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Previous position
Before October 1999 the Employment Rights Act 1996 (ERA) stated that unfair dismissal rights did not apply to an employee if, under their contract of employment, they ordinarily worked outside Great Britain. Unfortunately, the way this was interpreted by the courts meant that it was the date on which the contract was concluded that determined whether an employee worked wholly outside Great Britain. So, for example, if an employee was recruited to work in Australia but subsequently relocated to work in London on a permanent basis, the employee was not protected from unfair dismissal because when the contract was concluded it had not been envisaged that the employee would work in London.
Partly because of this problem, the relevant part of the ERA was repealed, but nothing replaced it. In the immediate aftermath of the repeal the employment tribunals had some difficulty in determining when they had jurisdiction to hear an unfair dismissal claim brought by an individual based temporarily or permanently overseas.
The confusion continued until January 2004, when the Court of Appeal held in Serco Ltd v Lawson that employment tribunals only have jurisdiction to hear unfair dismissal claims brought by employees who are 'employed in Great Britain'. Rather unhelpfully, the Court did not set out a definitive test for determining whether someone was employed in Great Britain, commenting that there was a need for a degree of flexibility when applying the test. It did, however, reject various other tests that had been considered by the employment tribunals in the past, including the 'base test', ie where was the employee's base located?
Crofts v Cathay Pacific: facts
A differently constituted Court of Appeal has recently reconsidered the meaning of 'employed in Great Britain' in the context of several pilots employed by Varta (V), a wholly owned UK subsidiary of Cathay Pacific. The pilots were engaged under contracts of employment governed by Hong Kong law, their salaries were paid into Hong Kong bank accounts, they held Hong Kong pilots' licences, their personnel files were kept in Hong Kong and all training, disciplinary and grievance procedures took place in Hong Kong. The pilots were, however, based in London and all individual flight cycles normally began and ended in London. The pilots were dismissed and brought proceedings for unfair dismissal against V in the English employment tribunal.
The fact that the pilots' contracts required each tour of duty to begin and end at Heathrow, even if a flying cycle began somewhere else, and the fact that they received a salary that reflected a lower cost of living than pilots based in Hong Kong, led the majority of the Court of Appeal to conclude that the centre of operations was quite manifestly in London, and the pilots were therefore 'employed in Great Britain'. The Court stated that as the pilots were based 'by their contracts' in England they could pursue their unfair dismissal claims before the employment tribunal.
Impact
This decision provides a little more clarification in relation to how the Serco test will be construed in practice, with some emphasis being placed on an employee's base, in spite of the earlier rejection of this approach. When Serco is considered by the House of Lords later this year, it is hoped that definitive guidance on this knotty issue will be provided for employers.
In the meantime, businesses that require employees with global duties to work in several overseas locations throughout the working week or year, or require employees to carry out a series of temporary overseas assignments, need to bear in mind the factors that are likely to be taken into account when assessing whether the employee is 'employed in Great Britain', including:
- the home base that the individual reports into or returns to at the end of each assignment;
- where work is generated from; and
- cost of living allowances that reflect the location of the employee (and possibly accommodation and school fees allowances, and so on).
It should not be assumed that such employees cannot bring unfair dismissal proceedings in an English employment tribunal.
E-mail: tania.stevenson@cliffordchance.com;
Tel: 020 7006 8938.
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