By: Tessa Cranfield and Georgina McAdam
Seyfarth Shaw (UK) LLP
In two recent decisions, the Employment Appeal Tribunal in the case of Fuller v United Healthcare Services Inc. and the Court of Appeal in CreditSights v Dhunna, employees with connections to the UK have been denied protection under UK employment law.
UK employment rights - a legal lacuna
Recent changes to the two key UK employment statutes mean they are both now silent as to their territorial scope. The Employment Rights Act 1996, which governs many employment rights including unfair dismissal and whistleblowing, previously excluded employees “ordinarily working outside Great Britain” from protection, while the discrimination legislation which preceded the Equality Act 2010 limited protection to employment “at an establishment in Great Britain”. In the absence of statutory guidance, it is now for the UK courts to assess whether there is a sufficient link to the UK, with appeal court decisions scrutinised by UK employment lawyers hoping to guide their clients.
Lawson v Serco principles
The most significant appeal court decision remains that of the UK’s top appellate court, the House of Lords, in the case of Lawson v Serco. In Lawson v Serco the House of Lords identified four types of case in which an employee will be entitled to protection from unfair dismissal under the Employment Rights Act:
1. Employees ordinarily working in Great Britain - An employee can usually bring a claim if they are working in Great Britain at the time of their dismissal.
2. Peripatetic employees - The employee’s base should be treated as their place of employment.
3. Expatriate employees - Expatriate employees working outside the UK need more than a British employer or nationality to bring a claim. Something more will be required, for example:
a. an employee working directly for the benefit of his UK employer (such as a foreign correspondent of a UK newspaper); or
b. an employee working for a UK employer in a “British enclave” (such as a British army base).
4. Equally strong connection with Great Britain - Employees who do not fit into categories 1 to 3 may still be covered if they have “equally strong” connections with Great Britain and British employment law. This final category has offered the most scope to overseas employees hoping to bring themselves within the ambit of UK protections.
Until the cases reported in this article, there was however no guidance as to whether the same principles applied to UK discrimination protection.
US employee assigned to the UK - Fuller v United Healthcare Services Inc.
The case concerned a US citizen who worked in a senior capacity for a US company, in the US. There was no governing law provision in his contract of employment. The employee agreed to responsibility for the UK and Middle Eastern business for a 2-year term, for which he was provided with accommodation in the UK. The assignment was ended and the employee was terminated after he returned to the US.
Both the Employment Tribunal and, on appeal, Employment Appeal Tribunal rejected his claims for unfair dismissal, whistleblower and sexual orientation discrimination protection on the basis there was an insufficiently strong connection with the UK.
The following factors were key:
• The UK assignment had ended and he had returned to the US at the time his employment terminated.
• There was no true break in his work connection with the US. The employee remained with the same US employer on the same contract and key benefits arrangements. Certain of his US work responsibilities also continued.
• The employee’s strongest personal connection remained with the US, where he maintained his home and his partner continued to live. He was paid in US Dollars and his partner was provided with paid flights from the US to the UK to visit him.
• His contractual documentation stated that he would be based in the US and would be required to spend time in other places including the UK and UAE and the practical arrangements were consistent with that.
Helpfully, the Employment Appeal Tribunal applied the same legal test to all of the employee’s claims. This means that claims under the unfair dismissal, whistleblowing and discrimination regimes all require the same strong connection with the UK.
UK national working outside the UK - CreditSights Ltd v Dhunna
In this case the employee worked as a salesperson and was initially based in London. He then relocated to the company’s Dubai operations, which were set up as a branch of the UK employer. There were later discussions as to his relocating to Singapore. Instead, the Dubai office was closed and his employment was terminated whilst in Dubai.
At first instance, the UK Employment Tribunal did not accept that the employee had sufficient connection with the UK to establish jurisdiction. The fact that he still had a UK employer, a UK employment contract and remained on the UK payroll and administration (but not UK benefits) was not sufficient to give him UK rights. The fact the employee received support with his work from the UK was also judged to be irrelevant, given the same support was also available to staff of the employer’s other overseas operations and he was not line-managed out of the UK. He had relocated to Dubai with no job to return to in the UK, and was working for the purposes of the Asian business, for an international company headquartered in New York.
On appeal by the employee, the Employment Appeal Tribunal overturned the Employment Tribunal’s decision, on the basis it should have compared the relative strengths of the employee’s connection with the UK and Dubai and the strength of employment law protection in each country. Appealed again by the employer, the Court of Appeal however, entirely disagreed: there should not be a comparison of connections between different countries, but simply consideration of whether the employee has a “much stronger connection” with the UK than another country. The Court also made clear that it is irrelevant that the employee may not be legally protected in the other countries where he or she has connections.
On this basis, the employee was not entitled to protection under UK law. He was not working in the UK at the time his employment terminated, and his working arrangements did not bring him into the exceptional category of expatriate workers who still maintain a sufficiently strong connection with the UK.
Fuller and CreditSights: Conclusions
The variety and complexity of these types of international working arrangements challenge the UK Courts. Employers and employees often embark on international arrangements without a clear picture of the legal rights conferred. Sophisticated employees with a choice of venues and law can be expected to choose the most favourable - which may be Europe rather than the USA.
For the UK, the principles of protection are however becoming clearer. Employees who are not working in the UK at the time of termination will now benefit from UK rights in exceptional cases.