Barry Clarke, Partner, Russell Jones & Walker

PREVIOUS SPEAKERS:

Barry Clarke
Partner, Russell Jones & Walker

ILS, London, 13 November 2003

Title: "The Territorial Scope of UK Employment Law"

Introduction

The workplace is becoming increasingly internationalised. Individuals from outside the UK may reside and work here (and vice versa), they may work in the UK but reside elsewhere (and vice versa), they may be peripatetic, residing and working in the UK but frequently travelling elsewhere (and vice versa), they may be seconded by a UK employer to an overseas employer (and vice versa), they may paid in the currency of another or subject to a different tax regime, and they may work to a contract stated to be governed by the law of another.
It is a time-consuming and complex exercise to work out what rights employees have in such circumstances. There remains little guidance in the standard employment law texts; in the main, they refer obliquely to "conflicts of laws" principles. In practice, advisers must look to a potentially huge range of legal sources: domestic legislation, tribunal rules of procedure, at least one European Directive and a number of international Conventions. The position also differs according to whether one is determining the governing law applicable to determining contractual rights or the territorial scope of statutory rights (and it even differs depending on the type of statutory right) and, in either case, the appropriate forum for the claim.
There are now three unreported EAT decisions dealing with the territorial scope of the Employment Rights Act 1996 (ERA): Lawson v. Serco Limited (EAT/0018/02), Bryant v. Foreign and Commonwealth Office (EAT/174/02), and Jackson v. Ghost Limited (EAT/0547/02). Lawson v. Serco will shortly go before the Court of Appeal.

Historical background

The previous territorial scope of the ERA

Section 244(1) ERA makes clear that it "extends to England and Wales and Scotland but not to Northern Ireland", but this was subject to a specific provision setting out the territorial scope of the ERA: Section 196 ERA. Until 25 October 1999, this set out a number of "excluded classes of employment". The rules were complex.

Certain rights would not apply in relation to employment during any period when the employee was engaged in work wholly or mainly outside Great Britain, unless the employee ordinarily worked in Great Britain and the work outside Great Britain was for the same employer, or his contract of employment was governed by the law of England and Wales or Scotland. Other rights did not apply to employment where, under the employee's contract of employment, he ordinarily worked outside Great Britain. There was also a complex deeming provision concerning work on-board ships registered in Great Britain.

The meaning of the old Section 196 ERA (and, in particular, the meaning of "ordinarily working" outside Great Britain "under the … contract of employment") had been examined many times by the courts, particularly in the context of unfair dismissal claims arising in the shipping or airline industries. An uneasy distinction had emerged between:

(a) The so-called "contract test". In essence, what did the terms of the contract provide would be the place that the employee ordinarily worked, notwithstanding what actually happens during the period of employment?

(b) The so-called "base test". In essence, in which country is the employee based?

The Carver amendment

The correctness of the "contract test" was reaffirmed in the 1999 case of Carver v. Saudi Arabian Airlines. The Court of Appeal held that Section 196 ERA required an Employment Tribunal to consider the position as it appeared at the date the parties entered into the contract of employment, looking at the whole period contemplated by the contract, and not at what actually happened during the contract. Mrs Carver was denied jurisdiction under the ERA because, despite having worked in the UK for a number of years from her employer's "base" at London Heathrow, her contract had actually been formed in Jeddah.

To overcome this apparent injustice, Parliament changed the law: with effect from 25 October 1999, Section 196 was repealed in its entirety. The amendment was quietly inserted into the Employment Relations Bill at its third reading in the House of Lords. The relevant Hansard report recorded the comments of Lord Simon of Highbury on the purpose of the repeal:

(a) First, to simplify a provision that he described as "complicated" and with "unnecessary complexities". Lord Simon noted that "international law and the principles of our own domestic law are enough to ensure that our legislation does not apply in inappropriate circumstances. There must be some proper connection with the UK first, and in such cases it is right that UK law should apply".

(b) Secondly, to reverse Carver. Lord Simon notes that the amendment was "inspired" by that case: "It … means that people like Mrs Carver, who had worked for some years in the UK but was nevertheless excluded from claiming under the [ERA], will be able to rely on the protection of our legislation as should be the case".

(c) Thirdly, as partial implementation of the Posting of Workers Directive, which had a stipulated implementation date of 16 December 1999 at the latest. However, the repeal went further than merely implementing this Directive; indeed, no "Posting of Workers Regulations" were laid before Parliament. Nothing was put in place of Section 196 to offer guidance on jurisdiction. However, given the comments of Lord Simon, some practitioners believed that the matter should be resolved by reference to international principles.

The previous territorial scope of the discrimination legislation

Confusingly, the position differs according to the ground of the alleged discrimination. For present purposes, we shall look at the Sex Discrimination Act 1975 (SDA).

