The European jurisdiction regimes seek to protect the weaker party in the employment relationship by restricting jurisdiction to an employee’s domicile. This decision gives wide scope to this protection, with the court going so far as to grant an anti-suit injunction against proceedings in a forum expressly agreed by the parties, in order to enforce the employment protections in the Recast Brussels Regulation.
Two US-based data storage companies have been in dispute for some time over what EMC(the employer in this case) allege is targeted poaching of its employees by its competitor, Pure Storage. In January 2015, EMC’s senior vice president and managing director for the UK and Ireland, James Petter, resigned to join Pure.
His employment contract with EMC Europe Ltd, a subsidiary of the US parent EMCCorporation contained restrictive covenants. During the period of his contract he also entered into a number of Restricted Stock Unit agreements (“RSU agreements”) directly with EMCCorporation. These were agreements granting an award to Mr Petter and other employees for having made a significant contribution to the business. Those agreements provided for exclusive jurisdiction of the Massachusetts courts as well as Massachusetts law.
When he joined Pure, EMC Corporation issued a claim against him in Massachusetts for violating the terms of a “detrimental activity” clause in the RSU agreements. It argued that anyRSUs which had not yet vested should be rescinded.
Mr Petter brought claims in England against both companies in relation to his restrictive covenants and the awards under the RSU agreements, arguing he had not breached the detrimental activity clauses and that, in any event, it was unenforceable as a penalty or unlawful restraint of trade. He also sought an interim injunction to restrain the EMCproceedings in Massachusetts.
EMC challenged the jurisdiction of the English court on the basis of the exclusive jurisdiction clause.
What does the law say on jurisdiction?
The Recast Brussels Regulation determines the jurisdiction of courts over defendants who are domiciled in EU member states. The general rule is that persons domiciled in a member state shall be sued in that state, but special provisions apply to protect individuals in employment contracts (s5 of the Recast Brussels Regulation (Articles 20,21 and 22)).
An employer may be sued in the member state where the employee habitually carries out his work, but the employer may only sue the employee in the member state where the individual is domiciled. The parties may not agree a variation to this unless the agreement happens after the dispute has arisen, or the agreement improves the employee’s options of jurisdiction.
If, despite the Recast Brussels Regulation, the employer commences proceedings in a non-member state country provided for under the exclusive jurisdiction clause and not the one in which the employee is domiciled, then the court may at its discretion grant an anti-suit injunction preventing the proceedings.
At first instance, Cooke J held that Mr Petter had a good arguable case that EMC Corporation was his employer and his claim related to a contract of employment with EMC Corporation for the purpose of Article 21, and that therefore the exclusive jurisdiction agreement for the Massachusetts courts should be disregarded. However, he did not grant the injunction in respect of EMC and the Massachusetts proceedings out of respect for the judicial decision made by the Massachusetts court, which had already decided that it had jurisdiction. Both parties appealed his decision.
The Court of Appeal upheld Cooke J’s dismissal of EMC’s jurisdiction challenge, and overturned his decision not to grant an anti-suit injunction.
The case turned, said Moore-Bick LJ, on the meaning of the words “employer”, “employee” and “contract of employment” in section 5 of the Recast Brussels Regulation. EU case law says that such terms must be given an autonomous meaning but this may not necessarily mean the same meaning as in domestic law. In his view, although EMC was not Mr Petter’s employer in the general English law sense, the RSU agreements were contracts between Mr Petter andEMC.
However, there were public policy reasons behind section 5 which means that it should be interpreted to protect employees as the weaker party, which in this case meant construing its terms more widely than English law might otherwise require. “Matters relating to individual contracts of employment” should be interpreted broadly. The dispute between Mr Petter andEMC really arose out of the dispute under his contract of employment with EMC Europe, and both defendants were his employers for the purpose of the Recast Brussels Regulation.
The anti-suit injunction
Previous case law (Samengo-Turner v J & H Marsh and McLennan (Services) Ltd (2007)) had established the principle that an injunction should be granted to prevent an employer from bringing proceedings outside the member states, in order to protect an employee’s rights under s5 of the Recast Brussels Regulation. All three judges accepted that they were bound bySamengo-Turner.
What to take away
The High Court, in its first instance decision in this case, described the situation as being “an irreconcilable clash” between US and UK law. Under Massachusetts law, the Massachusetts courts have jurisdiction; under English law, the High Court has exclusive jurisdiction.
This decision, following Samengo-Turner, broadens the scope of the special protection given to employees in disputes with their employers to include matters which might not be considered strictly part of the contract of employment – in this case, a separate employee incentives scheme between the employer’s parent company and the employee. An exclusive jurisdiction clause agreed between the parties at the outset is insufficient to prevent an anti-suit injunction being awarded.
Although the English High Court has jurisdiction to hear the case, the contract at its centre is governed by Massachusetts law. The High Court will therefore have to apply Massachusetts law, subject to any mandatory English law which applies.
Anti-suit injunctions are not available in all jurisdictions – if the employee had been resident in another EU state, he would have been unable to apply to the courts of that member state for one. Also, if the agreement between Mr Petter and EMC had specified that the courts of another member state had exclusive jurisdiction (rather than a non-member state as Massachusetts was here), then the English court would not have exercised its discretion to grant an anti-suit injunction. However, anti-suit injunctions are available in Massachusetts: in fact, one was made against Mr Petter in relation to the English proceedings. In reply, and showing how strongly the English courts will defend their jurisdiction under the Recast Brussels Regulation, the Court of Appeal ordered EMC not only to take no further steps in the Massachusetts proceedings, but also to take such steps reasonably open to it to withdraw its motions in that case and to have the anti-suit injunction against Mr Petter discharged.
Whilst the outcome may seem surprising to some – and many will agree with one of the judges, Vos LJ’s, concern that an employee can agree terms in order to get obtain certain benefits, and then avoid their application when it no longer suits – the outcome has the practical benefit of avoiding proceedings continuing in both countries and the losing party in each jurisdiction simply resisting enforcement in the other, resulting in no real resolution to the dispute.