Crofts & Ors v Cathay Pacific Airways Ltd & Ors

The Court of Appeal considered whether international airline pilots employed under Hong Kong contracts fell within the protection of section 94(1) of the Employment Rights Act 1996 (the right not to be unfairly dismissed). The court held that the binding decision in Lawson v Serco Ltd ([2004] EWCA Civ 12) requires application of the test whether the employment is "in Great Britain" and that that test normally excludes protection for international pilots whose work is inherently mobile unless the particular factual matrix shows the employment itself to be in Great Britain.

The Master of the Rolls (Phillips MR) concluded that, applying Serco, none of the pilots were employed in Great Britain and dismissed the pilots' appeals on the ERA claims, stayed their breach of contract claims on forum non conveniens grounds and allowed Veta's cross-appeal. Two other members of the court (Waller LJ and Maurice Kay LJ) reached a different conclusion on the Veta pilots, finding that the ET had correctly concluded the Veta pilots were employed in Great Britain and should have their ERA and contractual claims remitted to an Employment Tribunal. The dispute turned on the correct application of the Serco test, the effect of the repeal of section 196 ERA and whether the "base" or the broader Serco conception of "employment in Great Britain" applied in the pilots' cases.

Background and parties: The appellants were twelve pilots employed to fly Cathay Pacific aircraft. Some were employed by Veta Limited or USA Basings Limited (Hong Kong subsidiaries) under Hong Kong law; others remained employed directly by Cathay Pacific. The pilots lived in, or based some duties in, Great Britain and were dismissed following a decision taken in Hong Kong. The pilots sought remedies in an Employment Tribunal (ET) in England for unfair dismissal (section 94(1) ERA), failure to give written reasons and breaches of contractual disciplinary procedures.

Procedural history: The ET (London South) held in March 2003 that it had jurisdiction under the ERA for the Veta pilots but not for the CPA pilots or one USAB pilot (Mr Parrock); it accepted jurisdiction for some contractual claims but stayed others on forum non conveniens grounds. Appeals went to the Employment Appeal Tribunal which, in light of the Court of Appeal decision in Lawson v Serco Ltd ([2004] EWCA Civ 12), remitted some Veta claims. The matter proceeded to this Court of Appeal.

Issues:

• Whether Part X of the ERA and section 94(1) apply to these pilots — specifically how to apply the Serco test of "employment in Great Britain" to international pilots with bases in or connections to Great Britain.
• Whether the ET had jurisdiction to hear the pilots' contractual claims (service in England or service out) and whether England was the appropriate forum or the claims should be stayed on forum non conveniens grounds.

Reasoning and legal principles: The Court treated Serco as binding on the territorial scope of section 94(1), adopting the test that Part X applies to "employment in Great Britain". The Master of the Rolls took a restrictive view: international airline pilots are not to be regarded as employed in Great Britain simply because their flight cycles begin and end there; absent clear indicia that the employment itself is in Great Britain the ERA does not apply. He emphasised the effect of the repeal of section 196 ERA and the overall territorial presumption in statutory interpretation. He therefore concluded the pilots were employed under Hong Kong law and dismissed their ERA appeals, staying contract claims in favour of Hong Kong forums.

Waller LJ and Maurice Kay LJ accepted that Serco is the governing test but read it with greater flexibility. They considered that the ET’s factual findings about the Veta pilots (base in London, tours beginning and ending at Heathrow, repatriation and salary arrangements) were sufficient to conclude that those pilots were employed in Great Britain. They would allow the Veta pilots’ appeal and remit their ERA and contract claims to the ET; they agreed that the CPA pilots and Mr Parrock were not employed in Great Britain.

Wider context: The court discussed the repeal of section 196 ERA, the Posted Workers Directive and the policy difficulties in applying territorial employment protection to internationally mobile workers. The judgment records differing views as to the proper scope of protection for airline pilots but applies Serco as binding authority while allowing some factual flexibility.

The appeal was allowed in part. The Court applied the Serco ([2004] EWCA Civ 12) test that Part X of the Employment Rights Act 1996 applies to "employment in Great Britain". The Master of the Rolls held that, on that test, none of the pilots were employed in Great Britain and dismissed their ERA claims and stayed contractual claims in favour of Hong Kong proceedings. By majority (Waller LJ and Maurice Kay LJ) the Veta pilots were held to be employed in Great Britain and their ERA and contractual claims were remitted to the Employment Tribunal; the CPA pilots' and Mr Parrock's appeals were dismissed. The differing conclusions turned on the application of the Serco test and the weight to be given to the pilots' London base and related factual indicia.

Appeal from Employment Appeal Tribunal (His Honour Judge Peter Clark) decisions dated 24 June 2004 ([UK/EAT/0367 & 8/03/DA]) which in turn arose from an Employment Tribunal (London South) decision promulgated 10 March 2003. The Court of Appeal decision is reported at [2005] EWCA Civ 599. The Court applied and discussed the earlier Court of Appeal decision in Lawson v Serco Ltd [2004] EWCA Civ 12.