Cross country

Individual's work patterns and arrangements have become increasingly diverse in recent years with employees often working in more than one location and often for more than one employer. Where an employee works in more than one jurisdiction, there is even more complexity and the possibility that an employee accrues entitlements under two or more jurisdiction’s labour laws.

This article is concerned with the particular legal framework in the Gulf Cooperation Council (GCC) member states consisting of the following states: Kingdom of Saudi Arabia, Emirate of Kuwait, Kingdom of Bahrain, Qatar, United Arab Emirates and the Sultanate of Oman. The GCC region’s labour force is characterised by having a large number of expatriate workers (at all levels from blue collar workers to professionals and senior executives). Every non-GCC national must be sponsored for work permit and residency visa purposes to work in a GCC country by a locally based entity. Part of the process for applying for such sponsorship (which is employer specific and not personal to the employee) is the registration of an employment offer letter setting out the main terms and conditions of employment or a prescribed form employment contract registered with government authorities (usually the Ministry of Labour). There will be mandatory application of the local labour laws and if a dispute arose a court would insist on applying the local law on the basis that the employment contract had been performed locally even where a contract provided for a different jurisdiction and governing law.

The requirements of multinationals and the increasingly global integration of such organisations means that often employees, particularly senior executives or managers, employed in the GCC are international secondees or senior executives who work out of more than one location. Holders of certain roles, for instance that of a general manager or managing director, are required to be resident in the GCC country where the company is based. In some instances, general managers in this position maintain their residency visa through regular visits but actually carry out the majority of their work in another jurisdiction; for example, Great Britain.

Establishing rights

The position of floating employees or expatriate workers has been the subject of an increasing number of cases in the UK courts, with the lead case on the territorial jurisdiction of UK employment legislation being Serco Limited v Lawson, Botham v Ministry of Defence, Crofts & others v Veta Limited &others (2006) UKHL 3. In these three conjoined cases, the House of Lords identified three instances in which an employee working abroad could claim the protection of UK employment legislation:

• employees working for a British employer operating within what amounts, for practical purposes, to an extra-territorial political or social enclave in a foreign country;
• employees posted abroad by a British employer for the purposes of a business carried on in Great Britain (e.g. the foreign correspondent of a British newspaper); and
• employees working abroad but with equally strong connections with Great Britain and British employment law.

Each case will turn on its facts. However, from the cases decided by the courts since Serco et al, it is clear that expatriate workers will struggle to establish rights under UK employment legislation unless exceptional circumstances apply. A number of factors need to be taken into account when making an assessment of whether jurisdiction is likely to arise and these include: where the employee carries out most or all of his work; where he is normally resident; where he is paid and whether he continues to pay tax in the UK; and where his line of report is and for which corporate entity, business or establishment his work is carried out for, or in other words which business profits or derives a direct benefit from his work.

In Lawson, the House of Lords recognised that an employee could accrue entitlements in two jurisdictions and therefore an employer could be faced with double claims. It specifically stated that an employee in such a situation would not be entitled to double recovery and any payments or awards received would have to be taken into account if a claim was successful under UK employment legislation.

Terminated employment

Commonly, employment claims are raised by an employee when the employment terminates, with the most common claim being unfair dismissal. Territorial jurisdiction with respect to unfair dismissal is a matter to be decided based on the facts when the employment terminates and not when the employment contract is entered into. The main statutory entitlement arising on termination of employment in the GCC is that of end of service gratuity which is a form of statutory severance pay. There are variations in this entitlement under each of the GCC country’s labour laws; however, in each instance it is an entitlement linked to length of service and calculated according to the actual final remuneration of the employee. An individual sponsored for work permit and residency visa purposes will be recognised by the relevant Ministry of Labour as being entitled to end of service gratuity on termination of the employment in the GCC country regardless of whether the employee is redeployed within the organisation in another jurisdiction and his employment therefore continues. An employee is also able to challenge his termination as being arbitrary or unfair.

In order to manage such situations, employers should draft their employment contracts carefully with a view to setting employee expectations and covering any mandatory provisions required in the jurisdictions where the employee is working. The choice of governing law and jurisdiction is also important but not conclusive as the appeal court cases have demonstrated!