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Introduction

This case, heard on 22 November 2011, concerns the territorial limitation of the protection against unfair dismissal conferred by the Employment Rights Act 1996, s 94(1).  Read literally the s 94(1) of the 1996 Act applies to any individual working under a contract of employment anywhere in the world. This, of course, cannot have been Parliament’s intention. The question currently before the Supreme Court is: what is the test to be applied in determining whether an employee working abroad will be protected from unfair dismissal under the ERA 1996?

Current state of the law

The House of Lords decision in Lawson v Serco Ltd [2006] ICR 250 is the leading case in this area.  Lord Hoffman delivered the leading speech in that case and identified three circumstances in which an employee would be able to claim protection under s 94(1):

1. Standard cases: where the employee was working in Great Britain at the time of his dismissal the employee will be entitled to claim protection.

2. Peripatetic employees: where an employee does not work exclusively in Great Britain but is based in Great Britain the employee will be entitled to claim protection.

3. Expatriate employees: Lord Hoffman described these employees as the most difficult class and noted 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. Lord Hoffman stated that something more is needed than merely working for a British company and gave examples where expatriate employees would be covered such as an employee posted abroad to work for a business conducted in Britain and an employee working in a political or social British enclave abroad.

The facts

Mr Ravat was employed by Halliburton Manufacturing & Services Ltd (“HMS”) from 1990 until he was made redundant in 2006.  From 1995 onwards his work was outside the United Kingdom, initially in Algeria and then from 2003 in Libya.  Mr Ravat’s work pattern was in accordance with HMS’ “international commuter assignment policy”.  In accordance with this policy Mr Ravat was in a job-sharing arrangement in which he worked for 28 days in Libya followed by 28 days at home in Preston, Lancashire. Whilst at home Mr Ravat did some work for HMS, such as responding to emails, but he accepted that he was not required to do so as part of his contract.

Mr Ravat was paid on HMS’ normal UK pay and pension structure.  He was paid in pounds sterling into a UK bank account and he paid UK tax and National Insurance Contributions. Mr Ravat’s Human Resources issues (including payroll, grievance and redundancy) were dealt with through HMS’ Aberdeen office.

HMS provided services to other companies within the Halliburton group.  In these circumstances, the work Mr Ravat actually performed in Libya was for a German co-subsidiary of HMS. The German company was charged for the costs associated with employing Mr Ravat. In Mr Ravat’s day-to-day duties he reported to Halliburton group employees based in Libya and Cairo.

Mr Ravat’s contractual documentation stated that his employment was governed by UK legislation.  When Mr Ravat was threatened with redundancy he raised a grievance in accordance with HMS’ UK grievance policy.  When Mr Ravat was made redundant, he was purportedly dismissed and paid in accordance with UK statutory provisions and when he appealed against his dismissal the appeal was heard at HMS’s Aberdeen Office.

Mr Ravat made a complaint of unfair dismissal to an Employment Tribunal.  A jurisdictional question arose because, as set out above, the claimant was not working in Great Britain when he was dismissed.

Decisions in the Employment Tribunal and Employment Appeal Tribunal

At first instance, Chairman Mr R G Christie considered Lawson v Serco Ltd and found that the claimant in the present case did not fall into any of Lord Hoffmann’s categories.  The Tribunal found that Mr Ravat did not fit into the “expatriate” category because he did not live abroad.  However, the Tribunal found jurisdiction on the basis that there was a “substantial connection” between Great Britain and the employment relationship.

On appeal in the Employment Appeal Tribunal, the Honourable Lady Smith held that the Tribunal erred in law by applying a test of “substantial connection” with Great Britain.  Lady Smith found that Mr Ravat plainly fell into Lord Hoffman’s “expatriate” category.  However, Mr Ravat did not have “something more” than merely working for a British company, as required by Lord Hoffman.  According to the EAT, Mr Ravat had “something less” and that was that he was actually working in the operation of a German company, reporting for his daily work not back to Britain but to a manager of the German company in Libya and was dismissed by an employee based in Cairo.

Lady Smith also found that the Tribunal had fallen into error in light of ERA 1996, s 204.  That section states, in effect, that the proper law of the contract is of no materiality when considering the reach of statutory rights.  Lady Smith found that the Tribunal had taken into consideration the proper law of the parties’ contract and the reassurances given to Mr Ravat by HMS about the availability to him of UK employment law, neither of which were relevant.

Decision of the Court of Session

The Court of Session (Inner House) found in favour of Mr Ravat by majority.  All three Lords gave individual judgments (Lord Brodie dissented).

Lord Osborne held that it was not necessary for an employee to fit within one of the three categories described by Lord Hoffman.  In the opinion of Lord Osborne the correct question was whether an employee has “strong connections with Great Britain and British employment law” rather than a “substantial connection”.  Lord Osborne found that Mr Ravat did have the required “strong connection” and so allowed the appeal.

In Lord Carloway’s view Lord Hoffman had set out three definitive categories of employees, into which every person is capable of being squeezed.  Lord Carloway found that it was most significant that Mr Ravat paid UK tax and National Insurance Contributions.  Lord Carloway found that Mr Ravat was more peripatetic than expatriate and allowed the appeal.

Lord Brodie also found that Lord Hoffman’s three categories were comprehensive but rejected Mr Ravat’s appeal.  Lord Brodie found that Mr Ravat was an expatriate employee sent out of Great Britain to work and went on to find that, as the EAT had found, the fact that he performed work for a German company meant that he was not protected by ERA 1996, s 94(1).

Conclusion

It is common for large organisations to have individuals employed by an entity in one jurisdiction performing duties on behalf of another entity in another jurisdiction.  Given the inherently irregular nature of extraterritorial employment arrangements, it will be difficult to determine jurisdiction by drawing firm analogies from one case to the next.  However, as employers and employees cannot agree on the jurisdiction of the Employment Tribunal, clear guidance as to when the Tribunal’s jurisdiction will be enlivened would benefit claimants as well as respondents.  The Supreme Court’s decision in this matter is keenly awaited.