Supreme Court case
Unresolved issues and other case law
Employees who live in Britain and commute to work abroad may have unfair dismissal rights in Britain, particularly if the employment contract is governed by British employment law and the employee has been reassured that he or she will retain British employment law rights. On February 8 2012 the Supreme Court ruled that unfair dismissal rights will be available where the employment relationship has a stronger connection with Britain than with the foreign place of work.
Employers should bear this ruling in mind when determining the governing law that applies to an individual's employment contract, how to respond to requests for reassurance on employment law rights, and in which countries to recruit. They should also consider whether unfair dismissal rights may apply before deciding the process and reasons for dismissal of internationally mobile employees.
In Lawson v Serco the House of Lords (now the Supreme Court) established that an employee can claim unfair dismissal in Britain if he or she is:
- employed in Britain at the time of dismissal;
- a peripatetic employee based in Britain; or
- an expatriate employee posted abroad by a British-based employer to work for the British business, in a British enclave abroad or with some other equally strong connection with Britain and British employment law.
However, recent cases have led to confusion as to whether these three categories are exhaustive and, if so, how much flexibility applies to each category.
In Ravat v Halliburton Manufacturing and Services an employee of a British company worked a rota of four weeks mainly off duty in the United Kingdom, followed by four weeks in Libya for a German group company. He was paid and taxed in the United Kingdom within the normal remuneration structure applicable to employees based there. He was a British citizen and lived and had been recruited in Britain. His dismissal was handled by a human resources department in Aberdeen.
The Scottish Court of Session ruled that the employee was entitled to bring an unfair dismissal claim, but failed to agree on whether this was because he fell within a fourth category (if this was permitted by Lawson) or because he fell within the peripatetic category.
The Supreme Court has now confirmed that the second and third categories identified in Lawson are merely examples of situations in which there is a sufficiently strong connection between the employment and Britain or its employment law. Thus, other situations may arise in which there is such a connection.
An individual in the expatriate category who both works and lives outside Britain (ie, the third Lawson category) will need an especially strong connection with Britain and British employment law. In contrast, where the employee has his or her home in Britain, with all the consequences that flow from this for the terms and conditions of employment, the burden of showing sufficient connection is less onerous.
The key is whether the employment relationship has a stronger connection with Britain than with the foreign country where the employee works. Factors which are relevant, but not determinative, include:
- the place of employment;
- the issue of whether the relationship was "rooted and forged" in Britain - in other words, whether the employee is a British national and was recruited in Britain by a British company;
- the governing law of the employment contract;
- the place in which the employee lives; and
- the issue of whether reassurance was given as to whether British employment law applied.
The court did not attach as much significance to the fact that the employee was working for a German associated company as it would have done had the company not been a Halliburton group company. It recognised that:
"the vehicles which a multinational corporation uses to conduct its business across international boundaries depend on a variety of factors which may deflect attention from the reality of the situation in which the employee finds himself."
The question was ultimately one of fact and degree. The Supreme Court therefore upheld the tribunal's ruling that there was sufficient connection with Britain in this case.
Unresolved issues and other case law
Although this case brings some clarity to the territorial ambit of unfair dismissal law, there remains uncertainty as to when employees working outside Britain can bring discrimination claims under the Equality Act 2010, given that the act contains no express territorial jurisdiction limitation.
A recent Employment Tribunal decision(1) considered that the Lawson test should apply in relation to a pregnancy discrimination claim by a UK-qualified solicitor and equity partner of a UK law firm who was expelled from the partnership while working in Tanzania. The tribunal ruled that the claimant had sufficiently strong connections with Britain to justify the tribunal having jurisdiction. Among other things, it noted that:
- the claimant worked at least partly in Britain;
- the limited liability partnership (LLP) agreement was governed by English law;
- the claimant was a member of an LLP, which resulted in her agreeing budgets with her partners in London;
- the claimant visited London regularly;
- the claimant was mainly paid from London;
- the claimant's time recording was done on the LLP's time-recording system;
- all invoices generated were from Britain;
- the claimant was provided with administrative support from London;
- the claimant appeared on the Law Society online list of solicitors as a member of the LLP; and
- the LLP's press releases referred to her as a member.
It may be that a wider group of employees than those within Lawson can avail themselves of Equality Act rights. Employees working partly in Britain were protected under the predecessor legislation and it is unlikely that tribunals will give the act a narrower scope. Furthermore, Duncombe and Bleuse have established that UK laws which are derived from EU law must be construed as permitting claims in England where English law is the proper law of the contract, at least where the employee works in the European Union. This area remains ripe for Supreme Court attention.
The territorial ambit of legislation is only part of the picture. The tribunals must also have procedural jurisdiction, which requires the employer to reside or carry on its business in Britain, although this was given a broad interpretation in Pervez v Macquarie Bank.
For further information on this topic please contact Andrew Brown at Herbert Smith LLP by telephone (+44 20 7374 8000), fax (+44 20 7374 0888) or email ([email protected]).