When employees work permanently from a home office abroad, a standard-form clause choosing German law may not be sufficient if it does not make clear that mandatory employee protections under foreign law may still apply, the German Federal Labor Court (Bundesarbeitsgericht (BAG)) held in its judgment of March 19, 2026 (Ref. No. 2 AZR 53/25).

Quick Hits

• A choice-of-law clause stating, “German law applies to the employment relationship,” lacks transparency and is invalid if it does not indicate that mandatory foreign employee protections may still apply.
• For employees who work permanently from a home office abroad, the law of the habitual place of work may govern the validity of a termination of employment.
• The validity of the choice-of-law clause, however, is determined by the law that would apply under the Rome I Regulation if the choice of law were effective, which in this case is German law.

The Case—Termination During Permanent Remote Work in the Netherlands

The employee, a Dutch national, had been employed by a German employer since 2018. The employment contract contained the following clause: “German law applies to the employment relationship.” Beginning in March 2020, the employee worked exclusively from the employee’s home office in the Netherlands, initially because of the pandemic and later on a permanent basis. In January 2023, the employer terminated the employment relationship for operational reasons in two letters, one in English and one in German. At that...

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