UK Jurisdiction Issues in Cross-Border Employment

May 20, 2011

An area of serious concern for companies employing UK national employees to work outside of the UK relates to the jurisdictional reach of UK courts in relation to the employment of those individuals. Generally, the jurisdictional tests developed by the courts focus on the degree of practical connection between the job or work in question and the UK. The following is a brief overview.

UK Employment Laws

The UK laws that are most likely to be relevant in the context of extended jurisdictional claims are:

  • unfair dismissal law;
  • discrimination law; and
  • contract law.

The cross-border effect of each legal area is very different and; therefore, it is helpful to consider each in turn.

Unfair Dismissal Law

This right is alien to a number of countries outside of the UK and provides “protected employees” with the right for a procedure to be followed in the event of termination of the employment contract. Failure to do so can result in compensation claims limited in value to £80,400. However, the Employment Act generally provides that this protection will not apply to employees “ordinarily working” outside of Great Britain.

The meaning of “ordinarily working” outside of Great Britain has occupied many hours of Employment Tribunal and Court time. The main focus is to determine from a factual perspective where the employee is based and what happens in connection with his or her employment in practice. Matters to be considered include:

  • where the employee has his or her headquarters;
  • where the employee has his or her home;
  • what currency is paid to the employee; and
  • whether the employee is subject to, or the employer pays, UK taxes or national insurance.

In order for a UK court to take jurisdiction in relation to an unfair dismissal claim, the employee will need to show these factors exist or that his or her employment has a sufficiently strong connection with the UK such that jurisdiction should properly be taken.

Discrimination Law

The Equality Act that has recently come into force in the UK consolidates a huge raft of equal opportunities legislation. Unfortunately, parliament has not clarified the position in relation to the jurisdictional issues that arise when an employee wishes to litigate regarding alleged breaches of the legislation. Consequently, existing case law on the point is the only guide available until case law under the new Act has been decided.

However, as a general rule, an employee would be able to rely on UK discrimination law if he or she works “wholly or partly in Great Britain” or “wholly outside of Great Britain,” and the following conditions apply:

  • The employer had a place of business in Great Britain; and
  • The work was for the purposes of that business and the employee was ordinarily resident in Great Britain (a) at any time during the course of the employment, or (b) when he or she offered the employment.

Again, this is a form of the “closest connection” test being applied.

Contractual Rights

In this context, the first consideration should be the terms of the contact in order to ascertain whether the parties themselves have agreed to a jurisdiction that should apply to contract interpretation. Most contracts will have a jurisdiction clause providing significant guidance on the matter. However, this is not conclusive.

For example, the UK Court of Appeal (in Samengo-Turner v. J&H Marsh & McLennan (Services) Limited) disregarded the exclusive New York jurisdiction clause in a bonus agreement, which was agreed before the dispute arose. In so ruling, the court opined that a “multinational business must be expected to be subject to the employment laws applicable to those they employ in different jurisdictions.” However, again, it can be expected that the employee concerned would need to show a “close connection” to the UK in order to utilise the UK jurisdiction.

In conclusion, it is clear that attempting to devise a “one size fits all” test for cross-border employment jurisdiction is not possible. Each employee will have different factual circumstances that will need to be considered. However, the closer the connection, in practical terms, with the UK, the more likely it is that UK Employment Tribunals and Courts will take jurisdiction in relation to such issues.

For further guidance on deciphering cross-border employment jurisdictional issues in the UK and other EU countries, please contact the author in our London office or any other member of the McGuireWoods Labor and Employment Group.