BAG: Pre-formulated choice of law clause fails transparency test

A German employer’s standard contract clause choosing German law was ruled invalid because it didn’t clarify that Dutch labor protections could still apply. The ruling affects cross-border remote workers and highlights the need for clear legal disclaimers in employment contracts.

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Clause choosing German law struck down

The Federal Labor Court (BAG) ruled on March 19, 2026 (case no. 2 AZR 53/25) that a standard contract clause selecting German law was invalid. The clause failed to explain that Dutch labor protections could still apply to an employee working remotely from the Netherlands. For workers in similar situations, this means foreign labor laws may override contract terms—even if the contract says otherwise.

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Why the court intervened

The clause was unclear about an important rule: Under EU law, employees keep the protections of the country where they usually work, even if the contract picks a different country’s laws. The court found the clause misleading because it didn’t mention this exception, potentially discouraging workers from asserting their rights.

What happened in this case

A Dutch IT worker employed by a German company had been working fully remotely from the Netherlands since 2020. When the employer terminated his contract during sick leave, the worker argued Dutch law should apply—under which the termination would be invalid. The court agreed, finding the worker’s usual workplace was the Netherlands, not Germany.