In Duncombe and others v Secretary of State for Children, Schools and Families [No.2], the UK Supreme Court has decided that a teacher employed by the Secretary of State for Children, Schools and Families to work in a European School in Germany enjoyed the protection against unfair dismissal contained in the Employment Rights Act 1996 (the “ERA”), such that he was entitled to pursue a claim in the English Employment Tribunal in connection with the termination of his employment. The Supreme Court found that Mr Duncombe’s employment had a sufficiently close connection with Great Britain, more so than with any other jurisdiction, to justify this conclusion.

In its decision, the Supreme Court examined the principles already set out by the House of Lords in the landmark 2006 case of Lawson v Serco Ltd.

This is an important decision for employers based in the United Kingdom who engage staff to work abroad and highlights the need to give careful consideration to the employment law rights that any such employees might have.

What happened in this case?

Mr Duncombe was employed on a series of fixed-term contracts to work in a European School in Germany by the predecessor to the Department for Children, Schools and Families. After nine years’ employment and on the expiry of Mr Duncombe’s final fixed-term contract, his employment was terminated (as required by the relevant EC Regulations governing the administration of the European Schools under the so-called “nine-year rule”) and he subsequently brought Employment Tribunal claims for wrongful and unfair dismissal.

The arguments in Mr Duncombe’s case centred around the territorial scope of the ERA and the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002. The case went all the way to the Supreme Court. The Supreme Court has already ruled on 30 March this year on a different aspect of the case, finding that the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 did not operate to convert Mr Duncombe’s fixed-term contract into a permanent contract after he had been continuously employed for nine years on a series of successive fixed-term contracts (on the grounds that the nine-year rule objectively justified the use of a final fixed-term contract), thereby defeating Mr Duncombe’s wrongful dismissal claim. The Supreme Court has now also ruled on Mr Duncombe’s claim that he is protected against unfair dismissal under the ERA, despite working exclusively in Germany.

In reaching its decision, the Supreme Court relied on the decision of the House of Lords in Lawson v Serco Ltd. In that case, it was held that there are three categories of employees who are entitled to claim unfair dismissal protection under the ERA, as follows:

1. employees who work in Great Britain;
2. peripatetic employees who are based in Great Britain (e.g. pilots and travelling sales staff); and
3. expatriate employees in ‘exceptional circumstances’ such that, despite their workplace being abroad, other relevant factors are sufficiently powerful to give the employment relationship a closer connection with Great Britain than any other country’s system of law (e.g. a foreign correspondent who is posted abroad).

The Supreme Court held that Mr Duncombe fell within the third category in Lawson v Serco Ltd, basing its decision on the following key factors:

• his employer was based in Great Britain;
• as well as being based in Great Britain, the employer was the Government of the United Kingdom, giving it the closest connection with Great Britain that any employer could have;
• Mr Duncombe’s employment was governed by an English law contract;
• Mr Duncombe was employed in an international enclave which had no particular connection with the country in which he happened to be situated (Germany);
• Mr Duncombe did not pay local taxes; and
• it would be anomalous if a teacher who had been employed by the British Government to work in the European School in England enjoyed greater protection than a teacher employed by the British Government to work in the same sort of school in another country.

The Supreme Court therefore remitted Mr Duncombe’s claim of unfair dismissal to an Employment Tribunal for it to reach a decision on the merits of his case.

What the Supreme Court’s decision means for employers.

On the facts, it is perhaps not surprising that the Supreme Court decided that Mr Duncombe’s employment had a sufficiently close connection with Great Britain to entitle him to unfair dismissal protection under the ERA. However, the case does highlight the English courts’ willingness to give employees who work outside of Great Britain unfair dismissal protection (and potentially other domestic rights) where their employment has a demonstrably close connection with Great Britain.

English employers would be wise to consider carefully the legal rights that their expatriate employees may have both before engaging them and, in particular, when considering whether to terminate their employment.

On a separate note, it is worth pointing out that the Supreme Court did not have to deal with the particularly interesting point which was thrown up by the lower courts in this case concerning the extension of the territorial scope of UK employment law to give effect to directly effective EU rights. The Employment Tribunal and the EAT, applying their view of the principles in Lawson v Serco Ltd, both decided that the Mr Duncombe was not entitled to bring a claim for unfair dismissal, which would have meant that his remedy would have been limited to contractual notice rights. However, applying the principle in Bleuse v MBT Transport Ltd [2008], the Court of Appeal found it necessary to extend the remedy of unfair dismissal to Mr Duncombe in order to give him an effective remedy for breach of certain specific rights under EU law (namely those derived from the EU Fixed-term Working Directive). This decision of the Court of Appeal effectively gives employees working outside the UK, but in the EU, a “back door” means of pursuing an unfair dismissal claim in the Employment Tribunal in circumstances where they do not fit within the Lawson v Serco Ltd categories but where the Court considers that to be necessary to give them an effective remedy for a failure to give effect to an EU derived right (such as rights under the Fixed-term Working Directive). There was no need for the Supreme Court to consider the Bleuse issue as it had already decided (in its first decision) that Mr Duncombe’s fixed term contract did not convert to a permanent contract under the Fixed-term Employees Regulations (so that no effective remedy was therefore required) and because in this second decision of the Supreme Court, it decided that Mr Duncombe fell within one of the Lawson v Serco Ltd categories and was therefore entitled to bring a claim for unfair dismissal under the ERA. The Court of Appeal’s decision on the Bleuse issue therefore remains good law and UK employers need to be especially careful when considering the rights of employees who work outside the UK but in an EU Member State, particularly where their contracts are governed by English law.