This article was previously published in Employment Law Journal.
Naomi Oppenheim and Nick Tsatsas review Underhill J’s proposal to broaden the type of claims that the employment tribunal has jurisdiction to hear.
Underhill J, the former Employment Appeal Tribunal (EAT) president, has recently completed his review of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 (ET Rules). The result is a proposed set of new employment tribunal rules, on which formal consultation will take place later this year (see ‘Replacing the rule book’, by Sarah Ozanne). The new rules are intended to be more user-friendly for unrepresented parties, but they are likely to have a far greater impact than merely simplifying the management aspects of employment tribunal claims.
Facts of Pervez
One of the new employment tribunal rules (r8) may make employers around the world more nervous, because it has the potential to significantly increase the number of claims that English employment tribunals will have jurisdiction to hear. Rule 8 has its genesis in the EAT decision in Pervez v Macquarie Bank Ltd (London Branch) . Mr Pervez was employed by Macquarie Capital Securities Ltd (MCSL), a Hong Kong-based company, as a bond trader and both lived and worked in Hong Kong. In September 2008, he was moved to London by way of ‘international assignment’ to Macquarie Bank Ltd (London Branch) (MBL), an English company based in London and described in the assignment documentation as ‘the host’. The assignment was to last for one year, with the option to extend for up to five years.
Mr Pervez was required to report to MBL managers but undertake duties for the Macquarie group as a whole. London was referred to as the ‘host location’, with MCSL and Hong Kong being referred to as the ‘employer’ and ‘home location’ respectively. MBL, as host, was responsible for Mr Pervez’s remuneration and similar matters during his secondment to London. One of the terms of Mr Pervez’s London assignment was that he would be required to resign in the event that:
- his assignment was terminated by either MBL or MCSL; or
- he chose to repatriate to Hong Kong, or to relocate to somewhere other than Hong Kong, and there was no role anywhere for him within the Macquarie group at that time.
In early August 2009, Mr Pervez was told orally that his assignment would terminate at the end of the month and that this resignation clause would be activated as there was no work for him with the Macquarie group. Mr Pervez refused to resign. On 28 August 2009, MBL gave him written notice to terminate his assignment with effect from 29 September 2009. On 18 September 2009, MCSL wrote to him terminating his employment with immediate effect. The MCSL letter was written from the Hong Kong office but addressed to Mr Pervez in London.
Mr Pervez brought claims for unfair dismissal and race and religious discrimination in England against MBL and Macquarie Group Ltd (MGL), MBL’s and MCSL’s Australian parent company. This meant that there were three potential respondents:
- MCSL, the Hong Kong-based employer;
- MBL, the London-based host; and
- MGL, the Australia-based parent company.
A pre-hearing review was held to ascertain:
- which company was the correct respondent; and
- whether the employment tribunal had the jurisdiction to hear the claims.
The judge held that, while the claims fell within the employment tribunal’s jurisdiction under primary legislation (the Employment Rights Act 1996 (ERA 1996), Race Relations Act 1975 and Employment Equality (Religion or Belief) Regulations 2003), Rule 19(1) ET Rules operated to counter this (see box below).
Rule 19(1) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 is expressed as follows:
Jurisdiction of tribunals in Scotland and in England & Wales
19(1) An employment tribunal in England or Wales shall only have jurisdiction to deal with proceedings (referred to as ‘English and Welsh proceedings’) where –
(a) the respondent or one of the respondents resides or carries on business in England and Wales;
(b) had the remedy been by way of action in the county court, the cause of action would have arisen wholly or partly in England and Wales.
The result was that the employment tribunal had no jurisdiction to hear the claims because:
- MCSL (Mr Pervez’s employer) did not reside or carry on a business in England and Wales; and
- if the remedy had been by way of county court action, the relevant causes of action (discrimination and dismissal) arose wholly in Hong Kong.
The judge therefore dismissed the claims against MGL and refused to allow MCSL to be joined as a respondent to the claims. Given that Mr Pervez had conceded that he had been employed by MCSL throughout his secondment in London, meaning that no claim could lie against MBL, he was left with no respondent to which he could direct his claims. Mr Pervez appealed the decision.
Underhill J formed part of the EAT panel which heard the appeal. Indeed, it was Underhill J himself who delivered the appeal judgment, which provides a useful analysis of the case law existing at the time on the territorial scope of English employment legislation and how this intertwined with r19(1). The appeal judgment’s findings on jurisdiction under primary legislation have not been addressed in detail here because the Equality Act 2010 (EqA 2010) has superseded the discrimination legislation then in force and more recent case law has further clarified the jurisdictional scope of ERA 1996.
The principal focus of the appeal was on the correct interpretation of r19(1). Underhill J concentrated first on whether the claims ‘came within the grasp of the legislation upon which they were based’ and he concurred with the pre-hearing review judge that they did. However, he considered that the following facts were important:
- it was clear from the arrangements of Mr Pervez’s assignment (both written and practical) that he was working in London on a settled and, potentially, long-term basis as part of MBL’s organisation;
- his remuneration was paid by MBL;
- he reported to MBL managers; and
- he was essentially based in London for the duration of his secondment.
Underhill J further emphasised that ‘secondments come in all shapes and sizes’ and the appropriate conclusion in each case will be dictated by its specific facts. A shorter secondment with less integration may not result in the same decision.