Section 6(1) SDA makes it unlawful for an employer to discriminate against a woman "in relation to employment by him at an establishment in Great Britain". The meaning of "an establishment in Great Britain" is not defined in Section 6 SDA, but is explained by Section 10 SDA. Of specific relevance is the deeming provision in Section 10(1) SDA. Prior to its amendment, this provided that employment would be "regarded as being at an establishment in Great Britain unless the employee [did] his work wholly or mainly outside Great Britain". The Court of Appeal in Carver held that the term "mainly" should be given its literal meaning of "for the most part" or "on a balance of weight". There was a specific deeming provision covering British-registered ships, aircraft and hovercraft.

Section 10(4) SDA further provides, rather tortuously, that "where work is not done at an establishment at all, it shall be treated for the relevant purposes as done at the establishment from which it is done or (where it is not done from any establishment) at the establishment with which it has the closest connection".

With effect from 16 December 1999, the words "or mainly" were excised from Section 10(1) SDA. This served to complete implementation of the Posting of Workers Directive but, again, went further than strictly required, as (adopting the reasoning in Haughton) all employment is now treated as being at an establishment in Great Britain unless the work is done wholly outside. The use of the absolute term "wholly" does not appear to permit even a de minimis approach. This test has subsequently been amended further (see below).
Understanding the legal framework

The Rome Convention – governing law and mandatory rules
The Rome Convention was transposed into UK law by Section 2(1) of the Contracts (Applicable Law) Act 1990 with effect from 1 April 1991. Note the following.

Article 1(1) confirms that the rules of the Convention "shall apply to contractual obligations in any situation involving a choice between the laws of two different countries" (by implication, it therefore applies to all contracts, not just those with an EU connection, even though the signatories are EU member states).

Article 3(1) provides that a "contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case".

Article 3(3) provides that "the fact that the parties have chosen a foreign law, whether or not accompanied by the notice of a foreign tribunal, shall not, where all the other elements relevant to the situation at the time of the choice are connected with one country only, prejudice the application of rules of the law of that country which cannot be derogated from by contract, hereinafter called 'mandatory rules'." This is the first mention of the important concept of mandatory rules.

Article 4(1) provides that, "to the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected".

Article 6(1) limits the effect of a choice of foreign law where mandatory rules would be available: "Notwithstanding the provisions of Article 3, in a contract of employment a choice of law made by the parties shall not have the result of depriving the employee of the protection afforded to him by the mandatory rules of law which would be applicable under [Article 6(2)] in the absence of choice".

This means that, even though the law of a foreign jurisdiction may be chosen as the law governing an employment contract, certain mandatory rules of English law will still apply to that contract. The employee effectively gets the best of both worlds: where a mandatory rule of English law gives greater protection than the rule within the system of law chosen by the parties, English law will apply. Where a rule of law of the system of law chosen by the parties gives greater protection than the equivalent mandatory rule of English law, the system of law chosen by the parties will apply.

The purpose of this enquiry is not to compare the "package of benefits" available under the chosen law with the "package of benefits" available under the law applicable in the absence of choice, in order to give the employee the more favourable of the two. This would involve an inordinately complex, time-consuming and expensive analysis, as each could be more favourable than the other in numerous different aspects. The comparison is between the protection given by the chosen law and the protection given by the mandatory rule in connection with the disputed right only.

This means that a contract that selects the law of the country of the employer's principal place of business for all its employees worldwide will not achieve standardisation of terms and conditions of employment if applicable mandatory rules are more favourable. Arguments of business efficiency, harmonisation, equality of treatment among employees or the overall quality of the employment contract will not prevail if, if any one case that an individual employee can raise, mandatory rules offer better protection.

As Article 6(1) makes clear, in determining which (if any) mandatory rules apply, one must consider what law would apply in the absence of choice. This is the test in Article 6(2). This provides that, unless a choice of law can be inferred from the circumstances, a contract of employment will be governed by the law of the country with which it is most closely associated: "Notwithstanding the provisions of Article 4, a contract of employment shall, in the absence of choice in accordance with Article 3, be governed:

(a) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; or

(b) if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated;

(c) unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract shall be governed by the law of that country."

In other words, the applicable law will be presumed to be that of the country where the employee predominantly delivers performance under the contract, even though the employee may be temporarily employed in another country (Article 6(2)(a)). Where the employee works in several jurisdictions, the applicable law may be determined by the country in which the employer's place of business through which the employee was hired is situated (Article 6(2)(b)). There is, however, a proviso: the applicable law may yet be decided by the jurisdiction with which the contract is "more closely connected". This can involve a wide-ranging enquiry into how the employee was paid, how the employee was managed, the location from which disciplinary decisions emanate, and so on.

