UK: All Abroad

Last Updated: 30 September 2010
Article by Nicholas Robertson, Bernadette Daley and Christopher Fisher

Originally published 15 September 2010

Keywords: English employment law, contract of employment, employee rights, Duncombe, Secretary of State, MoD, Wallis and Grocott

Introduction

We have prepared this note as a result of two very recent cases. These have emphasised that English employers face claims by employees working outside England, and that the territorial reach of English employment law is greater than previously understood. The one previous case which had raised this point had generally been felt to be exceptional, and not indicative of a general approach. It now appears that the earlier case is the start of a new approach. However, we believe that there are a number of practical steps which employers can take to analyse the risk and to reduce the scope for unexpected liabilities.

Broadly speaking, in order to sue an employer in England, the employer needs to be based in England or to carry out business in England (even if its registered office is outside England). In order to be sued under English law, it is necessary to demonstrate that the relevant legal obligation covers the particular employee. It is the second of these requirements which has been expanded by the recent cases.

Thirdly, it is sometimes relevant to work out the law of the contract of employment itself. This can affect the interpretation and extent of the obligations accepted by the parties in the contract. If the parties expressly specify the law of a particular country in the contract, then this will be treated by the court as applying to the contract. If no law is specified by the parties, the court will usually look to the country where the employee habitually works. If the individual works in a country in the EU, the mandatory rules of that country's laws will always apply to the individual, regardless of the choice of law specified by the parties in the contract. So, for example, an employee originally from Germany, but now working in England, is entitled to protection from discrimination under English statutes, regardless of the choice of law the parties put into the contract.

Background

It had appeared that the Courts were fairly clear on the rules to determine whether an English employee was protected by English employment legislation. For most employment rights (excluding discrimination) the employee has to be employed to work in England. There are very limited exceptions for individuals who are peripatetic but based out of England, or for individuals who are expatriates but working abroad for the purpose of an English business, e.g. a journalist sent out by a London newspaper to report back to the newspaper on events in, say, New York. The rules are slightly more favourable for the employee under discrimination legislation. The employee can still be covered, even if he or she did not do any work at all in England, if the employee was ordinarily resident in England at any point when the contract was created or during the lifetime of the contract, and was working for the purposes of the English business. There are separate and special rules for employees posted from one country to another.

The New Approach

The two recent cases (Duncombe v Secretary of State and MoD v Wallis and Grocott) demonstrate neatly the legal risks for employers under the new wider approach. Mr Duncombe was a teacher working in Germany for nine years. The school at which he worked had a rule that required all employees to leave after a maximum of nine years' service. His contract stated that it was governed by English law. Mr Duncombe was able to bring a claim in England for breach of the English Fixed Term Regulations and for unfair dismissal. Mrs Wallis was employed in Belgium, working for NATO. Her contract contained a clause stating that it was covered by English law. She was able to bring a claim for unfair dismissal and sex discrimination in an English Tribunal.

The reasoning in the two recent decisions is not a model of clarity. In essence, the Courts have decided that, for purely English employment obligations, the old approach remains correct. However, if the employee is seeking to rely on an employment right deriving from a European directive or article, different rules should apply. If the law of the contract is English, this imports English statutory employment law into the relationship. (So Mr Duncombe was protected by the Fixed Term Regulations by virtue of the express choice of law clause in his contract and so he could complain about the non-renewal of his fixed term contract.) If English statutory rights apply, it is wrong to exclude the employee from protection merely because he or she worked in the European Union but outside England. So the old test has to be disapplied for EU-derived rights, and the court must agree to hear the case.

So now there is one set of rules for enforcement of a purely national employment obligation and a more relaxed set of rules for enforcement of an employment obligation deriving from the EU. The trouble is that most important employment obligations (apart from unfair dismissal itself) derive from European obligations. These include discrimination legislation, working time rules and most of the Transfer Regulations.

