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      On 11 December 2026, the Court of Justice of the European Union (CJEU) ruled on the concept of the “habitual place of work” and the law applicable to employment contracts when the habitual place of work changes during the course of employment.1  

      The CJEU concluded that the local French court must take into account all facts and circumstances when assessing which law applies to contractual obligations, including the new habitual place of work, social security obligations, and other factors connecting the employment contract to a particular country. If an employee’s habitual place of work changes during the employment relationship, then the law applicable to the contract may also change, and the most recent habitual place of work should be considered when determining which country’s law applies, especially with regard to mandatory employee protections. 

      WHY THIS MATTERS

      This ruling is significant for both businesses and employees because it clarifies how the law applicable to employment contracts is determined when an employee’s habitual place of work changes during the course of employment.

      For businesses, the decision highlights the importance of regularly reviewing employment arrangements and complying with the mandatory rules of the country most closely connected to the employment relationship.

      For employees, the ruling confirms that they may be entitled to the mandatory protections of the country where they most recently habitually work, even if their contract specifies a different applicable law. This provides greater legal certainty and protection for workers who are mobile or whose roles require them to work across borders, meaning that they do not lose important employment rights simply because their place of work changes. 

      About the Case C-485/24 Locatrans

      The case concerned a dispute between a transport company based in Luxembourg and one of its employees who worked as a driver across several European countries. Although the employment contract specified Luxembourg law as applicable, over time the employee carried out most of his work in France and was eventually registered with the French social security system.

      After a disagreement over the reduction of his working hours, the employment was terminated. The employee brought a claim before the French labour courts, seeking compensation and challenging the termination.

      The central legal question was which country’s law should apply to the employment contract, Luxembourg, as chosen in the contract, or France, where the employee most recently habitually worked. The French courts referred the matter to the CJEU for clarification on how to determine the applicable law when the habitual place of work changes during the employment relationship. 

      The Rome Convention

      The Rome Convention, formally known as the Convention on the Law Applicable to Contractual Obligations (opened for signature in Rome on 19 June 1980)2 is a foundational legal instrument in European private international law. Its primary purpose is to establish clear and predictable rules for determining which national law governs contractual relationships that have cross-border elements within Europe.

      In this case, Articles 3 and 6 of the Rome Convention are particularly relevant. Article 3 allows the parties to an employment contract to choose the applicable law, but Article 6 limits this freedom by ensuring that such a choice cannot deprive the employee of the mandatory protections provided by the law that would otherwise apply. Importantly, if all circumstances indicate a closer connection to another country, the law of that country will apply.

      These provisions are central to the case, as they guide the determination of which national law should govern the employment contract when the employee’s habitual place of work changes during the employment relationship. 

      Court Analysis

      In its judgment, the CJEU undertook a detailed analysis of the Rome Convention, particularly Articles 3 and 6, which govern the law applicable to contractual obligations and, specifically, to individual employment contracts.

      The court emphasized that the concept of the “habitual place of work” must be interpreted broadly. It includes not only the place where the employee physically works, but also where they organize their activities or where the majority of their work is carried out. If an employee works in several countries, the court must identify the country with which the work has the most significant connection.

      A key issue in this case was whether, if the habitual place of work changes during the employment relationship, the new place should be considered when determining the applicable law. The court found that the Rome Convention does not specify a particular period to be considered, but that all circumstances must be examined. If the employee has taken up work in a new country on a lasting basis, this new habitual place of work is a relevant factor in determining the law most closely connected to the contract.

      The CJEU highlighted that the Rome Convention’s rules are designed to protect employees as the weaker party in the employment relationship and to ensure legal certainty and predictability for both parties. The law most closely connected to the employment relationship should apply, especially to safeguard mandatory employee protection.

      Finally, the CJEU concluded that, under the Rome Convention, when an employee’s habitual place of work changes, the new place must be taken into account, alongside all other relevant circumstances, when determining the law applicable to the employment contract, particularly to ensure that the employee receives the protection of the mandatory rules of the most closely connected country.

      The final decision in this case will be made by the local French court that referred the matter to the CJEU.  

      KPMG INSIGHTS

      This case highlights the complexities faced by both employers and employees in cross-border employment relationships within the EU. The CJEU’s ruling underscores the importance of looking beyond the formal terms of an employment contract, such as the applicable law chosen by the parties, and instead focusing on the actual circumstances of the employment relationship, including where the employee habitually works and where social security obligations are fulfilled.

      For businesses, this means that simply specifying a particular national law in the employment contract may not be sufficient to avoid the application of another country’s mandatory employment protections if the employee’s situation changes.

      The Rome Convention and the Posted Workers Directive3 are both key instruments in the regulation of cross-border employment within the EU, but they serve complementary purposes. The Rome Convention establishes the rules for determining which country’s law applies to an employment contract, focusing on the habitual place of work and the country most closely connected to the employment relationship. The Posted Workers Directive sets minimum employment standards that must be observed when workers are temporarily posted to another Member State, regardless of the law otherwise applicable to their contract.

      The correlation between the two lies in their shared objective of protecting employees in cross-border situations: while the Rome Convention ensures that the most relevant national law applies, the Posted Workers Directive guarantees that posted workers enjoy certain core rights in the host country, even if their contract is governed by the law of another Member State.

      The Posted Workers Directive is considered a special law, and the Rome Convention does not preclude the application of such special laws. Therefore, there should be no conflict when applying these two instruments together.

      If you need support in devising, implementing, and managing your policy and processes for cross-border workers, reach your KPMG contact.

      Contacts

      Daida Hadzic
      Daida Hadzic

      Director, Washington National Tax – Global Mobility Services

      KPMG in the U.S.

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