Remote work has changed the way in which businesses recruit and employees seek opportunities. A South African employee can now work from their home in Cape Town for a company based in London, New York or elsewhere in the world, without ever setting foot in the country in which their employer operates.
While these arrangements may offer significant opportunities for both employers and employees, the ease with which cross-border employment relationships can be established may obscure an important question: what happens when something goes wrong?
For South Africans working remotely for foreign companies, the fact that they physically perform their work in South Africa does not necessarily mean that South African labour legislation applies or that the Commission for Conciliation, Mediation and Arbitration (“CCMA”) will have jurisdiction to determine a dispute.
This issue arose in Lime Global Ltd v Myhill NO and Others (JR827/18) [2020] ZALCJHB 144.
The employee worked remotely from South Africa for Lime Global Ltd, a company based in the United Kingdom. After the employment relationship ended, she referred an unfair dismissal dispute to the CCMA.
The CCMA found that she was an employee, that she had been unfairly dismissed and awarded her compensation of R1,080,000. Lime Global subsequently approached the Labour Court to review the award, challenging, amongst other things, the CCMA’s territorial jurisdiction.
The Labour Court found that Lime Global had no property, assets or business in South Africa. Although the employee performed her work remotely from South Africa, she was serving the employer’s business in the United Kingdom. There was no evidence that Lime Global conducted a separate undertaking in South Africa in which she was employed.
The Court accordingly found that the employee had not established that the CCMA had territorial jurisdiction to determine her dispute. The award was reviewed and set aside.
The judgment is an important reminder that where an employee happens to sit while performing their work is not necessarily determinative of where the employment relationship is situated for jurisdictional purposes.
Jurisdiction is not the only consideration.
Cross-border employment can also create practical difficulties when it comes to enforcement. Even where an employee has a valid claim and is able to pursue it in an appropriate forum, enforcing an award or judgment against a foreign company may prove difficult where that company has no assets or presence in South Africa.
An employee may therefore find themselves with a favourable outcome on paper but still face the practical and financial burden of taking steps to enforce it in the country where the employer or its assets are situated.
This is an issue that can easily be overlooked at the beginning of an employment relationship, particularly when salary is being paid regularly and the arrangement operates without difficulty.
Before accepting employment with a foreign company, employees should understand more than simply their role, remuneration and working hours.
The employment agreement should be considered carefully, particularly in relation to the identity and location of the employer, the law governing the agreement, where disputes are required to be determined and whether the employer has any South African presence or assets.
Employees should also pay attention to how the relationship itself is characterised. Cross-border arrangements are frequently structured as consultancy or independent contractor relationships. Calling someone an “independent contractor” does not necessarily determine their legal status, but a dispute about whether the individual is in fact an employee can introduce yet another layer of complexity.
Most importantly, employees should consider a question which is seldom asked when accepting an exciting international opportunity: if the relationship ends badly, where and how will I enforce my rights?
The risks are not limited to employees.
Foreign businesses engaging individuals in South Africa should obtain appropriate advice on how those relationships are structured rather than assuming that having no physical office in South Africa automatically excludes South African legal considerations.
The nature of the relationship, the business or undertaking in which the individual works, the terms of the contract and the employer’s operations may all be relevant. Businesses engaging multiple individuals in South Africa may also need to consider employment, tax and corporate implications beyond the terms of an individual employment contract.
Similarly, foreign employers should carefully consider the contractual provisions dealing with governing law and dispute resolution, particularly given the jurisdictional and enforcement difficulties that may arise if the employment relationship breaks down.
Remote work has made it possible for employment opportunities to cross borders far more easily than before. The law, however, has not become borderless.
The decision in Lime Global demonstrates why both parties should consider the legal structure of a cross-border employment relationship at the outset, rather than waiting until the relationship has broken down.
For employees, an attractive international opportunity should be accompanied by an understanding of who the employer is, which legal protections apply and how those rights can practically be enforced.
For employers, engaging someone remotely in South Africa should similarly prompt consideration of the legal consequences of doing so and whether the contractual arrangement appropriately addresses them.
When employment crosses borders, the question is therefore not only where the work is being performed, but where the employment relationship legally sits and what happens when either party needs to enforce its rights.
Article by:
Robyn Jacobs
Associate
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).