The Legal 500

In today

Following the repeal of s196, however, any geographical limitations on the ERA were removed. Read literally, the ERA seemed to apply to any individual who works under a contract of employment anywhere in the world. The right of an employee with an overseas connection to claim unfair dismissal has been the subject of some considerable debate.

This debate eventually found its way to the House of Lords, which recently considered the right to claim unfair dismissal under s94 in the context of three cases:

• Serco Ltd v Lawson, in which L worked as a security supervisor at an RAF base on Ascension Island for a British employer. He was not a British taxpayer.
• Botham (FC) v Ministry of Defence, in which the MOD employed B as a youth worker at the British Forces Germany Youth Service. He worked at various MOD establishments in Germany as part of the ‘civil component’ of the British forces in Germany and was treated as resident in the UK, rather than Germany, for various purposes, including taxation.
• Crofts and others v Veta Ltd and others, in which the employer was a wholly owned subsidiary of Cathay Pacific Airways Ltd. Both were Hong Kong companies. C was based at Heathrow and lived in the UK.

Lord Hoffmann gave the only detailed judgment. He pointed out that although at first blush s94 appeared to confer jurisdiction in respect of employees throughout the world, he accepted that the UK rarely ‘purports to legislate for the whole world’. He then attempted to determine what implied territorial limits applied to s94. Three categories of employee were identified for the purposes of assessing whether an unfair dismissal claim could be brought:

1) the standard case: employees working in Great Britain;

2) peripatetic employees: employees who move to and fro, or from place to place; and

3) expatriate employees: employees based overseas.

Standard case
Employees who work in Great Britain come within the standard category. In the House of Lords’ view, whether or not someone comes within s94 will be determined by whether he is ‘working in Great Britain at the time he is dismissed’. The issue is not where the contract originally contemplated that the employee would be working, as it could have been concluded many years previously and situations inevitably evolve. If, however, there is any doubt whether an employee is really working in Great Britain or whether he is merely on a casual visit (for example, in the course of peripatetic duties based elsewhere) the terms of the contract and the prior history of the contractual relationship could be relevant to determining whether he is working in Great Britain at the time he is dismissed.

Peripatetic workers
Peripatetic workers are those whose work takes them to many different places. For this category (which included Mr Crofts) the House of Lords considered that the employee’s base from where he operated at the time of dismissal, rather than the terms of the original contract, are key. The guidance set out by Lord Denning in Todd v British Midland Airways Ltd was approved as the most helpful guidance on the application of s94 to the peripatetic employee type of case:

‘A man’s base is the place where he should be regarded as ordinarily working, even though he may spend days, weeks or months working overseas… You have to find at the material time where the man is based.’

In the Veta case the first instance tribunal reached the view that the centre of Veta pilots’ operations was London. This was because their tour of duty began and ended there, and they were paid a salary designed to reflect a lower cost of living than that experienced in Hong Kong. The House of Lords upheld this decision, finding that s94 should apply to peripatetic employees who are based in Great Britain. Other categories of peripatetic employee identified by the House of Lords included international management consultants, salesmen and mariners.

Expatriate employees
In the House of Lords’ view this is the hardest category of employee for the purposes of determining whether they come within the scope of s94. The concept of a ‘base’ used in relation to the peripatetic employee is of no assistance in relation to expatriate employees. It was accepted 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.

As a minimum, to come within the scope of s94 the employee would have to be working for an employer based in Great Britain. But that would not be enough. In the Court’s view something more is necessary. British nationality or even having been recruited in Britain would not provide that ‘something more’. It could, however, be provided by the fact that the employee is posted abroad by a British employer for the purposes of a business carried on in Great Britain, although this would not cover employees working for a business conducted in a foreign country which belongs to British owners or is a branch of a British business. To come within the scope of s94, the expatriate employee would have to be ‘a representative of a business conducted at home’.

Cited by way of example of an expatriate employee coming within s94 was a foreign correspondent on the staff of a British newspaper, who was posted to Rome and lived there, but who remained a permanent employee of the newspaper and could be posted to some other country.

The Court also referred to the case of Financial Times Ltd v Bishop. B was a sales executive working for the FT in London. When he was dismissed he had been working for three years in San Francisco selling advertising space. In the House of Lords’ view, the question was whether B was selling advertising space in San Francisco as part of the business which the FT conducted in London, or whether he was working for a business which the FT or an associated company was conducting in the US, for example by selling advertising in the FT’s American edition. If the latter was the case then s94 would not apply.

Another class of expatriate employee is the employee of a British employer operating within what amounts for practical purposes to be an extra-territorial British enclave in a foreign country. The House of Lords found that this was the position of Mr Botham, who worked in a military base in Germany, and Mr Lawson, who worked at the RAF base on Ascension Island. However, Lord Hoffmann considered that the latter’s case was not quite so strong:

‘While it is true that Mr Lawson was there in a support role, employed by a private firm to provide security on the base, I think it would be unrealistic to regard him as having taken up employment in a foreign community in the same way as if Serco Ltd were providing security services for a hospital in Berlin.’

Referring to the decision in Bryant v Foreign and Commonwealth Office, where it was held that s94 did not apply to a British national who had been locally engaged to work in the British Embassy in Rome, the House of Lords considered that this decision was correct.

The House of Lords therefore ruled that an expatriate employee can claim unfair dismissal under s94 if: (i) the employee is posted abroad to work for a business conducted in Britain; or (ii) where the employee works in a political or social British enclave abroad. It was accepted that there may be other examples of expatriate employees coming within s94, but no further examples could be provided. It was stressed that any other category of expatriate employee would have to have equally strong connections with Great Britain and British employment law for s94 to apply.

Comment
Although the House of Lords’ guidance is welcome, it fails to establish hard-and-fast exceptions or comprehensive guidelines. Before dismissing an expatriate employee the risk of an unfair dismissal claim will have to be evaluated on a case-by-case basis. Will individuals seconded overseas who remain employees of a UK entity come within the scope of s94? Presumably they are working for the benefit of the overseas entity and therefore would not pass Lord Hoffmann’s expatriate test. But could they also be viewed as peripatetic employees if at the end of each secondment they return to the UK?