Dutch employee in Germany: which employment law applies?

A Dutch company that has staff working in Germany often opts for a Dutch employment contract. It feels familiar and fits with the rest of the organisation. Yet a Dutch contract does not mean that only Dutch employment law applies.

Choice of law, within limits

Employer and employee are in principle free to choose which law governs the employment contract. Under the European Rome I Regulation, however, that choice may not deprive the employee of the protection afforded by the mandatory rules of the law that would have applied in the absence of a choice. Without a choice of law, that is usually the law of the country where the employee habitually works. An employee who works in Germany on a structural basis can therefore often rely on the protective rules of German employment law, even if the contract refers to Dutch law.

Protection against dismissal in Germany

German dismissal law works differently from Dutch law. In Germany, the employer terminates the employment contract itself by giving notice, the Kündigung, without prior permission from a court or authority. The notice must be in writing and signed by hand; an email is not sufficient. If the employee works for a business with more than ten employees and has been employed for more than six months, the Protection Against Dismissal Act (Kündigungsschutzgesetz) applies and the dismissal must be socially justified. An employee who wishes to challenge the dismissal must, as a rule, bring proceedings before the Labour Court (Arbeitsgericht) within three weeks.

Posting is a different matter

If an employee is sent to Germany temporarily, the employment contract will generally remain subject to Dutch law. The European rules on posted workers then apply, however, which means that certain German terms of employment, such as the minimum wage and rules on working hours, must be respected. Notification obligations also apply.

Social security and tax

Which employment law applies is a different question from where the employee is insured for social security and where they pay tax. Social security is governed by European coordination rules, and tax by the double taxation treaty between the Netherlands and Germany. The outcomes may differ, particularly for employees who work in both countries.

Dismissing a German Geschäftsführer

The managing director of a German GmbH occupies a special position. His or her appointment as Geschäftsführer and the service relationship are two separate legal relationships. Removal from office as a director is a corporate law resolution, while the termination of the service contract follows its own rules. The dismissal protection of the Kündigungsschutzgesetz does not generally apply to a Geschäftsführer, which makes the terms of the contract all the more important.

What do we advise?

When hiring or posting staff in Germany, establish in advance which law applies and tailor the contract accordingly. A contract that takes the German rules into account avoids surprises in the event of a dispute or termination. If a dismissal is on the cards, have the applicable formalities and time limits assessed in good time.

This article contains general information and does not constitute legal advice. Legislation and case law may change, and the outcome always depends on the circumstances of your situation. For advice on your matter, please get in touch with us.