06 June 2017

Many UK businesses recruit employees to work solely overseas, and the question arises as to whether these individuals have unfair dismissal rights under UK employment law.

Unhelpfully, the Employment Rights Act (“ERA”) is silent on the issue of “territorial jurisdiction” i.e, in what circumstances can someone working abroad bring a claim under the ERA? Under earlier legislation, those who worked mainly overseas were specifically excluded.

In the leading case of Lawson v Serco Ltd, the court stated that “the circumstances would have to be unusual for an employee who works and is based abroad to come within the scope of British labour legislation”. It was acknowledged in that case, however, that there would certainly be cases where UK employment law would apply, for example where the employer was a UK business and the employee was posted abroad to work for the benefit of that UK business.

The test has developed over the years and now focuses on the need for a “sufficiently strong” or “substantial” connection between the individual and the UK, in order for UK employment law to apply.

This issue arose in the recent case of Green v SIG Trading Ltd. The employer was a UK business, opening a new business area in Saudi Arabia. Mr Green was recruited for that role. He had lived in the Middle East for many years and had no UK residence, though he was a UK national. He continued to live in Lebanon and commute to Saudi Arabia. He made occasional visits to the UK. His manager and support staff were in the UK. He was not entitled to join the UK pension scheme, and did not pay UK tax and NI. He was issued with a contract of employment subject to English law and referring to UK legislation (the tribunal stated that this had been done as a matter of “convenience” as the company did not have a Saudi Arabia-format employment contract available. The company ran separate “accounts” for the Saudi Arabia operation, so Mr Green was not directly contributing to the profitability of the UK-based operation.

The employment tribunal decided that Mr Green could not bring unfair dismissal claims in the UK under UK law. There was insufficient connection with the UK, and a much stronger connection with Saudi Arabia.

This decision was overturned by the EAT and the case was sent back to the tribunal to reconsider. While the tribunal had rightly carried out an exercise of comparing the links with the UK and the links with Saudi Arabia, and weighing up which were stronger, it had failed to attach proper weight to the terms of the employment contract which stated that the employment was subject to UK law. That was not conclusive but it was an important factor and the tribunal had wrongly disregarded it. Proper weight should be given to the fact that the parties had agreed in writing that UK law should apply, and there was no suggestion that they had in fact intended some other law to apply.

This case is a cautionary reminder to any company which engages staff to work abroad, not to just use standard UK employment contracts, but to think carefully about the relevant law, the choice of legal system which will apply, and whether it is intended that the employee will have rights under UK law. It will usually be essential to take advice both from UK lawyers and from lawyers in the foreign territory.

Contact: Douglas Strang Senior Associate dst@bto.co.uk T. 0141 221 8012