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Multi-national groups: EU employee granted injunction

12 August 2015

The recent case of Petter v EMC Europe Ltd and Anor [2015] EWCA Civ 828 serves as a warning to employers based outside the EU but with EU based employees.

The Petter case involved a US based parent company who had entered into a stock plan agreement with Mr Petter, one of the senior employees in their EU based subsidiary company EMC Europe Ltd. The stock was a substantial part of Mr Petter’s remuneration and related to the parent company. There was a jurisdiction clause in the stock plan stating that the agreement was under the exclusive jurisdiction of the Massachusetts courts.

Mr Petter left and joined a competitor, and there followed a dispute over the stock awarded to him by EMC Europe’s parent company. EMC brought proceedings in Massachusetts, in accordance with the jurisdiction clause, while Mr Petter brought a claim in the High Court in the UK challenging the enforceability of his restrictive covenants. Mr Petter also sought an injunction from the High Court to stop EMC bringing a claim against him in Massachusetts.

The Brussels I (Recast) Regulation

Mr Petter relied upon Section 5 of the Brussels I (Recast) Regulation (1215/2012) (“the Regulation”) which provides that an employer “domiciled” in the EU can be sued:

  • in the courts of the EU member state where the employer is domiciled;
  • in another EU member state here the employee “habitually works”;
  • in the EU member state where the business in which the employee is engaged is or was situated.

The Regulation also states that an employer can only sue an employee in the courts of the member state in which the employee is domiciled. The effect of this is that an employee can now bring a claim against a non-EU employer in the court of a member state, even if the employer has no EU presence.

The Court of Appeal’s Judgment

When the High Court heard Mr Petter’s claim, it held that it did have jurisdiction to hear Mr Petter’s claim regarding his restrictive covenants as a result of the Regulation, but it refused to grant the injunction against EMC suing Mr Petter in Massachusetts.

EMC appealed to the Court of Appeal on the jurisdiction point, and Mr Petter appealed in relation to the injunction.

The Court of Appeal held that the UK courts did, indeed, have jurisdiction to hear Mr Petter’s claim as a result of the Regulation. However, it also granted Mr Petter the injunction stopping EMC from bringing proceedings against him in Massachusetts.

On the question of jurisdiction, the Court of Appeal relied upon the case of Samengo-Turner [2007] EQCA 723 which stated that “a company which provides benefits to employees of associate companies within the same group may be regarded as an employer for the purposes of the Regulation if it provides those benefits in order to reward and encourage those employees for the benefit of their immediate employer and the group as a whole”. As a result, the stock plan offered by EMC Europe’s parent company rendered the parent company Mr Petter’s “employer” for the purposes of the Regulation. The effect of this was, therefore, that Mr Petter was entitled to sue EMC in the courts of the UK.

On the question of the injunction, the Court of Appeal found that it should be granted meaning that EMC were unable to bring proceedings against Mr Petter in the US. It held that the principle in Samengo-Turner should be applied which provides that “in a case falling within…the Regulation an anti-suit injunction should ordinarily be granted to restrain an employer from bringing proceedings outside [the EU] in order to protect the employee’s rights”.

As the proceedings EMC were issuing were outside the EU, then the UK courts were able to grant an injunction to protect Mr Petter’s rights. However, the injunction would not have been issued if the proceedings were being issued in another EU member state.

This case is a word of warning to multi-national groups with parents or subsidiary companies based outside the EU and seeking to impose the jurisdiction of another country. This case has reinforced the effect of the Regulation - that EU based employees can bring action in the EU against their employers, no matter what the jurisdiction clause in any contract states. It also means that those EU based employees can prevent action being taken against them in courts outside the EU.

As a result, prudent employers would ensure that any provisions (including restrictive covenants) in employees’ contracts of employment are enforceable in countries in which their employees work, particularly if that means they are working in the EU.