It remains a complex exercise to determine, in connection with any disputed right, whether an applicable mandatory rule of English law offers better protection that the rule within the system of law chosen by the parties. For example, how easily can it be established that the right to present a complaint of unfair dismissal, is better than the nearest equivalent right under, say, German law? This is where Article 7(2) of the Rome Convention puts a further spin on the ball, by apparently introducing a new type of mandatory rule. It specifically provides that: "Nothing in this Convention shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract". This suggests that the Rome Convention itself distinguishes between two types of mandatory rule:

(a) Rules that are mandatory only within the meaning of Article 3(3), which cannot be derogated from by contract. These would include those rules that would, as envisaged by Article 6(1), be applicable under Article 6(2) in the absence of choice; and

(b) Rules that are mandatory within the narrower meaning of Article 7(2), which not only cannot be derogated from by contract, but which also apply irrespective of the law otherwise applicable to the contract.

This distinction is a crucial one, especially when we come to consider below which UK statutory employment rights are mandatory rules capable of overriding an express choice of law in the contract of employment. Where the rights under consideration derive purely from the contract, however, and have no mandatory rule equivalent, Article 6 will determine the appropriate governing law.

The Posting of Workers Directive

As mentioned above, no "Posting of Workers Regulations" were laid before Parliament, and the Government purported to implement the Directive by repealing Section 196 ERA and amending the territorial limits of the discrimination legislation. Note the following.

Paragraphs (6) to (11) of the preamble to the Directive refer to the Rome Convention and in particular to Articles 6 and 7 thereof, and paragraph (13) further provides that: "Whereas the laws of the Member States must be co-ordinated in order to lay down a nucleus of mandatory rules for minimum protection to be observed in the host country by employers who post workers to perform temporary work in the territory of a Member State where the services are provided; whereas such co-ordination can be achieved only by means of Community law".

Articles 1(1) and 1(3) provide that the Directive shall apply to undertakings established in a Member State which, in the framework of the transnational provision of services, post workers to the territory of a Member State, although Article 1(4) (together with paragraph (18) of the preamble) further establishes the principle that undertakings from non-member States must not be given more favourable treatment than undertakings established in a Member State.

Article 2(1), which defines a posted worker as a worker who, for a limited period, carries out his work in the territory of a Member State other than "the State" in which he normally works.

Article 3(1) requires Member States to ensure that, whatever the law applicable to the employment relationship, workers posted temporarily to their territory are entitled to the minimum terms and conditions laid down by law, regulation or administrative provision in relation to certain specified matters. These are:

Maximum work periods and minimum rest periods (Article 3(1)(a)) and minimum paid annual holidays (Article 3(1)(b));

Minimum rates of pay, including overtime rates (Article 3(1)(c));

The conditions of hiring out workers, in particular the supply of workers by temporary employment undertakings (Article 3(1)(d));

Health, safety and hygiene at work (Article 3(1)(e));

Protective measures with regard to the terms and conditions of employment of pregnant women or women who have recently given birth, of children and of young people (Article 3(1)(f));

Equality of treatment between men and women and other provisions on non-discrimination (Article 3(1)(g)).

In cases of potential conflict between the Posting of Workers Directive and the Rome Convention, the Directive must take precedence. This means that, for the Government to comply with the requirements of the Directive, the nucleus of rules set out above at Article 3(1) above must operate as mandatory rules that take precedence over Article 6 of the Convention; that means that they must be mandatory rules for the purposes of Article 7(2). Of course, those who are not "posted workers" will have the issue of governing law determined exclusively by the Convention.

The Brussels Convention - jurisdiction

Where a contract of employment states that the law of a certain country is to apply to the contract, it often further purports to confer jurisdiction upon the courts of the same country. In such circumstances, the Brussels Convention, given force of law in the UK by virtue of Sections 2(1) of the Civil Jurisdiction and Judgments Act 1982, may apply. Like the Rome Convention it contains provisions dealing with individual contracts of employment; unlike the Rome Convention it contains no provisions on mandatory rules. It would therefore appear to assist only in determining the correct jurisdiction for resolving purely contractual disputes.

Complex provisions apply in respect of the power of a court to stay proceedings when the jurisdiction of the court "first seised" has been established.

The Convention applies so long as the defendant is domiciled in a contracting state; a defendant domiciled in a contracting state can always be sued in its domicile. Article 53 of the Conventions provides that "the seat of a company … shall be treated as its domicile" subject to the conflict rules of the forum. By virtue of Sections 42 and 43 of the Civil Jurisdiction and Judgments Act 1982, a company has its seat in the UK if it is incorporated and has its registered office in the UK or its central management or control is exercised in the UK. In essence, if an employer is domiciled in the UK, an employee based overseas may bring a claim arising out of his contract of employment before a court in the UK.

In certain circumstances, a defendant domiciled in a contracting state may also be sued elsewhere. In short, Article 5(1) of the Brussels Convention provides that, in matters relating to a contract, a person domiciled in a contracting state may, in another contracting state, be sued "in the courts for the place of performance of the obligation in question". In matters relating to individual contracts of employment, this place is:

The place where the employee habitually carries out his work; or

(b) If the employee does not habitually carry out his work in any one country, the employer may also be sued in the courts for the place where the business which engaged the employee was or is now situated.

