Labour law in Estonia: which is the applicable law in an international agreement?

An agreement on the applicable law in an employment contract may be void if the employee should enjoy better conditions.

The Estonian Supreme Court has ruled in a civil case on the question of the applicable law to an employment contract where the parties agreed on application of Estonian law but in fact the employee worked in the construction sector in Sweden. The salary agreed was 700 euros a month, whereas according to the Swedish collective agreement in the construction sector (“minimum wage in the construction sector”) his salary should have been at least 2803 euros a month: four times more. The dispute arose from the fact that the employment contract was based on Estonian law and Estonia was chosen as the place of employment but the employee actually only worked in Sweden.

The Estonian Supreme Court ruled that the law applicable to an employment contract is determined on the basis of Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). The regulation allows the parties to freely agree on the law applicable to an employment contract. Irrespective of the contract, the law of another country will apply if the employee is deprived of the protection granted to him ‒ in this case, a salary in line with the collective agreement in the Swedish construction industry. In addition, the court declared that because the employee was permanently employed in Sweden, he could not go on secondments to Sweden and get any secondment allowances.

In general, an employment contract must be governed by the law of the country where the employee normally works, even if this is other than specified in the employment contract.

The usual place of employment does not change if the employee works temporarily in another country.

If the usual place of work cannot be determined, then under the Rome I Regulation the applicable law is the law of the employer’s place. If this cannot be determined either, the law of the country most closely linked to the employment contract applies.

Source: Order of the Civil Chamber of the Supreme Court No 2-17-458 of 13.02.2019 

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