The territorial scope of English employment rights

The government has recently committed £13m of funding to UK Trade & Investment to support British companies in their global trading efforts. While vibrant international trade brings with it exciting business opportunities, it also gives rise to increasing employment-related challenges. With business travel and more complicated employment arrangements ever on the rise, the territorial scope of employment rights has become harder to define.

The two main pieces of employment legislation exhibit a pronounced (and unhelpful) lack of clarity as to the territorial scope of their application.

The Employment Rights Act 1996 (ERA 1996) used to exclude employees who ordinarily worked outside the UK from bringing claims under ERA 1996. However, the relevant provisions were then repealed by the Employment Relations Act 1999, without any replacement wording being introduced, rendering ERA 1996 silent as to its territorial scope.

When the Equality Act 2010 (EqA 2010) came into force on 1 October 2010, it drew together the various elements of discrimination protection and contained a number of disparate pieces of legislation. Prior to this, the general rule was that it was unlawful for an employer to discriminate against job applicants or employees in relation to their employment by an establishment in the UK. There is no equivalent wording in EqA 2010 and explanatory notes, which do not actually form part of EqA 2010, likend the position to that under ERA 1996, meaning that we are, again, left with legislation that is silent as to territorial jurisdiction.

Silence is difficult to interpret, so we must turn to case law for clarity. To date, a number of cases have contributed to the leading principles for determining whether employment tribunals have jurisdiction to hear claims under primary legislation. The questions that employment tribunals have tended to consider when faced with a quandary relating to territorial jurisdiction are:

1. Did the employee ordinarily work in the UK at the time to their dismissal?

2. Where is a peripatetic employee’s base? This will be considered their place of employment.

3. Where is an expatriate employee’s place of work and base? This will usually dictate the jurisdiction for any claims, irrespective of whether they were recruited by a British company in the UK.

4. Where an employee’s place of work is not the UK, can a sufficiently strong connection with it be established to enable it to be said that parliament would have regarded it as appropriate for an employment tribunal to hear their claim?

5. Does the relevant domestic employment law give effect to rights under EU law? If so, then the territorial scope of domestic law should be interpreted as widely as possible to give effect to the EU-derived right.

Sufficient connection

These principles are very much being put to the test in the ongoing case of Clyde & Co and another v Bates van Winkelhof [2012] EWCA Civ 1207. Ms Bates van Winkelhof was an equity member of London law firm Clyde & Co working principally, but not exclusively, for Ako Law in Tanzania. On 23 November 2010, she reported to Clyde & Co her concerns that Ako Law’s managing partner was involved in money laundering and that he had paid bribes both to secure clients and more favourable outcomes for cases. On 25 November 2010, she was dismissed by Ako Law. A subsequent investigation saw her expulsion as a member of Clyde & Co on 13 January 2011. Ms Bates van Winkelhof brought whistleblowing and pregnancy/sex discrimination claims against Clyde & Co (as well as one of its senior partners). The most recent decision in this ongoing saga was handed down by the Court of Appeal on 29 September 2012, which ruled that (i) LLP members are not workers (depriving Ms Bates van Winkelhof of her ability to pursue her whistleblowing claim), and (ii) Ms Bates van Winkelhof had a sufficiently strong connection with the UK to allow her discrimination claims to proceed (EqA 2010 expressly covers partners, including LLP members). The full merits hearing in respect of Ms Bates van Winkelhof’s discrimination claims was set for November 2012. However, it remains possible that both parties may submit an appeal to the Supreme Court against the Court of Appeal’s decisions, leaving a cloud of uncertainty lingering over this Court of Appeal decision.

While we wait to see if any appeals will be forthcoming in that case, employment tribunal jurisdiction continues to be a hot topic in light of Underhill J’s (the former employment appeal tribunal (EAT) president) proposed reforms to the current employment tribunal rules ((Constitution and Rules of Procedure) Regulations 2004 (ET Rules)).This piece of legislation provides that, even if a claimant satisfies the jurisdictional qualification under primary legislation, he or she must still satisfy the rule 19(1) ET Rules test by demonstrating either that (i) the respondent resides or carries on a business in England and Wales; or (ii) the cause of action would have arisen wholly or partly in England and Wales, if the remedy was by way of county court or High Court action.

Rule 8

The employment tribunal was required to consider rule 19(1) in detail in Pervez v Macquarie Bank Limited (London Branch) & Macquarie Capital Securities Limited [2010] UKEAT/246/10. Mr Pervez was employed by Macquarie Capital Securities Ltd (MCSL), a Hong Kong based company, as a bond trader, and both lived and worked in Hong Kong. In September 2008, he was moved to London by way of “international assignment” to Macquarie Bank Ltd (London Branch) (MBL), an English company based in London and described in the assignment documentation as “the host”. The assignment was to last for one year, with the option to extend for up to five years.