The place of work/place of hire provisions are similar (but not identical) to Article 6(2) of the Rome Convention, and there is no overriding provision granting jurisdiction to the country with which the contract is more closely connected.

It should be noted that Article 17 of the Brussels Convention precludes reliance on a clause conferring jurisdiction in a contract of employment except by the employee. Agreements conferring jurisdiction in contracts of employment will only have legal force if entered into after the dispute has arisen or if invoked by the employee. This greatly limits the impact of "exclusive jurisdiction" clauses in contracts of employment.

Conclusions on the legal framework

The key question for our purposes is whether the governing law of the contract or the appropriate jurisdiction determines the territorial scope of UK statutory rights. It would be convenient if the proper law was determinative of whether the ERA or discrimination legislation applies. However, the selection of the former does not determine the scope of the latter. As the EAT held in Lawson, an unfair dismissal case brought against a UK employer by an employee based on Ascension Island, "the proper law [of the contract] is not the measure of jurisdiction".

It has been demonstrated that if mandatory rules can be derived from the jurisdiction which would apply in the presumed absence of a choice of law, or if there are mandatory rules which apply irrespective of the law applicable to the contract (Article 7(2)), both override an express choice of governing law. The more difficult tasks, therefore, are to identify those mandatory rules and then determine their territorial scope.

Identifying mandatory rules

It will be recalled that, under Article 3(3) of the Rome Convention, a "mandatory rule" is defined as a rule "which cannot be derogated from by contract". It is trite law that UK statutory rights cannot be derogated from by contract unless in the form of an ACAS-conciliated settlement or a valid compromise agreement.

In case of any doubt, Section 204(1) ERA expressly provides that, "for the purposes of this Act it is immaterial whether the law which (apart from this Act) governs any person's employment is the law of the United Kingdom, or of a part of the United Kingdom, or not." The draftsman of the Act clearly intended the Act to apply, whatever the governing law of the contract, subject to the territorial scope provisions of Section 196 ERA. So the ERA is not precluded simply by applying "conflict of laws" principles and determining that foreign law should govern. In fact, the wording of Section 204(1) ERA resembles that of Article 7(2) of the Rome Convention, which provides that nothing (for example, in Article 6) shall "restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to the contract".

This suggests that the entirety of the ERA is a mandatory rule for the purposes of Article 7(2). This would include the right to present a complaint of unfair dismissal, certain maternity rights, redundancy payment rights, insolvency protection rights, minimum notice rights, whistleblowing provisions, and so on. This interpretation is favoured by Dicey, who opines that "the [ERA] applies, prima facie, to all contracts of employment, whatever their governing law, and will be treated as a mandatory provision for the purposes of Article 6 and Article 7(2) of the Convention". This interpretation sounds less bold when we remind ourselves that we have yet to consider the territorial scope of those rules.

The territorial scope of mandatory rules

Some of the consequences of the above could seem alarming. It has been asked if the ERA should be construed as giving rights to employees throughout the world. This would indeed seem odd, but for the fact that we have not yet addressed the territorial scope of those mandatory rules. Here, the issue may be more straightforward (but remains controversial).

The Lawson approach

The territorial jurisdiction of courts in England and Wales was historically circumscribed by the ability to bring a defendant before a court due to his/her presence in the jurisdiction and/or by the defendant's submission to the court's jurisdiction and/or by proper service abroad in accordance with well-established rules of procedure.

Employment Tribunals are creatures of statute that have jurisdiction bestowed upon them in respect of a series of legal complaints. Regulation 11(5)(a) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 provides that "the rules contained in Schedules 1, 2 and 3 shall apply in proceedings to which they relate where the Respondent or one of the Respondents resides or carries on business in England and Wales".

Rule 23(4)(e)(ii) of the Employment Tribunals Rules of Procedure (as set out in Schedule 1 to the 2001 Regulations) provides in essence that an IT1 naming an overseas employer may be sent to "such address or place outside the United Kingdom as the President or a Regional Chairman may allow". Furthermore, under Rule 23(7), "the President or a Regional Chairman may direct that there shall be substituted service in such manner as he may deem fit in any case he considers appropriate."

In other words, the wide language of Regulation 11(5)(a) deals with a broad range of cases brought under statutory rights that are also mandatory rules. This is subject only to the limitation on the territorial scope of those rules that the employer "carries on business" within the UK. Furthermore, Rules 23(4)(e)(ii) and 23(7) give the President and Regional Chairman considerable discretion to permit service of an IT1 on an employer based outside the UK, so long as it carries on business in the UK.

