The Employment Appeal Tribunal (“EAT”) has confirmed that the law governing the employment contract is a relevant factor in deciding whether an employee based abroad is protected by UK employment rights.

Background

Employees who live and work overseas but are employed by a UK entity may still have access to UK employment rights. The appropriate territorial jurisdiction for any claims depends on whether, in all the circumstances, the employee can point towards much stronger connections with Great Britain and with English employment law than any other country.

In Green v. SIG Trading Limited, Mr Green was employed as Managing Director to oversee SIG’s activities in Saudi Arabia (having previously been a consultant). He was married to a Lebanese national, lived in Lebanon and commuted to Saudi Arabia for part of the working week, with the company funding his accommodation. His office base was in Riyadh. He travelled to the UK for work, but only occasionally.

Mr Green was issued with one of SIG’s standard UK contracts, which stated that the relationship was governed by English law. It also contained references to statutory rights applicable in the UK and restrictive covenants relating to the UK and Ireland.

When Mr Green was dismissed by reason of redundancy, he brought a claim in the UK for unfair dismissal. The Employment Tribunal rejected his claims, on the basis that his connections to Saudi Arabia were stronger than to the UK and because the company had distinguished between its activities in Saudi Arabia and the UK in its use of separate financial budgets.

EAT decision

On appeal, the EAT found that the tribunal had approached the assessment incorrectly. In entering into the contract the parties had expressly agreed that it would be governed by English law and this should have been taken into account as one of the material factors to be weighed into the balance. The Employment Tribunal was wrong to focus instead on the company’s subjective explanation as to why the agreement had been used (i.e. for matters of convenience only).

The case has therefore been remitted back to the Employment Tribunal.

Comment

This case is a helpful reminder of the process involved in determining jurisdictional issues. Relevant factors will include (among others) the place of recruitment, where the work is done, where the employer is based, in what currency the employee is paid, and where and how the relationship and arrangements are managed. While the case does not establish any new legal principles, it is important and serves as a warning.

The Employment Tribunal may still conclude that Mr Green’s employment has a closer connection with Saudi Arabia (meaning that the claim will fail). However, the terms of the employment contract are a material factor that should properly be considered in assessing the position. Practical arrangements surrounding the engagement of the employee, including whether they will travel from place to place or principally be based overseas, will also be relevant.

Employers should also bear in mind that territorial scope will be widely construed so as to give effect to EU-derived rights. Employees temporarily posted overseas in the EU will also enjoy minimum rights in the host country for example related to working time and holidays, minimum rates of pay, health and safety, pregnancy and maternity, and discrimination.

Ultimately, the use of standard UK contracts for overseas workers should be approached with caution, particularly if it is not intended that the individual will have UK employment rights.

UK employers who engage individuals overseas must therefore give careful thought to the contractual underpinning of the relationship, including the governing law and jurisdiction clauses. These two aspects should be considered separately. The governing law clause states which country’s set of laws will apply, whereas the jurisdiction clause covers which country’s legal system will deal with any disputes. They are not merely boiler-plate, but can impact the nature of the relationship and the way in which any future dispute is handled.