Duncombe and others v Secretary of State for Children, Schools and Families [2011] UKSC 36

Hilary Term[2011] UKSC 36On appeal from:[2009] EWCA Civ 1355JUDGMENT
Between
Duncombe and othersRespondentsSecretary of State for Children, Schools and FamiliesAppellant
Before
Lord RodgerLady HaleLord ManceLord CollinsLord ClarkeDate 15 July 2011Hearing Heard on 17 and 18 January 2011Jonathan Crow QC, Maya Lester (Instructed by Treasury Solicitors) for AppellantNigel Giffin QC, Katherine Eddy, Simon Henthorn (Instructed by Reynolds Porter Chamberlain LLP) for Respondent
[1]This is the judgment of the court, composed of Lady Hale, Lord Mance, Lord Clarke and Lord Collins. Lord Rodger of Earlsferry presided over the panel which heard this case on 17 and 18 January 2011 and took part in our deliberations and decision upon the appeal: [2011] UKSC 14. His sudden illness and untimely death have sadly prevented him from taking any part in our deliberations and decision upon the cross-appeal.[2]The case relates to the unusual employment status of teachers employed by the Secretary of State for Children, Schools and Families to work in the European Schools. The main issue in the appeal was whether the terms of that employment fell foul of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 (SI 2002/2034) which implemented Council Directive 1999/70/EC concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP. This Court handed down judgment on 30 March 2011 allowing the appeal of the Secretary of State on that issue: [2011] UKSC 14. We reserved judgment in the cross-appeal of the teachers. The issue in the cross-appeal is whether their employment is covered by the protection against unfair dismissal conferred by section 94(1) of the Employment Rights Act 1996.[3]It is fair to say that had this issue stood alone it is unlikely that permission would have been given to bring an appeal to this Court. It is common ground that the basic principle was laid down by the House of Lords in Lawson v Serco Ltd [2006] UKHL 3, [2006] ICR 250. It is also common ground that these teachers’ employment does not fall within either of the specific examples given in Lawson of people employed by British employers to work outside Great Britain who would be protected from unfair dismissal. The question is whether there are other examples of the principle, of which this is one.[4]There were three cases heard together in Lawson v Serco. Mr Lawson was employed by Serco as a security supervisor at the British RAF base on Ascension Island, which is a dependency of the British Overseas Territory of St Helena. Mr Botham was employed as a youth worker at various Ministry of Defence establishments in Germany; under the NATO Status of Forces Agreement of 1951 he was part of the civil component of British Forces in Germany and treated as resident in the UK for various purposes. Mr Crofts was a pilot employed by a company which was a wholly owned subsidiary of, and provided aircrew for, Cathay Pacific Airways Ltd, the Hong Kong airline; but he was based at Heathrow under the airline’s “permanent basings policy”.[5]Section 94(1) of the Employment Rights Act 1996, which grants employees the right not to be unfairly dismissed, no longer contains any geographical limitation. Parliament had repealed the previous exclusion of employees (mariners working on British ships apart) who ordinarily worked outside Great Britain in 1999 and put nothing in its place. But it was agreed that section 94(1) could not apply to all employment anywhere in the world. But to what did it apply? Lord Hoffmann, with whom all the other members of the appellate committee agreed, emphasised that this was a question of law (para 34), and that it was a matter of applying a principle rather than inventing a rule (para 23). The “standard, normal or paradigm case” was an employee working in Great Britain at the time of the dismissal (paras 25, 27). Also covered were “peripatetic employees” who might spend much of their time outside Great Britain but were nevertheless based here (para 30).[6]The problem of “expatriate employees”, who worked or were based abroad, was more difficult (para 35). Lord Hoffmann agreed with counsel for the Ministry of Defence that it might well be correct to describe the cases in which section 94(1) could exceptionally apply to employees working outside Great Britain as those where “despite the workplace being abroad, there are other relevant factors so powerful that the employment relationship has a closer connection with Great Britain than with the foreign country where the employee works”. But “like many accurate statements, it is framed in terms too general to be of practical help”. So he tried to identify the characteristics which such an exceptional case would ordinarily have (para 36). First, it would be very unlikely that the right would apply unless the employee was working for an employer who was based here; but many British companies carry on businesses in other countries, so something more would be needed (para 37). The something more might be that the employee was posted abroad for the purpose of a business carried on in Great Britain, such as the foreign correspondent of a British newspaper (para 38). Another example was an employee working “within what amounts for practical purposes to an extra-territorial British enclave in a foreign country” (para 39). There might be other examples, but he could not think of any, and “they would have to have equally strong connections with Great Britain and British employment law” (para 40).