As the EAT held in Lawson, "once the jurisdiction of the Employment Tribunal is established [i.e. under Regulation 11(5)(a)], the mandatory provisions of the ERA relating to a claim for unfair dismissal relate to any application, notwithstanding the choice of applicable law by the parties, or the law of the country with which the contract is most closely connected, or any other provision. It follows that any employee can issue proceedings for unfair dismissal against an employer who carries on business in England and Wales and Scotland".

It is notable that this test focuses upon the employer's place of business, not the place where the contract was performed or where the Applicant was based (in contrast to the old "contract test" or "base test"). To that extent, it is similar to the approach taken in the Brussels Convention. So, if an Applicant's employer is domiciled in the UK, the mandatory right to claim unfair dismissal extends to those it directly employs, wherever they are based in the world.

The test of whether an employer "carries on business" in the UK is clearly broader than the Brussels Convention test of whether an employer is domiciled in the UK for the purposes of contractual claims. It appears to extend to circumstances even where the employer does not even have a formal place of business in the UK. In theory, therefore, a citizen of the USA could bring a claim for unfair dismissal in the UK against his or her USA employer, relating to employment in the USA with no connection to the UK, so long as the employer carries on business in the UK. However, the "check" on this approach may be found in Rules 23(4)(e)(ii) (and possibly also 23(7)), in that service of an IT1 upon that USA employer would be subject to the discretion of the President or Regional Chairman.

It is at that stage and on that issue that any preliminary hearings should focus. An Applicant should expressly seek the leave of the Regional Chairman or President to serve an IT1 on an overseas employer. As that application relates to the entitlement of a party to bring proceedings, it will trigger the requirement under Rule 6(2) for the Respondent to be given an opportunity to submit representations in writing or to advance oral argument.

Thus the Lawson approach raises its own procedural complexities, not least trying to discern what test the President or Regional Chairman should apply. The potential for an explosion of claims could be limited by a sensible approach to determining the existence of an employment relationship. For example, in many cases it may be clear that the Applicant's direct employment relationship was in fact with the overseas company rather than any parent company ultimately residing or carrying on business in England or Wales.

The Bryant approach

In a conflicting decision which does not refer to Lawson, the EAT in Bryant v. Foreign and Commonwealth Office held in strong terms that the ERA has no extra-territorial effect.

The President, Mr Justice Burton, noted that the statutory jurisdiction of an Employment Tribunal in relation to unfair dismissal should not be regarded as unconditionally extra-territorial and thus available to anyone who works anywhere in the world, so long as they have a British-domiciled employer. By contrast, this argument was accepted in relation to Ms Bryant's breach of contract claim, pursuant to the Brussels Convention.

The Appellant (a litigant in person) advanced her argument on the basis that she could pursue an unfair dismissal claim in the UK simply by virtue of being an overseas employee of a British diplomatic mission. Strictly speaking, insofar as territorial scope issues are concerned, the ratio of Bryant is limited to dismissing that argument. In dismissing any suggestion that the ERA has extra-territorial effect, the EAT noted that the purpose of the repeal of Section 196 ERA was to implement the Posting of Workers Directive. It added that there was a presumption against extra-territoriality that should clearly operate in respect of the ERA in circumstances where Parliament considered it necessary to include specific provisions dealing with of mariners, offshore employment and employment abroad.

No argument was presented to the EAT on the effect of Regulation 11(5)(a) in determining the territorial scope of the mandatory right to claim unfair dismissal, although it cannot be disputed that the FCO resides and/or carries on business in the UK. More importantly, the decision did not refer to the Rome Convention or to the concept of mandatory rules.

The Jackson approach

Jackson is the most recent and (to date) fully-reasoned EAT decision on the territorial scope of the ERA, and is the only one in which the full range of arguments were expressed. It describes the decision in Bryant as "plainly right" on its facts and refused to follow the decision in Lawson. The Regulation 11(5)(a) argument is dismissed as "wholly misconceived". The reasons given are three-fold:

Secondary legislation (i.e. Regulation 11(5)) should not be used to construe primary legislation (i.e. the ERA);

There is a presumption against extra-territoriality; and

The wording of Regulation 11(5) was not in any way influenced by the repeal of Section 196 ERA.

However, having done an effective job in dismissing the Regulation 11(5) approach, the EAT in Jackson was less effective in deciding what to put in its place. The EAT offers what it calls "our own analysis of the true jurisdictional position following the repeal of Section 196 ERA". It says that "the general rule of statutory presumption [i.e. the presumption against extra-territoriality] … is subject to the proviso that … the employment has a sufficient, that is substantial, connection with this country". Unfortunately, the EAT does not expand any further the basis on which such a test should be applied, saying merely that "we do not wish to speculate here".

