Working overseas: when can the employee still claim unfair dismissal?

The House of Lords has finally handed down its decision in relation to three cases where the central issue was the employee’s ability to bring a claim of unfair dismissal before an Employment Tribunal in Great Britain in circumstances where the employees themselves worked wholly or partly outside Great Britain.

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The House of Lords has finally handed down its decision in relation to three cases where the central issue was the employee’s ability to bring a claim of unfair dismissal before an Employment Tribunal in Great Britain in circumstances where the employees themselves worked wholly or partly outside Great Britain.

The background to this decision relates primarily to a former provision contained in the Employment Rights Act 1996. This provided that there was no jurisdiction under the Act where "under the employee’s contract of employment, he ordinarily works outside Great Britain". This was removed in 1999 (principally to allow compliance with the EU Posted Workers’ Directive) with no other provision being substituted. The resulting doubt as to the rules that ought to apply to individuals who were not posted workers but who nonetheless worked abroad led to a series of cases including the three that fell to be considered by the House of Lords.

In each of the three cases considered by their Lordships the employee seeking to assert UK statutory employment rights (including unfair dismissal) had been working abroad at the time of dismissal. While the 1996 Act itself now contains no geographical limitation, it was common ground among the parties that some limits must be implied, as it could not have been Parliament’s intention to provide rights to employees who may have no link whatsoever with Great Britain. The precise facts varied however:

A British company employed Mr Lawson, a domiciled British citizen. His job as a security supervisor was however on Ascension Island in the South Atlantic.

Mr Botham was treated as resident in the UK for tax and other purposes, but worked at various Ministry of Defence establishments in Germany.

Mr Crofts was employed by a wholly owned subsidiary of Cathay Pacific Airways Ltd. Cathay and his employer were both registered in Hong Kong. In his role as a pilot, Mr Crofts’ contract provided for a ‘permanent home base’, which affected where he could then choose to live. In Mr Crofts’ case, this was Heathrow and in turn he lived in Great Britain.

Among the three cases, the Court of Appeal adopted two different approaches:

1. Should the key issue be whether the ‘employment’ was in Great Britain? (The approach adopted in Serco and Botham leading to a decision that they could not claim in light of the above facts)
2. Alternatively, would being ‘based’ in Great Britain be enough? (Found to be the case in Crofts)

Lord Hoffmann has now given their Lordships’ opinion on this important issue (the other four members concurring). As any employment lawyer would have willingly agreed, having seen the development of this line of authorities over the past few years, Lord Hoffman confirmed that "the question of territorial scope is not straightforward".

However, having juggled with the various arguments and considerations he viewed to be relevant, Lord Hoffman has swung in favour of the first approach above, with some slight but important differences. While the Court of Appeal was correct to ask whether there was 'employment in Great Britain', this phrase should be treated as a general principle rather than a firm rule to be interpreted and applied. This was consistent with what Parliament appeared to have intended when originally framing the right. In the words of Lord Hoffman therefore "the application of (unfair dismissal legislation) should now depend upon whether the employee was working in Great Britain at the time of his dismissal", placing greater emphasis on what was actually happening, rather than the terms of the contract of employment.

Where the employee was physically working outside Great Britain, the employer’s base and employee’s nationality, while potentially relevant factors, would never be enough on their own to establish jurisdiction. Something more would have to be shown. The question in each case would be whether the unfair dismissal legislation applies "notwithstanding its foreign elements" i.e. the claimant would have to show strong connections with Great Britain. His Lordship, while not excluding the possibility for other examples, could think of only two situations where this would be satisfied: Where the employee is posted abroad for the purposes of a business carried on in Great Britain or where an expatriate employee operates within what amounts to an extra-territorial British enclave in a foreign country. Mr. Lawson and Mr. Botham both fell within the second example, and their appeals would therefore be allowed. In most "normal" expatriate situations therefore the position seems relatively clear that the employee will not be able to bring claims, including unfair dismissal, under the 1996 Act.

Lord Hoffman went on to confirm that Mr. Crofts, and other ‘peripatetic’ employees who, due to the nature of their job, would not work in any one territory should reasonably be allowed to treat their base as the place of their employment. The Court of Appeal’s decision in Crofts was therefore upheld.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 01/02/2006.