The Labour Appeal Court's ("LAC") decision in Sorrell v Petroplan Sub-Saharan Africa (Pty) Ltd has significant implications for cross-border employment arrangements, particularly in the context of temporary employment services ("TES"). This case addresses the territorial jurisdiction of the Labour Court in South Africa and its application to employees working abroad.
Facts of the case
Mr Sorrell entered into an independent contractor agreement ("ICA") in 2021 with Petroplan Sub-Saharan Africa ("Petroplan SSA"), which effectively operated as a TES. Under the ICA, Mr Sorrell was to work as a Logistics Superintendent for Petroplan SSA's clients at a gas exploration project in Mozambique. Annexure 1 of the ICA specified that the services were to be performed in Mozambique, and Mr Sorrell was to work on a rotational shift basis, alternating with another person. He reported to a field operations manager, with the UK entity responsible for directing operations at the site.
Due to COVID-19 and visa complications, Mr Sorrell worked from home in South Africa during January, March, May, and part of June 2021. Despite this, the ICA clearly stated that his role was an "in-field" position in Mozambique. Petroplan SSA terminated his services in June 2021, leading Mr Sorrell to file a claim with the Labour Court, arguing that his dismissal was unfair and seeking compensation.
Legal Issue
The crux of the matter was whether the Labour Court in South Africa had territorial jurisdiction to hear Mr Sorrell's unfair dismissal claim against Petroplan SSA. This turned on whether the undertaking in Mozambique was separate and divorced from a South African undertaking or whether it was inextricably linked. The court also had to consider whether the fact that Petroplan SSA was a TES based in South Africa affected this jurisdictional issue.
Relevant legal principles
The court considered whether the Labour Court had jurisdiction based on the location where the employee performed his duties. Under Section 198 of the Labour Relations Act ("LRA"), a TES is considered the employer of the worker it places with a client. The court needed to determine if this relationship extended to jurisdictional matters. The court evaluated the implications of cross-border employment arrangements and whether the location of the client's undertaking (in this case, Mozambique) influenced jurisdiction.
Findings of the Court
The LAC upheld the Labour Court's decision that it lacked territorial jurisdiction to hear the case. The court found that the location of the undertaking where Sorrell was employed (Mozambique) was the determining factor for jurisdiction, not the location of the TES (Petroplan SSA in South Africa). The fact that Sorrell worked from home in South Africa due to exceptional circumstances (being COVID-19 and visa issues) did not change the agreed place of employment and there the contract was to be performed, which was Mozambique.
Implications for employers
This decision has several important implications for employers operating in South Africa with employees working abroad. Employers must understand that the location of the undertaking where services are rendered is crucial in determining the jurisdiction of the Labour Court. This means that even if the TES is based in South Africa and recruits in South Africa, the jurisdiction may lie elsewhere if the work is substantially performed abroad.
Employers should ensure that employment contracts clearly specify the location of the undertaking, the place where the work is significantly given effect to and the jurisdiction that will govern any disputes. Clear communication with employees about the terms of their employment, including the location of their work and the applicable jurisdiction, is essential. This can help manage expectations by ensuring that both parties understand their legal rights and obligations and thus may help avoid jurisdictional challenges.
Companies should develop comprehensive policies for managing cross-border employment arrangements. These policies should address jurisdictional issues, tax implications, immigration requirements, and compliance with local labour laws in the countries where employees are deployed.
Where an employee of a South African entity is working, and giving effect to the contract, in a different country, and there is a degree of permanence to that arrangement, it is more prudent to ensure that their contract of employment is with a local subsidiary of the company rather than the South African entity. This can help avoid jurisdictional issues and ensure compliance with local laws. Employing workers through a TES in South Africa does not necessarily protect a foreign company from being sued in the local jurisdiction, depending on the relevant local laws. Similarly, hiring a South African employee under a contract that attempts to exclude the jurisdiction of South African courts does not automatically prevent the employee from filing a dispute in South Africa.
Ultimately, employers can never eliminate any risks associated with cross-border employment, including potential legal disputes in foreign jurisdictions. These tips may help employers minimise their risk exposure, but it is also advisable to seek legal advice to navigate the complexities of international employment law and ensure compliance with all relevant regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
