In a recent decision, the Supreme Court gives guidance as to when an employee working abroad for the benefit of an employer’s foreign subsidiary has a sufficiently strong connection to Great Britain to bring an unfair dismissal claim under English law.
Under English law, an employee has certain rights under the contract of employment, including hours, pay, holidays and notice. In addition, an employee in employment prior to 6 April 2012 who has 12 months' continuous service and an employee employed after 6 April 2012 and who has 24 months' continuous service (both a qualifying employee) has the statutory right not to be unfairly dismissed (section 94(1) Employment Rights Act 1996).
Section 94(1) sets out five grounds, each of which amounts to a “fair reason” for dismissal:
- Reasons related to the capability or qualifications of the employee for performing work of the kind which he is employed to do.
- Reasons related to the conduct of the employee (i.e. misconduct dismissals).
- That the employee was redundant (reduction in force).
- That the employee could not continue to work in the position which he held without contravention, of his part or on the part of his employer, of a duty or restriction imposed by or under enactment (e.g. health and safety issues for a pregnant employee).
- Some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.
Accordingly, if a qualifying employee is not dismissed for one of the five reasons set out above he/she will have a claim for unfair dismissal as well as a claim for breach of contract, e.g. because the employer has failed to give proper notice.
The case of Serco Limited v Lawson – a conjoined appeal heard by our then House of Lords (now Supreme Court) in January 2006 - identified four types of cases in respect of which an individual employee can benefit from unfair dismissal protection by being able to bring a claim before an Employment Tribunal in Great Britain:
Category 1: Employees ordinarily working in Great Britain at the time of dismissal. It is the factual position which is important not what the contract may say.
Category 2: Peripatetic employees who may move between jurisdictions and be away from their “home” or “base” for weeks or months on end but who can be said to have their home or base in Great Britain at the time of dismissal.
Category 3: Expatriate employees who are posted to work abroad but the fruits of their labour benefits the business carried on in Great Britain e.g. a foreign correspondent for a British newspaper; or an employee who works for a British employer within what amounts to an extraterritorial political or social enclave (e.g. someone who works for a British consulate overseas).
Category 4: Employees who do not fit into the three categories above but who have equally strong connections with Great Britain. Their Lordships could not think of an example that fitted within this category.
The Supreme Court has now given some guidance in relation to the fourth category set out in Serco, in the case of Ravat v Halliburton Manufacturing & Services Limited.1
Mr Ravat was employed by the British subsidiary of the American parent, Halliburton. He was posted to work in Libya for another Halliburton Group company, based in Germany. He worked 28 days “on” in Libya and had 28 days “off” which he spent in England. He was paid by the UK company in sterling and remained subject to UK tax and national insurance contributions. His lines of report were to managers based in Libya and Cairo, but his personnel issues were handled by the UK company in Aberdeen. His contract was governed by English law.
Following termination of his employment, Mr Ravat brought a claim for unfair dismissal:
- The Tribunal considered that his situation fell within Category 4 of Serco.
- On appeal to the Employment Appeal Tribunal it was held that he fell into the definition of “expatriate” employee (Category 3) but, because the fruits of his labours benefited the German subsidiary, not the UK company, he could not bring a claim before the Tribunal in Great Britain.
- On Appeal to the Court of Session in Scotland the three judges all reached different conclusions: one held “peripatetic” (Category 2), one held “expatriate” (Category 3) and the third “substantial connections” (Category 4); but all held, for different reasons, that Mr Ravat could bring his claim.
Supreme Court Decision
The Supreme Court dismissed the company’s appeal and held that Mr Ravat could bring his claim before the Tribunal, notwithstanding the fact that he worked in Libya for the benefit of Halliburton’s German subsidiary, because the underlying reality of Mr Ravat’s situation was that he was employed by a UK employer, paid in sterling, paid taxes and national insurance contributions in Great Britain, spent his time off in England and viewed his home/base as Great Britain and so had a sufficiently strong connection with Great Britain (and, importantly, a much stronger connection to Great Britain than to anywhere else, be that Libya, Egypt or Germany) so as to make it appropriate in all the circumstances for a Tribunal to hear his case. The principles set out in Serco were just that, principles for guidance, not fixed rules.
If a foreign employer with a subsidiary in Great Britain, wishes to post an employee, employed by the British subsidiary, to work abroad and wishes to avoid the possibility of an unfair dismissal claim on a termination, then careful consideration needs to be given and the arrangement properly documented if the employer is going to be able to defend any unfair dismissal claim on termination of the contract.