Mr Pervez was required to report to MBL managers but undertake duties for the Macquarie group as a whole. London was referred to as the “host location”, with MCSL and Hong Kong being referred to as the “employer” and “home location” respectively. MBL, as host, was responsible for Mr Pervez’s remuneration and similar matters during his secondment to London. One of the terms of Mr Pervez’s London assignment was that he would be required to resign in the event that:

? his assignment was terminated by either MBL or MCSL; or

? he chose to repatriate to Hong Kong, or to relocate to somewhere other than Hong Kong, and there was no role anywhere for him within the Macquarie group at that time.

In early August 2009, Mr Pervez was told orally that his assignment would terminate at the end of the month and that the resignation clause would be activated, as there was no work for him with the Macquarie group. Mr Pervez refused to resign. On 28 August 2009, MBL gave him written notice to terminate his assignment with effect from 29 September 2009. On 18 September 2009, MCSL wrote to him terminating his employment with immediate effect. The MCSL letter was written from the Hong Kong office but addressed to Mr Pervez in London.

The facts of Pervez v Macquarie are unique in that there were three potential respondents: (1) MCSL, the Hong Kong-based employer, (2) MBL, the London-based host company, and (3) Macquarie Group Limited (MGL), the Australia-based parent company. A pre-hearing review (PHR) was held to ascertain: (a) which company was the correct respondent, and (b) whether the employment tribunal had the jurisdiction to hear the claimant’s claims, namely unfair dismissal and race and religious discrimination claims, initially brought against MBL and MGL (Claims). The PHR judge decided that the employment tribunal had no jurisdiction to hear the claims because of rule 19(1). Pervez appealed this decision.

Underhill J formed part of the EAT panel that heard Macquarie’s appeal. His judgment firstly focused on whether the claims “came within the grasp of the legislation upon which they were based” and he concurred with the PHR judge’s decision that they did. (The jurisdictional scope of the primary legislation in Pervez v Macquarie has not been addressed in this article because (i) EqA 2010 has superseded the discrimination legislation at issue in that case, and (ii) more recent case law has further clarified the jurisdictional scope of ERA 1996.)

Underhill J’s analysis in Pervez v Macquarie made it clear that rule 19(1) operated independently of, and was secondary to, the jurisdiction rights conferred by primary legislation. He accepted that MCSL (the claimant’s actual employer) could not be said to carry on a business in England in any ordinary sense. However, he seemingly felt compelled to honour what he perceived to be parliament’s intention – allowing employees to enforce protections which they notionally enjoyed – and accepted that seconding Pervez to London from Hong Kong meant that MCSL was “carrying on business” in England, even if the supply of workers was beyond the scope of the normal course of business. Simply put, a strained interpretation of rule 19(1) was adopted in order to avoid limiting the scope of primary employment rights.

Underhill J acknowledged as much, and perhaps it is this case and judgment which prompted him to propose a new rule, rule 8, as part of his recent review of the ET Rules, intending that this rule replace rule 19(1). Rule 8(c) would allow a claim to fall within an employment tribunal’s jurisdiction based on their ability to demonstrate a connection with the UK relevant to their claim(s):

“8. Presenting the claim […]

(2) A claim may be presented to a tribunal office in England and Wales if-

(a) the respondent, or one of the respondents, resides or carries on ?a business in England and Wales; or

(b) one or more of the acts complained of took place in England and Wales; or

(c) where neither (a) nor (b) applies, the connection with Great Britain by virtue of which the claimant is entitled to present the claim is at least partly a connection with England and Wales.”

While rule 8 is only at the proposal stage, the likelihood that it will become actual law in the near future is high. There are clear parallels between how case law has developed and Underhill J’s strained interpretation of rule 19(1) in Pervez v Macquarie. At the very least, these developments show which way the wind is blowing – namely, towards a broad interpretation of territorial scope.

Of course, it is possible that England and Wales may not be the only jurisdiction within which a claimant may pursue their employment claims in any given situation. While a discussion regarding the resolution of conflict of laws is beyond the scope of this article, the general position is that in circumstances where more than one court has the right to hear a dispute, it is in the court first seised that a case will proceed, whilst proceedings in the other court will be stayed. It is, therefore, usually up to a claimant to decide which jurisdiction may be more favourable to their position.

However, jurisdiction arguments will be equally important to employers looking to defeat claims at the outset without having to go through a merits-based hearing.

The broad approach currently adopted by English employment tribunals and their inclusive approach to analysing employers’ and employees’ ties to the UK affords much greater opportunity for employees to argue their way into the employment tribunal’s jurisdiction. As a result, foreign employers could be forced to deal with litigation based on unfamiliar and, in some cases, more employee-friendly legislation. UK employers should not consider employees based abroad as ‘out of sight, out of mind’.

Similarly, employers with little or no connection to the UK would be advised to seek advice as to what steps can be taken to minimise the risk of employment claims being brought against them in the UK, should their employees frequent this jurisdiction for business purposes.