How territorial jurisdiction works
Holly Cudbill, September 08, 2017
It is for the courts to consider whether the individual has a stronger connection to the country they work in or the UK
With an increasingly globalised workforce, the recent employment appeal tribunal (EAT) case of Green v. SIG Trading provides a helpful reminder of the factors to be considered in determining whether an individual working abroad can be protected by UK employment law, otherwise known as 'territorial jurisdiction.'
Green was employed by SIG Trading, a British company, as the managing director of its business in Saudi Arabia. He had no home in the UK and lived with his family in Lebanon, commuting to Saudi two to four days each week. Green paid no UK tax or National Insurance and he was not part of the company's pension scheme as he lived abroad.
Green's contract of employment stated that it was to be governed by English law and made reference to British statutory employment protections. The company explained this last point as being a matter of convenience: at the time of employing Green it had no template for Saudi employment contracts.
After being made redundant Green sought to bring claims before a British employment tribunal, which had to determine whether he had the legal right to do so.
Claims for unfair dismissal in Great Britain are brought under the Employment Rights Act 1996 (ERA). However, the ERA does not specify whether people working abroad (for example, employees of UK-based companies) can bring such claims and so it is for the courts to decide. As a result, a body of case law has built up since the leading case on the subject – Lawson v Serco – in 2006.
In Lawson the judge said 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". In the 2011 case of Duncombe v. Secretary of State for Children, Schools and Families (No 2) the principle in determining territorial jurisdiction was summarised as being "that the employment must have much stronger connections both with Great Britain and with British employment law than with any other system of law".
It is for the courts to carry out a comparative assessment to consider whether the individual's circumstances point to a stronger connection to the country in which they work, or to Great Britain.
In Green v SIG Trading the tribunal found that Green's connections to Saudi Arabia were closer than his ties to the UK and therefore he was not able to proceed with his claim. Green appealed arguing (among other things) that the employment tribunal failed to properly consider the fact that his contract was governed by English law. The EAT reiterated the importance of the court carrying out an objective comparative exercise to determine the 'closest connection' question and found, in favour of Green, that the ET had given too much weight to SIG's description of the UK contract as a mere matter of convenience.
It should be noted that the EAT did not find that Green was definitely able to proceed with his claim, simply that the earlier tribunal decision was flawed for not properly considering all the relevant factors.
This case is a timely reminder of the importance of ensuring that employment contracts and working practices accurately reflect the intended agreement between employer and employee.
It should also be noted that the recent Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 will follow similar principles when considering whether staff working overseas should be included in the threshold and/or reporting obligations.
Holly Cudbill is an associate in the employment law team of Blake Morgan