The importance of adapting contracts for overseas employees
The fact that the employment contract of an overseas employee states that it is governed by UK law is a factor that an employment cannot ignore when considering whether it has jurisdiction to hear an employee’s unfair dismissal claim.
When determining whether an employee’s employment had a closer connection with Great Britain, (and therefore whether it could hear his unfair dismissal claim), the employment tribunal had been wrong to ignore the fact that the contract was stated to be governed by English law and accept the employer’s explanation that it had used its standard UK contract “for convenience”. The tribunal should have carried out an objective assessment of all the circumstances.
In Green v SIG Trading Limited, Mr Green was married to a Lebanese national, had lived in Lebanon for a number of years and had no home in the UK. He was recruited by SIG Trading Limited (SIG), a British company, to work as Managing Director of its new business in Saudi Arabia. He continued to live in Lebanon and commuted to Saudi Arabia two to four days each week. He reported to a manager based in the UK and other staff and support services were located in the UK.
When he was recruited, SIG gave him its standard UK contract. This stated that it was governed by English law and it contained reference to British statutory employment protections and UK policies.
When SIG decided to close its business in Saudi, the UK board of directors decided to make Mr Green redundant and his redundancy was handled by the UK HR Director.
He claimed unfair dismissal but the tribunal decided that it did not have jurisdiction to hear his claim. He was an expatriate employee. He was not working for the benefit of SIG’s UK business but developing an entirely new business in Saudi Arabia. His employment therefore had stronger connections with Saudi Arabia than with Great Britain. It accepted SIG’s explanation that it had used its standard UK contract “for convenience” and considered that his redundancy had been handled by the UK business for “pragmatic” reasons and so this was not a factor pointing to a stronger connection with Great Britain.
Mr Green appealed.
The Employment Appeal Tribunal upheld his appeal. The assessment of whether his employment had a stronger connection with Great Britain or with Saudi Arabia had to be viewed objectively. The fact that the parties had agreed that his contract should be governed by English law was a material factor which the tribunal should have taken into account. It should not therefore have accepted SIG’s explanation that it had used its standard contract as a matter of convenience.
However, the employment tribunal had been entitled to take into account SIG's explanation for the redundancy decision-making being made by management in the UK. This was a factor that the tribunal saw as supporting Mr Green's case, but had to be seen in the context of the Saudi Arabia business being new, with no organisational support there. The employment tribunal had therefore been entitled to conclude that this was simply a pragmatic arrangement which said little about the connection between Mr Green's employment and Great Britain.
The case was remitted to the employment tribunal to reconsider whether it could hear his unfair dismissal claim.
When employing overseas employees, employers should not simply use their standard UK contract without giving the matter further thought. Overseas employees will be able to bring unfair dismissal, discrimination and other statutory employment claims if their employment has a closer connection with Great Britain than the laws of any other country. In considering this question, one of the factors that the tribunal must take into account is the law that the parties have agreed should govern the employment contract. It is therefore important that employers think carefully about which law they choose as this may impact on whether an overseas employee will have UK statutory employment protections, as well as determining which law will apply to any disputes arising under the contract.
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