by Daniël Pretorius Financial Mail 28 January 2000
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SA has recently moved away from a history of isolation. Government policy objectives include the attraction of foreign investments, the facilitation of international trade and commerce and the attraction of foreign skills and entrepreneurial energies.
The effect of this emerging openness is that foreign nationals are more readily employed by SA companies or by foreign companies extending their operations to SA, and that South Africans are more readily employed abroad. This exchange of labour does not happen in a legal vacuum, and important questions such as the jurisdiction of the SA courts and the applicable law need addressing.
The most fundamental question employers face is whether SA labour law applies to the relationship between them and foreigners in their employ. The courts will firstly determine whether they have the power to give an effective judgment that can be enforced.
If the answer is yes, the inquiry proceeds to which law will apply in the particular circumstances. Here the court applies its choice of law rules to determine the applicable law.
The general rule is that the law of the place where the contract was entered into (lex loci contractus) governs the interpretation and enforcement of the contract. An important exception to this rule is that where the contract is to be performed elsewhere, the latter place's law (lex loci solutionis) will apply (Standard Bank of SA v Efrioken and Newman 1924 AD 171 and Shacklock v Shacklock 1949 (1) SA 91 A).
Employment contracts with an international dimension are governed by the general rule that the place of performance is the connecting factor for jurisdictional and choice of law purposes. If the work is performed in SA, an SA court will assert jurisdiction and apply its choice of law rules to determine the applicable law. During the latter determination, except for a few exceptions, the court will again apply the workplace rule and apply SA labour law.
Our courts will regard the application of SA labour law as mandatory in the case where an SA company is incorporated under the auspices of a foreign business.
Though it is a well-recognised principle that contracting parties can determine the law that should govern their contract, contracts which exclude SA labour law pursuant to such a scheme will not be upheld.
In Trythall v Sandoz Products (Pty) Ltd & Another (1994) 15 ILJ 661, the court stated: "If the court was to dismiss the applicant's case . . . it would be allowing every SA-based company operating under the auspices of a holding company situated abroad to act contrary to the provisions of SA law to the detriment of its citizens and maintenance of law and order and of harmonious relationships." Here a Swiss company set up a subsidiary in SA and Trythall worked in SA. The court found that Trythall was de facto employed by the SA company and applied SA law pursuant to the workplace rule.
A South African working in another country will, according to the general rule, not have recourse to SA labour law. In Transport & Allied Workers Union of SA v Schoeman NO & Another (1991) ILJ 58 (T) the court confirmed that the Labour Relations Act does not have extraterritorial application.
However, the courts are prepared to pierce the corporate veil in certain instances. In Mabhala v SL Contractors (Pty) Ltd (1990) 11 ILJ 411 (IC) an SA company had a wholly owned subsidiary in a foreign country and employed the employee to work there. The court held that the subsidiary in the foreign country did not acquire a distinct legal persona, and that it in fact remained the same company. The court emphasised that an employer cannot hide behind the existence and dealings of its "external" company and consequently applied SA labour law.
In Great Britain, the right not to be unfairly dismissed does not apply to cases where under the employee's contract of employment she ordinarily works outside Great Britain.
This rule was applied in Carver (née Mascarenhas) v Saudi Arabian Airlines (1999) 3 All ER 61. The appellant employee had taken up employment with the respondent airline as a flight attendant in 1986. Her employment contract provided that she might be based at any location where the airline operated. After training in Jeddah in Saudi Arabia, she was based in Bombay for four years before being transferred to London. In 1996, she brought unfair dismissal proceedings against the airline in the UK.
The Court of Appeal held that, in applying the "ordinarily working" test, the question was "where, looking at the contract as a whole, the employee's base of work was to be". The court concluded that, looking at the whole period of the contract, it was clear that the appellant's base could be nowhere other than Jeddah. Consequently, it was found that British courts had no jurisdiction to hear the appellant's unfair dismissal claim.
SA nationals who ordinarily work in Britain (in the sense that they are based in Britain) will accordingly be subject to British unfair dismissal law. The same principles apply in the US.
Where an SA company with no external or subsidiary company in a foreign country bona fide employs an employee to work in a foreign country, our courts have applied the workplace rule in its simple form and held that an SA court will not have jurisdiction to hear such a case. Consequently, the inquiry does not even proceed to the question of applicable law.
Foreigners legally in SA and performing their work here, have the same rights under SA labour law as SA citizens. However, illegal immigrants or people working without the required work permits cannot claim the same labour protection as their legal counterparts.
Daniël Pretorius is a partner at Bowman Gilfillan Inc
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