The lack of any guidelines therefore takes us no further. It is clear that the appeal courts have yet fully to grasp the concept of mandatory rules in both the Posting of Workers Directive and the Rome Convention, and it is clear that (Lawson aside) they are unwilling to stomach what has been called a "globalist" approach to ERA claims. What we are left with is a loose test of "substantial connection" with no easy or practical way of applying it to the kinds of overseas or peripatetic workers described in the introduction.

The territorial scope of the anti-discrimination legislation

Insofar as the SDA, RRA and DDA are concerned, Dicey suggests it is axiomatic that they apply irrespective of the law applicable to the contract. The effect is that, where it can be shown that employees pass the relevant territorial hurdle (e.g. for SDA claims, the Applicant does not work wholly outside Great Britain), their provisions will be treated as mandatory for the purposes of Article 6 and Article 7(2) of the Rome Convention. This would certainly be consistent with the Posting of Workers Directive, which expressly views "equality of treatment between men and women and other provisions on non-discrimination" as being part of the "nucleus of mandatory rules" requiring special protection (Article 3(1)(g)). Unfortunately, the position differs according to the ground of the alleged discrimination.

Sex Discrimination

As stated above, the territorial scope of the Sex Discrimination Act 1975 (SDA) approaches the issue by defining what it means by employment at "at an establishment in Great Britain". The meaning of "an establishment in Great Britain" is explained by Section 10 SDA. Of specific relevance is the deeming provision in Section 10(1) SDA. Prior to its amendment on 16^th December 1999, this provided that employment would be "regarded as being at an establishment in Great Britain unless the employee [did] his work wholly or mainly outside Great Britain".

Prior to its amendment on 16^th December 1999, Section 10(2) SDA provided protection from sex discrimination to those who worked:

(a) on board ships registered at a port of registry in the UK, and

(b) on board aircraft or hovercraft registered in the UK, and operated by a person who had his principal place of business, or was ordinarily resident, in Great Britain

unless they "worked wholly" outside Great Britain. It is important to note in this context that ship, aircraft and hovercraft workers will always work "mainly outside" Great Britain. By way of example, on a pure time basis, cabin crew will begin and end their tours of duty at a British airport such as Heathrow, but spend most of their time beyond British shores and outside British airspace. That is probably why, despite originally adopting the "wholly or mainly outside Great Britain" test for all workers, Parliament enacted the more generous "wholly outside Great Britain" test for ship, aircraft and hovercraft workers. Importantly, however, its generosity only extended to those who worked on British registered ships, aircraft and hovercraft.

By contrast, Mrs Carver could not rely on the old Section 10(2) SDA because her employer, Saudi Arabian Airlines, did not have its principal place of business, and was not ordinarily resident, in Great Britain. Accordingly, her claim could only proceed under Section 10(1) SDA; and this was unsuccessful upon remission of her case to the Tribunal because, for the most part, she worked outside British airspace on tours of duty from Heathrow to Jeddah and elsewhere.

In summary, until 16^th December 1999, British-based cabin crew working for foreign airlines were denied protection from sex discrimination because they did work "mainly" outside Great Britain. They could not overcome the test in Section 10(1) SDA and were not covered by the deeming provision for ship, aircraft and hovercraft workers in Section 10(2) SDA.

With effect from 16^th December 1999, the words "or mainly" were excised from Section 10(1) SDA. This served to complete implementation of the Posting of Workers Directive, due by that date. Adopting the reasoning in Haughton, all employment is now treated as being at an establishment in Great Britain unless the work is done wholly outside. The use of the absolute term "wholly" does not appear to permit even a de minimis approach. This may be because the Posting of Workers Directive does not define a "posting" save to say that, to qualify, it need only be for "a limited period".

When the words "or mainly" were removed from Section 10(1) SDA with effect from 16^th December 1999, Section 10(2) was also changed. In effect, the deeming provision remained as a means of covering those who worked on British registered ships, aircraft and hovercraft. However, given the absolutist nature of the "wholly" test, Section 10(2) SDA has become rather otiose. It only appears to be relevant as a "for the avoidance of doubt" deeming provision for those who work wholly outside Great Britain on British-registered aircraft or hovercraft operated by those living in or working from Great Britain; under Section 10(3) SDA, however, those who work wholly outside Great Britain on British-registered ships are excluded.

Happily, British-based cabin crew for foreign airlines, such as Mrs Carver, who worked from such airlines' British bases and plainly did some work in the UK, were now clearly covered by Section 10(1) SDA.

Racial discrimination

The territorial scope of the Race Relations Act 1976 (RRA) operates in a similar but not identical way to the SDA. From 16^th December 1999 to 18^th July 2003, under Section 8(1) RRA, claimants were deemed to work from "an establishment in Great Britain" so long as they did not work "wholly outside Great Britain".

