Jurisdiction: when can overseas employees bring claims for unfair dismissal and discrimination?

In two recent cases, the UK courts have considered the circumstances in which overseas employees can bring claims for unfair dismissal or discrimination in the employment tribunals. In the first, the Court of Session (the Scottish equivalent of the Court of Appeal) has held that an employee working abroad on a rotational basis can bring a claim against his UK-registered employer for unfair dismissal.

6 July 2010

In two recent cases, the UK courts have considered the circumstances in which overseas employees can bring claims for unfair dismissal or discrimination in the employment tribunals. In the first, the Court of Session (the Scottish equivalent of the Court of Appeal) has held that an employee working abroad on a rotational basis can bring a claim against his UK-registered employer for unfair dismissal. In the second, the EAT, although denying the discrimination claim of an individual based in Germany, has provided useful guidance on what amounts to being "ordinarily resident" in Great Britain for the purposes of claiming protection under the discrimination legislation.

Employee working abroad on a rotational basis can claim unfair dismissal (Ravat v Halliburton Manufacturing & Services Ltd)

Mr Ravat, a British citizen who lives in Lancashire, was employed by HMSL, a British subsidiary of Halliburton Inc, a large American company, for 16 years until his redundancy in 2006. His employment contract was subject to UK law. At the time of his dismissal, he was working in Libya for a German subsidiary of Halliburton. He worked a rotation with 28 days on in Libya, followed by 28 days off at home in the UK. Mr Ravat was retained on the UK pay and pensions structure, was paid in Sterling into a UK account, and HMSL deducted UK income tax and National Insurance Contributions at source. All contractual aspects of Mr Ravat's employment, including payroll and grievance procedures, and the redundancy process when his employment terminated, were dealt with from HMSL's Aberdeen HQ. Following his dismissal for redundancy, Mr Ravat claimed unfair dismissal in the employment tribunal.

By way of reminder, in 2006 the House of Lords, in Lawson v Serco, held that employees can qualify for unfair dismissal protection if, at the time of their dismissal, they fall into one of three categories:

  1. standard cases where the employee lives and works in Great Britain;
  2. peripatetic employees (e.g. airline pilots), who work in different jurisdictions but have their base in Great Britain; and
  3. expatriate employees, who might come under British jurisdiction in certain cases, for example, those posted abroad to further the business of a British employer, or employees of a British employer working in a British enclave (e.g. overseas army bases). 

In this case, a majority of the Court of Session held that Mr Ravat could proceed with his claim. However, the reasons for this decision are unclear as each judge took a different approach. Lord Osborne held that tribunals should assess whether there was a "strong connection" between the employment and Great Britain and must look at "the whole circumstances of the case": Mr Ravat was not an expatriate employee, as he did not live and work abroad, nor was he peripatetic. However, on the facts, he could demonstrate a sufficiently strong connection between his employment and Great Britain for the tribunal to have jurisdiction to hear his claim.

Lords Carloway and Brodie took a different approach:  Lord Carloway found that Mr Ravat was "more peripatetic than expatriate" and could therefore bring his claim. Lord Brodie, however, refused the appeal. In his view, Mr Ravat was an expatriate employee who had been sent out of Great Britain in order to work and had not been posted abroad for the purposes of a business carried out in Great Britain. The focus, in Lawson, when considering the expatriate category was on the place of work and did not attach any significance to where the employee lived. His case did not fall within any exceptions set out by Lord Hoffmann in Lawson and the tribunal did not have jurisdiction to hear the claim.

