The application of UK employment law to employees working outside the UK is a big issue for multi-national companies and employers in the shipping industry. If you have an employee who works for you outside the UK, can you be sure that they are not entitled to UK employment rights?

Not always – and there has been a great deal of case law over the last few years which indicates just that. Some employees working outside the UK may have UK employment rights – international employers should remain aware of that risk to avoid surprise claims.

But which employees will have such rights? A new case this week in the Employment Appeal Tribunal ("EAT") might provide some help in answering that question, at least in relation to employment protection derived from EU law, such as discrimination claims. We take a look at Hasan v Shell International Shipping Services (PTE) Ltd, and consider if this case takes us any further in defining the true scope of UK employment law.

The general position

The question as to whether an employee working outside the UK is nevertheless entitled to UK employment protection will depend on what type of claim he is bringing.

In particular, the case of Bleuse v MTB Transport Ltd made clear that, as regards employment rights and protections which are derived from EU law, Tribunals will need to construe such provisions widely enough to give effect to that EU-derived protection to everyone who has an English law contract (even if that does not seem to strictly comply with the letter of the UK law and the employee has little or no connection to the UK). Mr Bleuse, a German national who worked for a UK company throughout Europe (but not in the UK) under an English law contract, was unable to bring claims for unfair dismissal or unlawful deduction of wages because he could not satisfy the tests set out in Lawson v Sercothat is to say his employment did not have sufficient connection to the UK; his English law contract was not enough for these purposes. These two claims are ‘UK-based’, they are not derived from EU law. On the other hand, because his claim for holiday pay centered on EU-derived rights and his contract was governed by English law, the EAT held it was required to interpret the UK legislation in such a way as to allow this claim to proceed, without the need for any further ‘sufficient connection’ to the UK.

The provisions of the Equality Act 2010 (affording protection against unlawful discrimination) are, like those regarding holiday pay, derived from EU law. Following Bleuse, therefore, Tribunals will need to interpret the scope of these anti-discrimination provisions in such a way that (as far as possible) these EU-derived rights are enforced even where the employment has little or no connection to the UK other than an English law contract.

Bleuse only helped us so far, however, as it concerned a German national working for a UK company throughout Europe. The case didn’t provide any clarification as to whether this interpretation requirement applied where the employee was working in a non-EU state.

Mr Hasan’s particular position

Mr Hasan was a mariner. He was employed by a Singapore company, who contracted out the day-to-day management of the employment relationship to a company registered in the Isle of Man. Further, a manning agreement existed between the Singapore employer and a third company, registered and based in the UK, under which Mr Hasan’s employer provided personnel to this UK company. Mr Hasan lived (when not working aboard ships) in the UK, was paid in pounds sterling, and was subject to the UK tax regime. When he was dismissed, the dismissal was confirmed in a letter from the Isle of Man company, responsible for day-to-day management of the employment relationship.

Mr Hasan brought claims for discrimination, unfair dismissal and breach of contract (in relation to unpaid notice). The key point from this case arises from the discrimination claim.

The discrimination claim

This claim related to events onboard the ship Galea, a Singapore-flagged ship which did not enter UK waters during Mr Hasan’s employment.

Section 81 of the Equality Act states that the protection afforded by the Equality Act will apply to seafarers "only in such circumstances as are prescribed". The prescribed circumstances are set out in accompanying Regulations which in this case meant that, in order for Mr Hasan to qualify for anti-discrimination protection under the Equality Act, he would need to be employed on a UK registered vessel with a "registered port of choice" in Great Britain. This was clearly not the case. The Employment Tribunal found that he was not entitled to protection under the Equality Act.

Mr Hasan appealed against this finding. Part of his argument centered on the "Bleuse principle" which we have discussed above. This principle, he argued, should mean that the territorial limitation under section 81 of the Equality Act should be relaxed to allow him an effective means of exercising directly enforceable EU-derived rights (in this case protection from discrimination). He referred to the case of Dhunna v Creditsights, which concerned an employee working in Dubai seeking to enforce EU-derived employment rights under UK law (in that case regarding working time restrictions). Although the Claimant in that case was not successful, Mr Hasan’s argument was that this did not mean that there was a general rule that the Bleuse principle should not apply where the Claimant was working outside the EU. He suggested that this be a point of reference to the European courts.

The EAT disagreed. Having considered numerous authorities, the EAT was satisfied that in none of these was the Bleuse principle held to apply when the acts complained of occurred outside the EU (as they had done here), and it declined to extend the principle in this case. In any event, the EAT remarked that the provisions of s.81 of the Equality Act (and the accompanying Regulations) were express, and so cannot be dis-applied by any implied interpretation of the territorial scope of the Equality Act.

Mr Hasan’s discrimination claim therefore failed – the UK tribunals had no jurisdiction to hear this claim.

No extension of the Bleuse principle

This case does provide some clarity for international and shipping employers. Following this case, it will be difficult for individuals who work outside the EU to argue that EU-derived employment protection should apply to them. Having said that, however, nor did the case expressly and firmly state that the Bleuse principle could never apply in such circumstances. As case law in this area develops constantly, such employers are urged to remain vigilant to further case law developments. In the meantime, however, the risk of such claims from international employees – particularly seafarers – seems to be reduced.