Foreign Respondents – can you sue a US-based Respondent in a discrimination claim?

At Farore Law we often advise and represent senior executives who are employed by UK subsidiaries of American multinationals in legal claims. In this blog we look at issues we have faced in discrimination cases. In such cases, we often encounter situations where although a senior executive might be employed by the UK subsidiary, discriminatory acts (including the decision to dismiss) were taken by decision-makers based in the US.

For the purposes of this blog, we’ll consider two scenarios:

• Scenario A: Claimant is employed by a UK subsidiary and works out of the London office. However, the decision-makers behind the dismissal (which is pleaded as an act of discrimination) were employed by the US parent company. The Claimant wishes to bring a discrimination claim against the UK subsidiary, US parent company and the US-based employees.
• Scenario B: Claimant is employed by the UK subsidiary but works remotely in Canada. Despite never living in the UK, his contract of employment states that his employment is governed by English law. Payroll was outsourced to a Canadian payroll services provider and HR issues was dealt by the US parent company. The Claimant was paid in Canadian Dollars. During the Claimant’s employment, he would only visit the UK head office in London twice a year (on total, 4 weeks). The Claimant was then dismissed. The Claimant wishes to bring a discrimination claim against the UK company, the US parent company and the US-based employees.

The legal basis for bringing claims against foreign Respondents

The starting point is that, in both these scenarios, the senior executive might have a claim against the US parent company or the US individuals (“the US Respondents”). In discrimination claims, for example, it might be argued that the Respondents were acting as principals (and the UK employer an agent), or that the US Respondents were instructing, causing or inducing the UK employer to contravene the Equality Act; or otherwise aiding the UK employer to contravene the Equality Act (see sections 110 – 112 of the Equality Act 2010).

However, in addition to this, the Employment Tribunal in London needs to have jurisdiction to hear a claim when dealing with foreign-based Respondents, and there has to be territorial connection.

Establishing international jurisdiction

In order to bring a claim against a foreign-based Respondent, the Claimant must demonstrate to the ET that it has international jurisdiction to hear the claim. The test for international jurisdiction is set out at section 15C of the Civil Jurisdiction and Judgments Act 1982, which provides that the employer may be sued in the UK in the following circumstances:

“(a) where the employer is domiciled in the United Kingdom, in the courts for the part of the United Kingdom in which the employer is domiciled,

(b) in the courts for the place in the United Kingdom where or from where the employee habitually carries out the employee’s work or last did so (regardless of the domicile of the employer), or

(c) if the employee does not or did not habitually carry out the employee’s work in any one part of the United Kingdom (or any one overseas country), in the courts for the place in the United Kingdom where the business which engaged the employee is or was situated (regardless of the domicile of the employer).”

Under both Scenario A and B, establishing jurisdiction is straightforward on the basis that the employer (the UK subsidiary) is domiciled in the UK.

Territorial connection

However, even if the Claimant establishes that the ET has international jurisdiction to hear their claim, they then must show that there is a territorial connection between their claims and statutory employment rights.

Scenario A is straightforward, on the basis that the Claimant worked in the UK. The Claimant in Scenario A may proceed with his unfair dismissal and discrimination claims and is unlikely to encounter any territorial jurisdictional issues with pursuing these claims in the ET.

What’s less straightforward, however, is Scenario B, as it is not sufficient to argue that the Claimant should be protected under the Equality Act 2010 merely because he was employed by an UK company – a sufficiently strong connection is required in order for the ET to apply UK statutory employment rights to an foreign-based employee.

The general presumption for Claimants that have worked exclusively outside the UK is that there is no sufficiently strong connection with the UK. Under the facts set out in Scenario B, the Claimant is very unlikely to succeed in establishing a sufficiently strong connection, on the basis that he only spent 4 weeks physically working in the UK and had payroll dealt with in accordance with Canadian social security and tax laws (with his salary being paid in Canadian Dollars). Furthermore, all HR issues were dealt by the US parent company. Although the employment contract purports to be governed by English law, choice of law and/or exclusive jurisdiction clauses are insufficient to establish a sufficiently strong connection on its own. As such, there is a good chance that the Claimant’s claims would be struck out under Scenario B.

How can we help?

Farore Law is a boutique employment litigation firm for senior executives, with extensive experience in high-value cross-border employment litigation. We are very well placed in advising clients on jurisdictional issues when bringing claims against foreign Respondents and Defendants.

Please contact us if you require legal advice.