However, in the case of the RRA, the old Section 8(2) RRA was repealed in its entirety; unlike the SDA, no substitute Section 8(2) RRA was put in its place. Section 8(3) RRA remained, and this mirrored Section 10(3) SDA. The apparent effect was that the deeming provision only operated to the benefit of those who work on board British-registered ships. However, because the deeming provision in Section 8(3) RRA expressly excluded those who worked "wholly outside" Great Britain, it was difficult to see what remaining purpose Section 8(3) RRA served. This was because, if an employee did not work wholly outside Great Britain, he or she should fall under Section 8(1) RRA in any event.

A further inconsistency is that, unlike the SDA, the RRA has in Section 9 further provisions dealing with seamen recruited abroad. There were no express provisions dealing with aircraft and hovercraft workers.

Since 19^th July 2003, the provisions have been further amended. Section 8(1)(a) RRA now provides that claimants are deemed to work at an establishment in Great Britain if they work "wholly or partly in Great Britain". This will clearly be the applicable test in the vast majority of cases, and the word "partly" will almost certainly sufficient to catch posted workers for the purposes of Article 3(1)(g) of the Directive.

It is very interesting that Parliament proposes an expressly extra-territorial provision in the new Section 8(1)(b) RRA, in that, for the first time, a statutory employment right will be expressly available to an employee who does his work "wholly outside" Great Britain. The qualifying criteria are set out in Section 8(1A) RRA:

(a) The employer has a place of business at an establishment in Great Britain;

(b) The work is done for the purposes of the business carried on at that establishment; and

at the time when he applies for or is offered alternative employment, or

at any time during the course of the employment.

Section 8(2) RRA is still repealed and Section 8(3) RRA is unamended. This means that there are no express provisions covering aircraft or hovercraft workers (who, presumably, can still rely on the amended Section 8(1) RRA). It is unclear whether workers on British-registered ships will still be excluded under Section 8(3) RRA if they work wholly outside Great Britain, or whether they can avail themselves of protection under the new Sections 8(1)(b) and 8(1A) RRA.

Disability discrimination

The territorial scope of the Disability Discrimination Act 1995 (DDA) operates in a similar but not identical way to the RRA. Section 68(2) DDA, which came into force on 16^th December 1999, operates the same deeming provision in Section 10(1) SDA and Section 8(1) RRA, but applies it in reverse. Whereas under the SDA and DDA an employee is treated as working from an establishment in Great Britain unless he works wholly outside Great Britain, under the DDA an employee is treated as not working from an establishment in Great Britain if he works wholly outside Great Britain.

It is not quite clear whether this semantic difference has any practical impact. The issue has not been tested before the courts. For example, would the absence of the words "is to be regarded as being" make a hypothetical Neill LJ less likely to conclude that, as with the SDA in the Haughton case, the DDA contains an "all-embracing definition to cover all employment other than that which is excluded specifically"? It is arguable that the less strident wording of Section 68(2) DDA would make it more difficult for an employee who does some work in Great Britain to persuade a Tribunal that, for the purposes of the DDA, they are deemed to work at an establishment in Great Britain.

There is currently no express deeming provision covering employment on ships, aircraft or hovercraft, although Parliament reserved within Section 68(3) DDA the option to develop "prescribed cases" for such workers.

However, these provisions will be further amended with effect from 1^st October 2004. From that date, Section 68(2)(a) DDA will likewise provide that claimants are deemed to work at an establishment in Great Britain if they work "wholly or partly in Great Britain", and Section 68(2)(b) will provide that claimants who do their work "wholly outside" Great Britain can claim under identical qualifying criteria in Section 68(2A) DDA.

One difference is the application of the territorial scope provisions to ship, aircraft and hovercraft workers, thereby introducing "prescribed cases". The combined effect of Sections 68(2B), 68(2C) and 68(2D) are that:

(a) Employment on board a ship is only covered if it is registered at a port of registry in Great Britain or (for the first time) the ship "belongs to or is possessed by Her Majesty in right of the Government of the United Kingdom" (see Sections 68(2B) and 68(2D)(a) DDA); and

(b) Employment on board an aircraft or hovercraft is only covered if the aircraft is registered in the United Kingdom and operated by a person who has his principal place of business, or is ordinarily resident, in Great Britain, or (for the first time) the aircraft or hovercraft "belongs to or is possessed by Her Majesty in right of the Government of the United Kingdom" (see Sections 68(2C) and 68(2D)(b) DDA).

The effect of this is to create a category of employees who can present complaints that they have been discriminated against on grounds of sex or race, but cannot present complaints that they have been discriminated against on disability. This category comprises workers on foreign registered ships, aircraft and hovercraft. This can best be explained by hypothetical reference to a British-based flight attendant like Mrs Carver working out of Heathrow on board a foreign registered aircraft.