Impact on employers

  • This case is binding on tribunals in Scotland but only of persuasive authority in England.
  • There was clearly an element here of not wanting to deny a UK citizen who lives and pays tax in the UK and who works for a UK registered company the benefit of British law.
  • Because of the conflict in the majority decision and its divergence from Serco v Lawson, this decision may well be appealed to the Supreme Court. If it is not, we may see the "substantial connection" test begin to gain popularity in tribunals in cases where the employee does not clearly fall into one of the three categories in Lawson.
  • Employers should not assume that employees working abroad are not covered by British employment law and should be alive to the following:
    • the three Lawson categories may not be exhaustive. In particular a tribunal may be persuaded to assess whether a "strong connection" existed between the employment and Great Britain;
    • factors such as whether an employee pays income tax and, more especially, NICs in the UK and whether the employee is resident in the UK may influence the outcome - two of the judges in this case felt that Mr Ravat was not an expatriate because he had not "forsaken" his native land and did not work and live outside the UK on a stable, ongoing basis.
  • Employers who wish to weaken or break any connection between the employment and Great Britain in order to minimise the risk that an overseas employee can raise claims in an employment tribunal should consider a number of measures, such as engaging employees via offshore companies, ensuring that administration of taxation and NICs is handled offshore, payment in currencies other than Sterling, excluding employees from UK reporting lines and disciplinary and grievance procedures and expressly labelling them as "expatriate" employees.
  • However, even such measures may not defeat claims by employees in circumstances similar to Mr Ravat where there are strong moral grounds for arguing that he should not be denied rights under British employment law.
  • The legislation expressly provides that the choice of law governing the contract is immaterial and so UK statutory jurisdiction cannot be escaped simply by providing that a contract is governed by a foreign law.
  • Offshore employees who work on the UK continental shelf on a similar rotational basis can bring unfair dismissal claims in the UK as the legislation has been expressly extended to cover that territory.
  • The interpretation of the Lawson test is likely to take on greater significance as it may be applied in future to discrimination cases - see the next case report.

Meaning of ordinarily resident in Great Britain for the purposes of bringing a discrimination claim

A teacher who was working in Germany at the time when he applied and failed to be short-listed for a teaching post at a school in Cyprus was not deemed to be "ordinarily resident" in Great Britain, and so could not rely on the protection of British anti-discrimination legislation (Neary v Service Children's Education and Others).

Mr Neary had moved to Germany in April 2007 to take up a teaching post and stayed there until November 2008. In the previous 16 years he had held various employment positions abroad, interspersed with periods when he returned to the UK. In March 2008, he applied for the post of head of mathematics at St John's School in Cyprus. His application was rejected and he believed that this rejection amounted to discrimination on the grounds of his age and disability. He presented a complaint to the employment tribunal in London, giving his address in Germany.

The employment tribunal held that it had no jurisdiction to determine Mr Neary's claims because at the time Mr Neary applied for the post in Cyprus and was notified that he had not been short-listed he was not ordinarily resident in Great Britain. Ordinary residence is just one part of the test under the discrimination legislation for whether the alleged discrimination has occurred at an establishment in Great Britain.

The EAT dismissed Mr Neary's appeal and provided some useful guidance to tribunals on how the phrase "ordinarily resident in Great Britain" should be interpreted:

  • The concept of "ordinarily resident" for tax purposes was useful but not conclusive:
    • ordinary residence refers to a person's abode in a particular country, which he has adopted voluntarily and for settled purposes as part of the regular order of his life, whether of short or long duration;
    • a person may be ordinarily resident in two countries at the same time;
    • it is wrong to conduct a search for the place where a person has his permanent base or centre adopted for general purposes or, in other words to look for his "real home";
    • there are only two respects in which a person's state of mind is relevant in determining ordinary residence.  First, the residence must be voluntarily adopted; and second, there must be a degree of settled purpose; and
    • the purpose, while settled, may be for a limited period; and the relevant purposes may include education, business or profession as well as a love of a place.
  • The EAT confirmed that those principles are also relevant in deciding whether, for the purposes of discrimination legislation in the employment field, an employee was ordinarily resident in Great Britain.
  • Although the legislation required a consideration of the facts at a particular point in time (that is when the employee applies for or is offered the employment), applying those principles requires a broader investigation into the “regular order” of the employee's life at that time. This will include an inquiry into what was happening either side of the relevant date, to set it in context.

In this case, although the employment tribunal had not considered whether Mr Neary could be said to be "ordinarily resident" in Germany and Great Britain at the same time, its decision was plainly and unarguably right and Mr Neary's claim failed.

Impact on employers

  • Currently, the territorial jurisdiction test is broadly the same across all strands of UK discrimination legislation and so this decision is relevant to all protected characteristics.
  • However, this statutory test does not feature in the Equality Act 2010 so, when that Act comes into force later this year, it will be open to the courts and tribunals to apply new tests in cases involving alleged acts occurring overseas or employees working outside Great Britain. In such cases we may see them turning to the Lawson test for guidance.
  • Until then, employers who receive applications from individuals based overseas should not simply assume that the individual is not protected under UK legislation. Such employees may, in certain circumstances, be able to claim protection under the discrimination statutes. Each case will turn on its own particular facts and will depend upon the evidence as to place of residence.
  • An employee may be ordinarily resident in more than one country and may therefore have a choice of jurisdictions in which to raise a claim. Such an employee may opt for the jurisdiction where he will be awarded more compensation, or simply the easiest jurisdiction in which to raise a complaint.