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In the UK, organisations that employ overseas nationals must, in addition to considering various immigration issues, take into account numerous employment law issues, even if the overseas national is to work in the UK on secondment rather than as an employee of a UK entity.
'Employment' contract
Void contract
If individuals are subject to UK immigration control and do not have the appropriate leave to remain in the UK, their employer commits a criminal offence in employing them, and the contract of employment between the parties is void. Consequently, neither the employer nor the employee will be able to rely upon its terms. The employee will have no UK employment rights, either in contract or statute, and the employer will be unable to enforce any post-termination restrictions, contractual confidentiality obligations or clauses dealing with the protection of intellectual property (IP).
Statutory particulars of employment
Pursuant to s1 of the Employment Rights Act 1996 (ERA), employees must be provided with a written statement of the terms and conditions of their employment within two months of commencing work. If the section 1 statement is not given, or is incomplete, and the employee pursues employment tribunal proceedings that incorporate a claim for the failure to provide a section 1 statement, the tribunal may (pursuant to s38 of the Employment Act 2002) award up to four weeks' pay (capped at the maximum weekly amount specified in s227 of the ERA - currently £280).
If an overseas national is to be employed by a UK organisation, the provision of the above information is mandatory. If the individual is to be seconded to a UK organisation but will remain employed overseas, the provision of the above information is good practice, given the statutory UK employment rights that individual will have in any event.
Secondment agreements
Many employers (and organisations to which employees are seconded) rely on very simple secondment agreements - often just a letter confirming the secondment and the anticipated duration. However, careful consideration must be given to the terms of the individual's existing employment agreement and, in particular, whether appropriate protection is afforded to the organisation to which the employee is to be seconded. The following are important facts to consider:
§ Any provisions relating to the protection of confidential information and ownership of IP contained in the individual's employment contract will usually be drafted with a view to protecting information belonging to the employer (and possibly associated companies) rather than to any third party. The secondment agreement will therefore need to incorporate obligations to protect the confidential information of the UK company to which the employee is seconded and ensure that the appropriate entity (be that the employer or the company to which the employee is seconded) gains ownership of any IP created by the employee during the term of the secondment.
- Appropriate provisions should be included to entitle the UK company to terminate the secondment in specific circumstances, such as:
- in disciplinary situations where the UK company would normally terminate the employment of its own employees;
- if the individual's employment with the employer organisation is terminated;
- upon the giving of appropriate notice; or
- on the expiry of a fixed-term contract.
- The individual's terms of employment should be varied by the secondment agreement to make the employee subject to the UK company's disciplinary regime. The individual will be working within a UK organisation on a day-to-day basis, and should be subject to the same, or at the very least a similar, management regime to other employees if allegations of discrimination are to be avoided.
- Post-termination restrictions to protect the UK company from solicitation of clients and employees should also be included. Any post-termination restrictions in the employment contract will undoubtedly be drafted to protect the employing company, its employees and clients - not the third party to which the employee is seconded.
Notwithstanding the UK company's desire to protect itself, its business and its confidential information, the provisions applied to temporary secondees from overseas cannot be more stringent than the terms imposed on permanent UK employees. To do so in circumstances where the difference cannot be objectively justified will undoubtedly be discriminatory.
Jurisdiction
Pursuant to Article 3(1) of the Rome Convention (which became law in the UK by virtue of the Contracts (Applicable Law) Act 1990), a contract shall be governed by the law chosen by the parties.
In the absence of choice, Article 6(2) of the Rome Convention provides that the applicable law is the law of the country in which the employee habitually carries out work in the performance of the contract, even if the employee is temporarily employed in another country.
If the employee does not habitually work in any one country, the contract will be governed by the law of the country in which the place of business through which they were engaged is situated, unless it appears from the circumstances as a whole that the contract is more closely connected with another country. In this case the contract shall be governed by the law of that country.