As suggested above, the previous version of Section 10(2) SDA gave protection to those working on British-registered vessels whom would otherwise have worked "mainly" outside Great Britain. Given the absolutist nature of the "wholly" test in Section 10(1) SDA that survived 16^th December 1999, Section 10(2) SDA has become rather otiose, and only appears to be relevant as a deeming provision for those who work wholly outside Great Britain on British-registered aircraft or hovercraft. Mrs Carver would pass the Section 10(1) SDA test, as she did some work in Great Britain in terms of pre and post flight duties and duties within British airspace.

However, in the case of cabin crew, the express deeming provision contained in Sections 68(2C) and 68(2D)(b) DDA demonstrates that any employees working on board aircraft are only protected from disability discrimination if the aircraft is registered in the UK and operated by a person who has his principal place of business, or is ordinarily resident, in Great Britain (or one of Her Majesty's fleet). Taking Mrs Carver as an example, this would clearly preclude her from relying on the primary test in Section 68(2) DDA. She would also fail to pass the test in Sections 68(2C) and 68(2D)(b) DDA because, like other foreign airlines, Saudi Arabian Airlines is not ordinarily resident in Great Britain and does not have its principal place of business here. As a corporate entity, Saudi Arabian Airlines may accurately be said to have a branch or establishment here, for the purposes of the Brussels Convention, but that is not necessarily the same as saying it "ordinarily resides" here when its primary operations are in Jeddah.

No such hurdle is present in the case of either sex or race discrimination.

Sexual orientation and religion/belief discrimination

The territorial scope of these provisions is set out in Regulation 9. The DTI did not include a draft of Regulation 9 in the version of the Regulations it issued for consultation. At that stage, the DTI asked consultees for their views on the "practical implications" of retaining a similar test as used in the other discrimination legislation or adopting a different test. Regulation 9 was, otherwise, left blank. The overall effect is that the DTI has adopted a different test for establishing the territorial scope of the new Regulations, but has not consulted on the implications of the test it has adopted.

The test in Regulation 9(1)(a) reflects the new approach that is now in the amended race and disability discrimination legislation. An employee is protected from discrimination on grounds of sexual orientation and religion/belief if he does his work "wholly or partly in Great Britain", but will also be protected under Regulation 9(1)(b) if he does his work "wholly outside" Great Britain under the same qualifying criteria set out in Regulation 9(2).

Because (unlike with the RRA and DDA) no amendment for "wholly outside" workers has been made or proposed for the SDA, the indisputable effect of the new tests is to create a category of employees who can present complaints that they have been discriminated against on grounds of race, disability, sexual orientation and religion/belief but who cannot present complaints that they have been discriminated against on grounds of sex. It is odd that, under the new equality framework where consistency should be paramount, there should be employees who are better protected because they are gay, disabled, Christian or black than because they are female.

Also of note is Regulation 9(3). The repeats the problems identified above with Sections 68(2B), 68(2C) and 68(2D) DDA, as it causes difficulties for British-based workers on foreign registered ships, aircraft and hovercraft. Once again, the point can best be explained by hypothetical reference to a British-based flight attendant like Mrs Carver working out of Heathrow on board a foreign registered aircraft.

As stated above, the amended version of Section 10(2) SDA provides that "employment" in Section 10(1) SDA includes "employment on aircraft or hovercraft registered in the UK and operated by a person who has his principal place of business, or is ordinarily resident, in Great Britain". By contrast, Regulation 9(3) provides that "employment" in Regulation 9(1) includes "employment on aircraft or hovercraft only if the aircraft or hovercraft is registered in the UK and operated by a person who has his principal place of business, or is ordinarily resident, in Great Britain" (emphasis added).

The presence of the additional words "only if the aircraft or hovercraft is" in Regulation 9(3) clearly suggests that any employees working on board aircraft are only protected from the new types of discrimination if the aircraft is registered in the UK and operated by a person who has his principal place of business, or is ordinarily resident, in Great Britain. Unlike the drafting used in the amended Section 10(2) SDA, the express words "only if the aircraft or hovercraft is" clearly prevent such employees from placing reliance on the primary tests in Regulation 9(1).

Given the similar changes to the DDA, it is clear that this is no legislative oversight; for some reason, Parliament intends to exclude cabin crew working for foreign airlines from protection from discrimination on grounds of disability, sexual orientation and religion/belief, but wishes to protect them from discrimination on grounds of sex or race.

If correct, it necessarily follows from the above that the Government may have failed properly to implement the Posting of Workers Directive. Foreign airlines frequently require cabin crew to work on a series of overseas postings; take for example, Mrs Carver, who was posted from initial training in Jeddah first to Bombay and then to London. If a flight attendant is denied protection from discrimination on grounds of disability, sexual orientation or religion/belief, despite being posted to the UK, the Government has failed to include such protection in the "hard core" of mandatory rules, contrary to Article 3(1)(g) of the Directive.

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PREVIOUS SPEAKERS:

Barry Clarke Partner, Russell Jones & Walker

ILS, London, 13 November 2003

Barry Clarke
Partner, Russell Jones & Walker