the payment of taxes and social security contributions in a certain place is not a consequence of a choice for that country as country of work but only of the fact that the employees lived there, is also incorrect, as European case law has already ruled that the reason for paying taxes and social security contributions in a certain country is not of particular importance. The Arnhem-Leeuwarden Court of Appeal thereby failed to recognise that taxes and social contributions are paid in a particular country, as such relevant for answering the question of whether there is a closer connection with a country other than the usual country of work. Therefore, the Court of Appeal’s ruling cannot be upheld, the Supreme Court said.
Back on the road again
The drivers and their former employer can hit the road again… This time the Supreme Court refers the case to the Amsterdam Court of Appeal for further consideration. So it is likely to be continued in due course. Anyhow, this judgment tells us how to determine which law applies in cross-border employment, more specifically in international road transport, because the Supreme Court has ruled that all the circumstances of the case must be considered, in particularly in which country taxes are paid and where the employee enjoys social security entitlements. Moreover, we now know that the circumstance that wages are determined in a particular place is insufficient to determine on that basis alone that the law of a country other than the usual country of work is applicable. If you have any questions in cross-border employment, please contact one of our lawyers to help you get started.