However, the parties' ability to choose the law applicable to an employment contract or secondment agreement is limited to the extent that the choice must not deprive employees of rights afforded to them by 'mandatory rules of law', ie statutory employment protections that would have been applicable had the parties not made that choice (Article 6(1) of the Rome Convention). Therefore, irrespective of which jurisdiction that the contract provides is applicable, an individual working in the UK will be entitled to rely on the various employment rights and protections contained in UK statutes. Consequently, an employee may have contractual rights subject to the law of another jurisdiction, but also have statutory UK employment rights.
The recent case of Crofts and others v Cathay Pacific Airways Ltd and others reinforces this principle. Following a change of Cathay Pacific policy in 1990, which enabled pilots to live outside Hong Kong, a number of pilots entered into employment contracts with Veta Ltd, a subsidiary of Cathay Pacific registered in Hong Kong. The contracts of employment of the pilots involved were governed by Hong Kong law, their salaries were paid into Hong Kong bank accounts, they held Hong Kong pilots' licences and all training, disciplinary and grievance procedures took place in Hong Kong, from where flight instructions were issued.
However, despite this, the Court of Appeal held that Veta Ltd was effectively a shell company, and because the individuals employed by Veta Ltd had a substantial connection with the UK (including the fact that London was the allocated base area from which their flight cycles started and ended) London was their principal place of work. Consequently, those individuals were entitled to rely on UK statutory protection from unfair dismissal.
Employment Rights
In general terms, only an employee can pursue claims in relation to unfair dismissal, the right to redundancy payment, a written statement of particulars of employment pursuant to s1 of the ERA, written reasons for dismissal and various rights to time off under the ERA. If individuals are employed under a contract of service (rather than a contract for services - such as an independent contractor or self-employed consultant), they will acquire the full range of employment rights. If individuals are on secondment, they will be 'workers' rather than employees, unless their employment is transferred to the UK organisation for the duration of their stay. Although the definition of 'worker' varies according to the relevant items of legislation, the rights available to workers generally include:
- the right not to suffer unauthorised deduction from wages;
- entitlement to the national minimum wage (a fact that can be particularly important in relation to employment of overseas nationals in domestic service);
- the right not to suffer discrimination on the grounds of sex, race, disability, sexual orientation, religion or belief and, from 2006, age; and
- the right for part-time workers not to be subject to less favourable treatment than comparable full-time workers.
Some of these rights, in particular the right not to suffer discrimination, are significant even before the worker is hired.
Race discrimination
An employer's obligation not to discriminate starts well before an individual physically commences work. Pursuant to the Race Relations Act 1976 (RRA), it is unlawful to discriminate on the grounds of race in recruitment and selection, as well as in terms of employment, promotion, transfer and training. Pursuant to s3(1) of the RRA, 'racial grounds' are defined as colour, race, nationality, and ethnic or national origin.
Discrimination can take a variety of forms, including:
- Direct discrimination (s1(1)(a) RRA) - treating someone less favourably than another is or would be treated in the same or similar circumstances on racial grounds. (For example paying a secondee less than a member of the permanent workforce, or vice versa on the basis of their race would be discriminatory. However, in relation to short-term secondment, uplifts to take into account the fact that an individual is living away from home are not uncommon and are acceptable.)
- Indirect discrimination (s1(1)(b) RRA) - the application of a requirement or condition that is not objectively justified, which, although applied equally, has a disproportionate effect on members of a particular racial group (eg a requirement that English is an individual's native language, rather than a requirement that English is spoken to an appropriate level).
- Victimisation (s2 RRA) - less favourable treatment because it is known, believed or suspected that the individual has done or intends to do any act that is protected under the RRA, including bringing proceedings or assisting another to do so.
Lack of motive for discrimination is not a defence. An employer that treats one individual less favourably on racial grounds will be guilty of unlawful race discrimination unless the reason for that discrimination falls within one of the specified exemptions in the RRA. One such exemption is employment in a private household, and another is the requirement that an individual's race is a genuine occupational qualification, such as an Indian waitress required for an Indian restaurant, for the purposes of creating an authentic dining experience.