Underhill J also made it clear that r19(1) operates independently of, and is secondary to, the jurisdiction rights conferred by primary legislation. He also commented that the heading to r19(1) suggests that the intention behind the drafting was to demarcate the jurisdiction of the employment tribunals in England and Wales from those in Scotland. He surmised that the draftsmen of neither the ET Rules nor the primary employment legislation could have foreseen the potential effect that r19(1) could have on cases with a ‘non-GB’ element. Nevertheless, he acknowledged that the wording of r19(1) allowed for a debate about the employment tribunal’s jurisdiction to hear the claims in this case.
MCSL argued that it could not be established that it carried on a business in England and Wales or that it had a place of business in London. Further, it did not perform any transactions of any kind in London. The fact that it had associated companies in London was not evidence that these acted as overseas branches or offices for MCSL. MCSL’s counsel also submitted that, while it could not be denied that seconding Mr Pervez to MBL in London constituted, to some degree, a part of MCSL’s business activities, not every business activity within a country constituted carrying on a business there.
Underhill J accepted that MCSL could not be said to carry on a business in England in any ordinary sense. However, he found it ‘wrong in principle’ that employees should not be able to enforce protections which they notionally enjoy, and did not believe that Parliament would have intended such a result. In his opinion, the only way in which a result contrary to Parliament’s intention could be avoided was to accept that seconding Mr Pervez to London from Hong Kong was ‘carrying on business’ in England, even if the supply of workers was beyond the scope of the normal course of business. Simply put, Underhill J adopted a very broad interpretation of r19(1) to avoid limiting the scope of primary employment rights and to allow Parliament’s (perceived) intention to prevail.
Rule 8 of the new ET Rules
Underhill J did acknowledge in the appeal judgment that his interpretation of r19(1) was strained. Perhaps this decision prompted him to propose replacing it with r8 (see box below).
8. Presenting the claim […]
(2) A claim may be presented to a tribunal office in England and Wales if –
(a) the respondent, or one of the respondents, resides or carries on a business in England and Wales; or
(b) one or more of the acts complained of took place in England and Wales; or
(c) where neither (a) nor (b) applies, the connection with Great Britain by virtue of which the claimant is entitled to present the claim is at least partly a connection with England and Wales.
But how will this rule sit with the territorial scope of primary legislation such as ERA 1996 or the EqA 2010? Both of these Acts are silent on the issue of territorial jurisdiction. However, a number of cases have contributed to the leading principles for determining whether employment tribunals have jurisdiction to hear claims under primary legislation:
- Serco Ltd v Lawson  found that the employment tribunal has jurisdiction to hear a claim if the employee: was ordinarily working in Great Britain at the time of their dismissal; was a peripatetic employee whose base was Great Britain; was an expatriate employee working in a British enclave abroad or posted abroad for the purposes of a British business; or had another equally strong connection with Great Britain.
- Building upon Serco, in Ravat v Halliburton Manufacturing & Services Ltd  it was found that where an employee’s place of work is not Great Britain, a sufficiently strong connection with Great Britain must be established to enable it to be said that Parliament would have regarded it as appropriate for an employment tribunal to hear their claim.
- According to Bates van Winkelhof v Clyde & Co LLP , Serco is the most useful authority to determine jurisdictional issues under the EqA 2010 (although the respondents have submitted an appeal on this point).
- Where domestic employment law gives effect to rights under EU law, its territorial scope should be interpreted as widely as possible to give effect to the EU-derived right (Bleuse v MBT Transport Ltd , Duncombe v Secretary of State for Children, Schools and Families  and Ministry of Defence v Wallis .
Underhill J’s judgment in Pervez suggests that primary employment rights should be considered before employment tribunal rules but also that those rules should be construed to give effect to those rights and to Parliament’s intention.
While r8 is only at the proposal stage, the likelihood that it will become law in the near future is high, especially in light of the developments in case law since Serco. There are clear parallels between how Ravat has built upon Serco and the strained interpretation of r19(1) in Pervez. These developments show which way the wind is blowing and, by all indications, it is blowing towards a broad interpretation of territorial scope.
A growing problem
In a world where temporary foreign assignments and nomadic lifestyles are fast becoming the norm, the territorial scope of employment legislation is an increasingly important issue for both employers and employees. For employees, these legal developments may allow them to ‘cherry pick’ which jurisdiction will allow for the strongest claim against their employer. Employers can also benefit from jurisdictional arguments by using them to try to defeat claims at a preliminary stage without having to go through a merits-based hearing.
While employment tribunals will always need to consider the relevant legislation, together with the facts of each specific case, the adoption of a more inclusive approach to analysing employers’ and employees’ ties to Great Britain gives employees a much greater opportunity to argue their way into the employment tribunal’s jurisdiction. With the potential for domestic law, EU law and the laws of other jurisdictions to overlap, it is difficult to identify a universal approach to the issue of territorial jurisdiction. Nevertheless, it seems it can be said that there is a widespread intention not to deprive employees of recourse to justice unless it is wholly inappropriate to do so.
Bates van Winkelhof v Clyde & Co LLP & anor
 IRLR 548
Bleuse v MBT Transport Ltd & anor
 IRLR 264
Duncombe & ors v Secretary of State for Children, Schools and Families
 EWCA Civ 1355
Ministry of Defence v Wallis & anor
 EWCA Civ 231
Pervez v Macquarie Bank Ltd (London Branch) & anor
Ravat v Halliburton Manufacturing & Services Ltd
 UKSC 1
Serco Ltd v Lawson
 UKHL 3
Nick Tsatsas, Partner, Fladgate LLP (firstname.lastname@example.org)
Naomi Oppenheim, Solicitor, Fladgate LLP (email@example.com)