[7]According to these principles, all three employees in Lawson v Serco were covered by the legislation: Mr Crofts because he was based in Great Britain, and both Mr Botham and Mr Lawson because they were working for British employers in what amounted to a British enclave. In the latter two cases, although there was a local system of law “the connection between the employment relationship and the United Kingdom was overwhelmingly stronger” (para 39). On the other hand, he had no doubt that Bryant v Foreign and Commonwealth Office, unreported, 10 March 2003, was correctly decided: there the Employment Appeal Tribunal held that section 94(1) did not apply to a person (who happened to be a British national) locally engaged to work in the British embassy in Rome (para 39).[8]It is therefore clear that the right will only exceptionally cover employees who are working or based abroad. The principle appears to be that the employment must have much stronger connections both with Great Britain and with British employment law than with any other system of law. There is no hard and fast rule and it is a mistake to try and torture the circumstances of one employment to make it fit one of the examples given, for they are merely examples of the application of the general principle.[9]The Employment Tribunal rightly held that neither of Lord Hoffmann’s specific examples applied to teachers employed by the British Government to work in European Schools abroad. The Tribunal thought that their employment was much more firmly rooted in the European Schools than in Great Britain. However, the teachers’ argument is that, although their actual work might have strong connections with the particular school in which they were employed, their employment relationship had virtually no connection with the system of law in the country in which that particular school happened to be. They were not employed in a British enclave but they were employed in an international enclave. There is no applicable international system of employment law to which they can turn. In this respect they are very similar to Mr Lawson and Mr Botham, where there was a local system of law, but “the connection between the employment relationship and the United Kingdom was overwhelmingly stronger”.[10]The teachers also draw attention to the similarities between their case and that of Mrs Wallis and Mrs Grocott: see Ministry of Defence v Wallis and Grocott [2011] EWCA Civ 231. This case is of interest, first, because of the agreed statement of facts between the Ministry of Defence and the claimants, which was relied upon by the employment judge; and second, because on facts very similar to the present case, the Employment Tribunal, Employment Appeal Tribunal and Court of Appeal reached a different conclusion.[11]Mrs Wallis was employed by the Ministry of Defence as a library assistant at the international school attached to the Supreme Headquarters Allied Powers Europe (SHAPE) in Belgium. Mrs Grocott was employed by the Ministry of Defence as a school secretary in the British section of the Armed Forces North International School attached to the Joint Forces Command (JFC) in the Netherlands. Both SHAPE and JFC are entities within the structure of NATO. The claimants were recruited to these jobs because they were the wives of armed forces personnel working at SHAPE and JFC. Both were dismissed from their jobs when their husbands left the British armed forces (although they continued to work for NATO at SHAPE and JFC respectively in a civilian capacity). According to the agreed statement of facts in the case, the Ministry of Defence regards it as desirable for the harmony of the family life of those engaged in the forces, or the civilian component accompanying them, that there are employment opportunities open to their spouses and other dependants and so actively tries to recruit them. Their contracts of employment are governed by English law and the Ministry of Defence goes to considerable lengths to reassure such employees that their terms and conditions are essentially English. They pay neither British nor local taxes, but do pay British national insurance contributions. These employees are in a different category from “directly employed labour”. The latter are employees engaged locally with the help of the host state, who are engaged on local (host state) labour terms, regardless of their nationality, and pay local taxes.[12]The employment judge rightly rejected the argument that the women were working within a British enclave. Rather, they were working within an international enclave. But their employment was so closely connected to England as to be within section 94(1) of the Employment Rights Act 1996. They were “piggy-backed” by their husbands into the same terms and conditions as employees of the British armed forces posted to serve abroad, who undoubtedly fall within the Botham exception. They were thus in a quite different position from the locally engaged “directly employed labour” such as Mrs Bryant: Mrs Bryant’s connection with England was just the fortuitous one of nationality in what would otherwise be a standard case of directly employed labour.[13]That reasoning was described as “unimpeachable” by Underhill J in the Employment Appeal Tribunal and accepted by the Court of Appeal. Elias LJ said this:
“They were the spouses of persons who formed part of a British contingent working in an international enclave, and they obtained their employment only because of that relationship. In my judgment they have equally strong connections with Great Britain and British employment law as those employed in British enclaves abroad” (para 46). Mummery LJ also rejected the Ministry of Defence submission that this would be to “export”