Recruitment advertisements can be a particular area of contention for employers employing overseas nationals. It is unlawful to publish an advertisement that indicates, or could be understood to indicate, an intention to discriminate against applicants from a particular racial group. An advert that discriminates unlawfully cannot form the basis of a claim of race discrimination by an individual, although complaints against adverts that discriminate unlawfully may be brought by the Commission for Racial Equality. However, such an advert can amount to evidence of an intention to discriminate, thereby providing evidence in support of a discrimination claim based, for example, upon an applicant not being recruited. An advertisement that states that an individual must have leave to remain in the UK in order to apply for the position will undoubtedly fall foul of the above provisions. The requirement to have leave to remain can only be lawful in relation to individuals actually commencing work, not to their ability to apply for the position.
Unfair dismissal
Whilst the concept of unfair dismissal is familiar to UK employers, managers and employees, it is often an alien concept for overseas nationals, particularly US employees who are used to 'employee at will' status. An overseas national employed in the UK has the right not to be unfairly dismissed and should be treated accordingly. Equally importantly, an overseas national working in the UK in a managerial position must be made aware of the right of those they manage not to be unfairly dismissed, and the circumstances in which such dismissals can arise (whether overtly or constructively), in order to minimise the risk of unfair dismissal claims.
Unfair dismissal claims commonly occur as a result of a failure to follow procedure in relation to performance or disciplinary proceedings, or in respect of the termination of employment. Since 1 October 2004, in order for a dismissal to be fair in law, an employer must not only have a fair reason for dismissing the employee (eg a reason relating to the employee's capability or conduct, a redundancy situation, or the contravention of a statutory duty if the employee remains employed - ie inability to satisfy statutory requirements regarding immigration status) but must also follow a fair procedure. That procedure must, at the very least, comply with the three-step statutory dismissal and disciplinary procedure introduced by the Employment Act 2002 and implemented by the Employment Act 2002 (Dispute Resolution) Regulations 2004.
Many employment claims stem from managers' failures to follow appropriate and/or fair practice and procedures in relation to those they supervise. In addition to informing overseas nationals of the rights of those they manage in the UK, and the appropriate procedures to be followed, it is imperative to ensure that the same procedures are applied across the workforce. Secondees should be treated no differently to other employees (subject to the terms of the secondment agreement, and authority to discipline) in order to minimise the risk of allegations of discrimination based on disparity of treatment.
Fixed-term workers
The Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (the Regulations) were brought into force on 1 October 2002, in compliance with the EC Fixed-Term Work Directive (99/70) of June 1999. The Regulations only apply to employees, and not to the wider category of 'workers'. Therefore employees on secondment from overseas organisations will not be covered.
The Regulations prohibit a fixed-term employee being subject to less favourable treatment than a comparable permanent employee on the grounds of fixed-term status unless it can be shown that there is an objective reason to justify such treatment. Less favourable treatment may include being employed on less favourable contractual terms. Although it is not always necessary to compare like with like on a clause-by-clause basis, the overall terms of the contract must not be less favourable.
Overseas nationals employed in the UK (by the UK organisation rather than on secondment from abroad) on fixed-term contracts, for example for a period commensurate with the length of their work permit, will be fixed-term employees for the purpose of the Regulations and must be treated accordingly. In addition to potential claims under the Regulations, arguments of less favourable treatment because of fixed-term status may be used to support race discrimination claims.
Conclusion
In managing overseas nationals, as with all other employees, the motto must be that prevention is better than cure. If careful consideration is given to the terms on which overseas nationals are recruited and employed or seconded, many potential claims can be avoided or at least the risk of them can be minimised. That said, only careful management of overseas nationals within the workforce will reduce the risk of claims being brought by other employees as a result of treatment or actions by the overseas national, which although acceptable in the individual's home workplace may be unacceptable in the UK.
Adele Martins, Tel: 020 7495 3003
E-mail: adele.martins@magrath.co.uk
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