Identifying the Risks

The risks for employers are self-evident. Foreign management, unfamiliar with English employment law, may well act in a way which flouts English employment law obligations. As such, the employee has a clear cut claim for damages. It is likely that the extension of territorial jurisdiction for EU-derived claims will rapidly become well-known to claimants' lawyers.

It is also likely that there will be further cases to clarify the position. Duncombe is to be heard by the Supreme Court in January 2011. There may need to be a referral to the European Court of Justice. However, in the meantime, we recommend that employers review their risk profile and take action now to avoiding incurring further difficulties.

Existing employees working outside England

  1. If the employee's contract expressly states English law applies, and the employer carries out business in England, and the employee is working in the EU, this is a high risk case. This employee can claim for breach of English employment obligations derived from the EU. Unless the employer wants to recontract such employees or transfer the employee to a company which does not carry on business in England, then the employer needs to ensure that any treatment of that employee is in line with the way the employee would have been treated if he or she was working in England. It may be easier to persuade the employee to accept a new employer, but with the same terms of employment, as opposed to changing the terms of employment to remove the English choice of law clause.
  2. If the employee's contract expressly states English law applies, and the employer carries out business in England but the employee is working outside the EU, then our reading of the cases indicates that this is a lower risk (unless the employee qualifies under the old test, i.e. the employee is working on behalf of the English business as an expatriate employee or is a peripatetic employee but based in England). At the moment, the cases have dealt with individuals working in the EU and the reasoning is consistent with limiting the extension to employees in the EU. However, this may change in future cases, and it would clearly have a significant impact on recruitment of staff outside England on English law contracts. For now, however, we would not recommend rushing to recontract, given that the law does not seem to apply to these employees and recontracting may simply destabilise the employment relationship.
  3. If the employer carries out business in England and the employee is working in the EU, but the contract is silent as to the law of the contract, the employer should review the rules relating to identifying the proper law of the contract itself. Generally this will be where the employee habitually works, but if this is unclear or there are competing countries which might be treated by a court as being most closely associated with the contract, then it may be essential to analyse whether it is better to take no steps, and hope that no dispute arises, or whether to fix the uncertainty by specifying a choice of law in the contract, identifying one which is acceptable to the employee, but is sufficiently favourable to the employer.

New employees being recruited to work outside England

  1. Consider whether it is better to include an English choice of law clause or not in the contract. If no choice of law is included this will leave it unclear as to which law applies, and there may be a dispute in the future about which law is the law of the contract. An employee may well take advice and shop around for a country with a link to the performance of the contract, with a higher level of protection for the employees, and then try and establish that country's law as the law of the contract. Specifying a choice of law clause may cut down the opportunities to do this. If a choice of law clause is to be specified then the employer should check whether the local legal system is preferable to English law. It has been suggested that, possibly, one could have an English law clause but expressly exclude English statutory law, but we feel that this is very risky, and a court might well decide that it is not possible to pick and choose which bits of English law are applied to the contract.
  2. Consider whether an English company should be the employer. If the employer is not located in England nor carries out business in England, then no questions of English jurisdiction arise. It may be relatively easy to persuade the employee to accept a new employer but with the same terms of employment, as opposed to changing the terms of employment to remove the English choice of law clause.

Conclusions

There is no doubt that this issue is a hot topic. Given the ability to reduce risk significantly for EU staff, we would strongly recommend employers review their contracts of employment between employers carrying on business in England and employees working in the EU outside England. For new contracts it may be necessary to reword the template terms or change the employer of offshore employees.

Uncertainty will be increased when the Equality Act 2010 comes into force, starting in October this year. The existing statutory rules or claims under discrimination legislation will be removed and nothing will be said explicitly in the Act about territorial jurisdiction. It is to be left to the courts to determine the appropriate test. Clearly, this issue is going to run for some time yet.

Learn more about our Employment practice.

Visit us at www.mayerbrown.com.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2010. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.