British unfair dismissal law to a foreign country and contrary to the principles of sovereignty and equality of states in international law: “Considerations of international comity could not possibly affect the claimants’ husbands’ access to an employment tribunal for unfair dismissal from the armed forces and I do not see how they could affect claims by the claimants if there is a sufficiently strong connection of their employment to Great Britain and its unfair dismissal law” (para 35).[14]The teachers in this case point out that they too have been recruited to work in an international enclave and have even stronger links with Britain and British employment law. They have not been recruited simply because they are the dependants of British personnel posted abroad, but as British public servants to be posted abroad. Furthermore, although they were not being employed abroad for the purpose of a British undertaking conducted here, nor were they being employed for the purpose of a foreign branch of a British undertaking, they were being employed to fulfil the obligations which the United Kingdom government had undertaken to other European Union states under the Statute of the European Schools.[15]In this case, the Secretary of State was content simply to argue that it fell within neither of the cases identified as exceptional in Lawson v Serco: the teachers worked entirely overseas in a sui generis international establishment and this was not a strong enough connection with Great Britain and its employment law. The Court of Appeal had been right to defer to the judgment of the specialist Employment Tribunal. In applying for permission to appeal in the case of Wallis and Grocott, the Ministry of Defence argues that aspects of the employees’ personal lives have been wrongly labelled employment factors, so as to supply the necessary connection between the employment and British employment law, and that the decision fails to respect the employment laws of the countries in which the women were employed. The Ministry also makes some in terrorem arguments about the potential consequences of adding these further examples to those in Lawson v Serco.[16]In our view, these cases do form another example of an exceptional case where the employment has such an overwhelmingly closer connection with Britain and with British employment law than with any other system of law that it is right to conclude that Parliament must have intended that the employees should enjoy protection from unfair dismissal. This depends upon a combination of factors. First, as a sine qua non, their employer was based in Britain; and not just based here but the Government of the United Kingdom. This is the closest connection with Great Britain that any employer can have, for it cannot be based anywhere else. Second, they were employed under contracts governed by English law; the terms and conditions were either entirely those of English law or a combination of those of English law and the international institutions for which they worked. Although this factor is not mentioned in Lawson v Serco, it must be relevant to the expectation of each party as to the protection which the employees would enjoy. The law of unfair dismissal does not form part of the contractual terms and conditions of employment, but it was devised by Parliament in order to fill a well-known gap in the protection offered by the common law to those whose contracts of employment were ended. Third, they were employed in international enclaves, having no particular connection with the countries in which they happened to be situated and governed by international agreements between the participating states. They did not pay local taxes. The teachers were there because of commitments undertaken by the British government; the husbands, in Wallis and Grocott, were there because of commitments undertaken by the British government; and the wives were there because the British government thought it beneficial to its own undertaking to maximise the employment opportunities of their husbands’ dependants. Fourth, it would be anomalous if a teacher who happened to be employed by the British government to work in the European School in England were to enjoy different protection from the teachers who happened to be employed to work in the same sort of school in other countries; just as it would be anomalous if wives employed to work for the British government precisely because their husbands were so employed, and sacked because their husbands ceased to be so employed, would be denied the protection which their husbands would have enjoyed.[17]This very special combination of factors, and in particular the second and third, distinguishes these employees from the “directly employed labour” of which Mrs Bryant was an example. There, the closer analogy was with a British, or indeed any other company, operating a business in a foreign country and employing local people to work there. These people are employed under local labour laws and pay local taxes. They do not expect to enjoy the same protection as an employee working in Great Britain, although they do expect to enjoy the same protection as an employee working in the country where they work. They do, in fact, have somewhere else to go. (It would indeed be contrary to the comity of nations for us to assume that our protection is better than any others’.) To admit the cases before us as another example of the principle laid down in Lawson v Serco is scarcely to extend those exceptional cases very far or to offend against the sovereignty and equality of nations.[18]For those reasons, the cross-appeal is allowed and the case will return to the Employment Tribunal. It follows that the application of the Ministry of Defence for permission to appeal on this point in the cases of Wallis and Grocott will be dismissed.

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