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June 8, 2017

Employment contracts and working overseas

Under the Employment Rights Act 1996 (ERA 1996), employees have the right not to be unfairly dismissed by their employer. However, the ERA 1996 is silent regarding its geographical scope, so it has been left to the courts to decide.

Is an employment contract governed by English law valid if the employee works overseas?

The Employment Tribunal (ET) recently considered an interesting set of circumstances. The ERA 1996 protected a British citizen employed by a British company (working overseas remotely from Saudi Arabia) against unfair dismissal.

Background

A UK company, Sig Trading Limited (SIG), employed Mr Green as the Managing Director of its business in Saudi Arabia. Mr Green had lived in the Middle East for over 15 years and had no home in the UK. He continued to live in Lebanon, commuting to work in Saudi Arabia for 2-4 days a week. Since SIG had only recently established the Saudi Arabian operation, Mr Green reported to a manager based in the UK. Other staff and support services were also in the UK. 

Further, when offered the position, Mr Green was given one of SIG’s standard UK contracts. The contract recorded that it was to be governed by English law and included references to statutory employment protections. It also included post-termination restrictions relating to the UK, and SIG paid Mr Green in UK pounds sterling.

The Tribunals

SIG dismissed Mr Green for redundancy, but the ET rejected his claims because he had stronger connections to Saudi Arabia and the Middle East than he did to the UK. In practice, the Saudi Arabian budget was independent of the company’s UK financial budget.

Mr Green appealed this decision, and the Employment Appeals Tribunal (EAT) partially allowed the appeal. The EAT said that assessing whether Mr Green’s employment had a stronger connection with Great Britain and English or Saudi Arabian employment law must be viewed objectively.

The fact that the employment contract was subject to English law was not a factor SIG could discount because it had used its standardised form of a UK contract out of convenience.

The ET had, therefore, wrongly disregarded this relevant factor. It had considered the employer’s subjective explanation rather than applying an objective test. The EAT has sent the case back to the ET for reconsideration.

Conclusion

Although it is possible that on remission, the ET won’t find a strong connection between Mr Green’s employment and UK employment law, this case highlights the risks for UK businesses using standard contracts for overseas employees.

Best practice dictates that businesses carefully consider every form of employment contract used on a case-by-case basis at the start of any employment relationship.

Equally, suppose a business has employees working outside of the UK. In that case, it is advisable to take legal advice before taking steps concerning those individuals’ employment.

If you want to work overseas, speak to Karen Cole today to find out more.

Note: This is not legal advice; it provides information of general interest about current legal issues.

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