International Labour Law: When New York Law Applies to an Employee of a French Bank

Imagine for a moment: you are an executive in a French bank, transferred six years ago to the New York branch. One day, your employer dismisses you. Which law applies? French law, which offers you greater protection, or New York State law, which is more flexible for the employer? This is exactly the question that arose in this case, and the answer from the Court of Cassation on 18 May 1999 set a precedent.

For landlords and tenants in Castelnau-le-Lez or Mauguio, this decision may seem distant. Yet it illustrates a fundamental principle of private international law: the employment contract is primarily governed by the law of the place where the employee habitually carries out their work. A principle that can have concrete consequences for any professional required to work abroad, or for a company that employs workers outside France.

So, what exactly does this ruling say? And how does it apply in practice? Let's break it down.

The Facts: A Story Like Many Others

Mr X, an employee of Banque Nationale de Paris (BNP), had for several years held the position of "Head of Foreign Exchange Department" at the New York branch. In 1991, he was dismissed. The employee, who had been hired in France and then transferred to the United States, challenged his dismissal before the French labour courts. He claimed damages based on French law and the collective agreement for banking staff.

But the bank argued that the employment contract was subject to the law of New York State, the place where the work was habitually performed. Indeed, Mr X had been working in New York for over six years at the time of termination. Moreover, his status as an "expatriate employee" entitled him to specific benefits but did not give him the full protections of French legislation. The Paris Court of Appeal ruled in favour of the bank, and the employee appealed to the Court of Cassation.

The debate thus centred on the law applicable to the employment contract in the absence of an express choice by the parties. The employee invoked French law, the country of hiring and the employer's nationality. The bank argued for New York law, the place where the work had actually been performed for years.

The Reasoning of the Court — Analysed

The Court of Cassation dismissed the employee's appeal and upheld the appeal court's decision. Its reasoning was based on a key principle: in international employment contracts, the applicable law is that of the country with which the contract has the closest and most significant connection. This principle, now codified in Article 8 of the Rome I Regulation (No 593/2008), was already established by case law.

In this case, the Court noted two determining factors: first, the status conferred on the employee (expatriate) did not allow him to benefit from all the rights under French legislation or the banking collective agreement, but only from strictly defined benefits. Second, the employee had been assigned to New York for over six years. Therefore, in the absence of a choice by the parties, the contract was governed by the law of New York State, the place where the work was habitually performed.

In other words, the Court considered that the strongest connection was the place where the work was actually and permanently carried out, not the place of hiring or the employer's nationality. However, this is not an absolute rule. If the employee had been seconded for a short period, the outcome might have been different. In that case, the law of the country of hiring would likely have been retained.

What few people know is that this decision is part of a broader trend among judges to favour the law of the habitual place of work, in order to provide consistent protection to the employee, who is often the weaker party. But here, paradoxically, it was the employee who wanted French law, which was more protective. The Court therefore applied the objective criterion of the place of performance, without considering which law was more favourable.

What This Means for You — In Practice

For an expatriate employee, this decision means that if you have been working in a foreign country for more than six years, your contract will likely be governed by that country's law, unless the parties have chosen another law. This can have significant consequences on your rights in the event of dismissal, paid leave, or social protection.

If you are an employer, you must be vigilant: by sending an employee abroad for a long period, you risk having your contract governed by a foreign law, with different obligations (notice periods, severance pay, etc.). It is therefore crucial to include a choice-of-law clause in the employment contract.

Let's take a concrete example: an executive from a company in Mauguio is transferred to the New York subsidiary for seven years. In the event of dismissal, New York law will apply, perhaps less protective than French law. Conversely, an employee from Castelnau-le-Lez sent on a six-month assignment to New York will remain subject to French law.

undefined, I have encountered cases where employees, after years of expatriation, found themselves deprived of certain French social protections. Hence the importance of negotiating the contract carefully before leaving.

Four Tips to Avoid This Type of Dispute

• 1. Insert a choice-of-law clause in your employment contract. From the moment of hiring or before an assignment abroad, expressly state the applicable law (e.g., "This contract is governed by French law"). This will avoid any uncertainty.
• 2. Negotiate a clear and precise expatriate status. A status that guarantees specific benefits can be useful, but it must be drafted in detail to avoid any dispute over the extent of rights.
• 3. In case of a long-term assignment abroad, consult a lawyer specialising in international law. Each country has its own rules, and a poorly drafted clause may be ineffective.
• 4. Keep a record of your workplaces. If you frequently change countries, your contracts or addenda should mention each assignment. This will help determine the applicable law in the event of a dispute.

Further Reading: Related Case Law and Developments

This 1999 decision has been confirmed and refined by subsequent rulings. For example, the Court of Cassation has held that simply being seconded abroad is not enough to exclude French law if the employee retains a close connection with France (particularly in the case of a temporary assignment).

Since 2008, the Rome I Regulation has codified these principles: in the absence of choice, the applicable law is that of the country where the employee habitually carries out their work (Article 8). If that place cannot be determined, the law of the country where the employer is established applies. The trend is therefore towards legal certainty, but each case remains specific.

For companies, it is advisable to include a choice-of-law and jurisdiction clause to avoid any surprises. French courts remain committed to protecting the employee, but they respect the proximity principle.

What You Absolutely Must Remember

FAQ

1. Which law applies to my employment contract if I work abroad without a choice-of-law clause? The law of the country where you habitually perform your work, if you have been there for a long time (several years).
2. Can I choose French law even if I work in New York? Yes, but only if you insert an express clause in your contract. This clause is valid as long as it does not deprive the employee of the mandatory protection of the law of the place of work.
3. What should I do if I am dismissed abroad and want to challenge it? First check the applicable law. If it is a foreign law, you will need to bring proceedings in that country's courts, unless there is a jurisdiction clause.
4. Does this decision apply to employees teleworking from abroad? Yes, the habitual place of work may be the home if that is where you work most of the time. This issue is currently debated.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) could save you months of proceedings — and often much more. Book an appointment →