The importance of mandatory rules in cross-border employment relationships. In this article we provide a practical analysis of the CJEU’s Judgment in Locatrans Sàrl v ES [2025] and its implications in an ever-more interconnected world.
A pivotal matter in today’s world of work.
Global mobility is a defining characteristic of the modern workplace. Employees are now routinely engaged in cross‑border arrangements or working from multiple jurisdictions while performing their roles. In an increasingly interconnected business environment fuelled by rapid technological developments, employers can structure their operations to avail of multijurisdictional synergies and collaboration across vast geographic distances, time zones and, significantly, legal jurisdictions, with ease.
Businesses ahead of the curve of this trend tend to have a competitive edge. However, a critical factor that should not be forgotten when structuring a cross-border workforce remains – which law governs these employment relationships? This can have significant consequences from an immigration, employment, tax and data protection context.
What does the law say?
According to the Rome Convention (and later the EU Regulation Rome I), parties to an employment contract may choose what governing law applies to their relationship. However, the choice cannot deprive the employee of the minimum protection afforded by the law that would have applied if no choice had been made.
Of recent relevance, the CJEU Judgment in Locatrans Sàrl v ES [2025] serves as a reminder that all of the circumstances surrounding the employment relationship must be considered in determining the applicable mandatory laws. Of note, the CJEU confirms that the most recent place of work is one of the many factors to be considered in determining the law applicable to the each employment relationship.
Analysis of the Court’s judgment
What happened?
ES was employed as a driver for Locatrans Sàrl, a transport company based in Luxembourg. The contract of employment stipulated that Luxembourg law would govern the employment relationship, though the employee had been carrying out most of his work in France and was even registered with the French social security system.
The employment relationship came to an end after ES objected to a reduction of his working hours and had rejected another position. The employer treated this rejection as a resignation with no mandatory severance payment required to be made under Luxembourgish law.
The employee instituted proceedings in the French courts, challenging the termination of his employment and seeking compensation. France’s court of final appeal referred the case to the CJEU to determine whether the full duration of the employment relationship, including the most recent period of employment, should be taken into account in determining ES’s habitual place of work and, in turn, the applicable law to apply.
What did the CJEU decide?
As the contract of employment was concluded before the enactment of the Rome I Regulation, the judgment of the CJEU provides an interpretation of the similarly drafted Rome Convention.
Both the Convention and the Regulation aim to prevent employees from working under worse conditions than those applicable in the country that is more strongly connected to their employment relationship.
The CJEU noted that the Rome Convention does not provide a reference period to determine the habitual place of work. Therefore, it is necessary to look at the history of the employment. When the employee’s place of work is changed, the courts must take account of all the elements which define the employment relationship to assess which country is most closely connected to the contract when determining the applicable mandatory rules. Courts should identify one or more elements of the relationship as being the most significant in their determination, such as the state in which the employee pays taxes and contributions for the purposes of social security or the parameters used by the employer in determining salary or other working conditions.
Noting that the provisions of the Rome Convention were drafted to provide legal certainty and foreseeability to cross-border employment relationships, the CJEU confirmed that the habitual place of work over the most recent period of employment was a relevant factor, specifically where such place is intended to become the new habitual place of work. This intention to create a new habitual place of work in the most recent period of employment is objective evidence of the contract being more closely connected to that latter place.
The CJEU remitted the matter back to the French courts. In March 2026, Locatrans withdrew their original appeal, meaning that the selection of Luxembourg as the governing law in the contract could not deprive the employee of the mandatory protections of France, the state most closely connected to the contract. Locatrans was ordered to pay compensation to the employee, as well as the costs of the proceedings.
What does this mean in practice?
The mandatory rules of the country most closely connected to the employment relationship will affect how the employer is obliged to interact with the employee. What may seem lawful and ordinary under the governing law provided for in the contract might be substandard under the mandatory rules of the country that is more closely connected to the contract
It is for that reason that employers must pay special attention to all the circumstances surrounding an employment relationship that may, at any point throughout its development, contain cross-border elements, including secondments or remote work from other nations. It is clear from the decision of the court that the intention of the parties is a critical part of an examination of this matter, and consequently if an arrangement is truly intended to be a short term assignment, this should be expressly documented and reflected in how the arrangement operates in practice.
This case is another example of the importance of a strategic approach to global mobility matters, and considering a business model holistically from the outset. When organising a globally mobile workforce, important factors to consider include where employees will live, work, pay social security, whether conflicts of laws or tax issues arise, the prospect of these arrangements evolving over time and how all of those arrangements will be documented and applied in practice. Conducting this exercise from the outset typically leads to more predictable outcomes and a stronger, more robust business model.
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For more information please contact partners Ailbhe Dennehy, Rachel Barry, or any member of our Employment, Pensions and Benefits Group or your usual contact at Matheson.