The terms of an employment contract are governed by law

In today’s litigious climate, individuals are increasingly aware of their employment rights, and the opportunity to pursue claims before Employment Tribunals and the courts. Most employers recognise that specific employment law issues arise when employing overseas nationals (even if the individual is to work in the UK on secondment rather than as an employee of a UK organisation). However, many of those issues are sidelined or ignored when the individual is from the US because of a perceived commonality of language and culture. This can be a dangerous oversight.

Whilst the principles of discrimination legislation are similar (although thankfully the levels of compensatory awards are not), other concepts, such as unfair dismissal, are unfamiliar to American employees. Consequently, careful thought must be given to the terms of employment or secondment and whether individuals being sent to work in the UK require training on key UK employment issues.

SECONDMENT AGREEMENTS
An employment contract for a US national employed by a UK company will (or should) be no different to the contract used by the company in employing UK or other nationals – to do otherwise would be discriminatory. However, secondment agreements are often very simplistic, sometimes no more than a letter confirming the period of secondment and stating that all other employment terms remain in effect. This is unwise.

Appropriate protection should be afforded to the organisation to which the employee is seconded – failure to include appropriate terms in a secondment agreement will leave the UK organisation significantly exposed. Even for relatively short secondments, consideration must be given to the following:

• Imposing appropriate confidentiality obligations to protect the confidential information of the UK company to which the employee is seconded.
• Provisions to ensure that any intellectual property created by the employee during the term of the secondment is owned by the correct entity – whether that is the employer or the company to which the employee is seconded.
• Including clauses entitling the UK company to which the employee is seconded to take disciplinary action against the individual whilst on secondment – including the ability to terminate the secondment in circumstances where a UK employee’s employment would be terminated by way of disciplinary sanction.
• Imposing restrictions to protect the UK company from solicitation of clients and employees once the secondment ends. Any post-termination restrictions in the individual’s employment contract will undoubtedly only protect the employing company.

The terms applied to temporary secondees from overseas must not be more stringent than those imposed upon permanent UK employees. To do so, where the difference cannot be objectively justified, exposes the UK company to claims of race discrimination.

JURISDICTION
Subject to certain restrictions, the terms of a contract are normally governed by the law chosen by the parties. If no election is made, the applicable law will be the law of the country in which the employee habitually carries out his or her work in the performance of the contract. That said, the ability to choose the law applicable to a secondment agreement is limited to the extent that such choice must not deprive the individual of rights afforded to him or her by the “mandatory rules of law”, ie, statutory employment protections. A company seconding an individual to the UK from the US cannot avoid the various employment rights and protections granted by UK statutes simply by electing that US law governs the contract.

UNFAIR DISMISSAL
The right not to be discriminated against is a concept familiar to both US and UK employees and is therefore (provided the secondment terms are not less favourable than those offered to “home” employees) unlikely to present any significant difficulties whether an individual works in the UK as an employee or secondee. However, the concept of unfair dismissal (the right to be dismissed for a fair reason and only after a fair process that complies with statutory procedures), is more problematic.

If a US national is employed by a UK company, he or she will automatically have the right not to be unfairly dismissed, subject to satisfying the usual applicable criteria in relation to length of service, etc. If a US national is seconded to the UK he or she will not gain that right, save on inter-company transfers where the courts are likely to afford protection to the employee in any event.
However, irrespective of the employment status, any individual in a managerial position must be made aware of the right of those he or she manages not to be unfairly dismissed, and the circumstances in which such dismissals can arise (whether overtly or constructively) in order to minimise the risk of unfair dismissal claims.

Claims that an employee has been dismissed unfairly (an alien concept to US employees) most commonly occur because managers fail to follow fair procedures when conducting disciplinary proceedings, performance reviews and upon termination of employment. Prior to 1 October 2004, a dismissal was fair in law if an employer had a fair reason for dismissing the employee (capability, conduct, a redundancy situation, the contravention of a statutory duty if the employee remains employed, ie immigration status, or some other substantial reason), and followed a procedure that would be regarded as fair by a “reasonable employer”.
Since 1 October 2004, that procedure must also satisfy the requirements of the three-step statutory dismissal and disciplinary procedure introduced by the Employment Act 2002 and implemented by the Employment Act 2002 (Dispute Resolution) Regulations 2004. Failure to do so may result in costly awards of compensation up to a cap of £58,400 from 1 February 2006. Even without the risk of an unfair dismissal claim, secondees should be treated no differently to other employees (subject to the terms of the secondment agreement, and authority to discipline) in order to minimise the risk of allegations of race discrimination based on disparity of treatment.

CONCLUSION
Often the practicalities of sending a US employee to work in the UK are given more consideration than the legalities. However, it is imperative to ensure that appropriate contractual arrangements are in place – be that an employment contract or secondment agreement – and that the potential issues of cultural disparity are addressed. Discussions in relation to termination of employment which may well be acceptable in a US “employee at will” environment can cause significant difficulties, and potentially costly unfair dismissal claims, in the UK.

Therefore, in addition to ensuring that the terms of an individual’s contract or secondment agreement are properly drafted, it is imperative to ensure that those in managerial positions in the UK understand the rights and obligations of their subordinates. Tailor-made training programmes can be invaluable in this regard and save considerable sums for an organisation which may otherwise be faced with avoidable Employment Tribunal proceedings.

For more information, contact:
Adele Martins
Partner, Magrath & Co Solicitors
Employment Department
Tel: +44(o) 207 495 3003
E-mail: adele.martins@magrath.co.uk