Illegality of employment contracts

employment contract

When an employment contract is fundamentally unlawful, employers can rely upon the illegality of the contract as a defence to any claim that an employee may bring, for unfair dismissal for example.

One way of looking at this is that if both parties have benefited from some underlying fraud, the tribunal or court would be less likely to enforce the contract. However, if the employee has clearly been in a weaker position and has been exploited, the contract might be held to be enforceable.

Often this occurs because of an employee’s unlawful immigration status; one interesting recent case in which judgment was given on 15th January 2018 was Okedine v Chidale, decided by the Employment Appeal Tribunal (EAT). The Claimant employee had been brought to the UK as a domestic worker, but her immigration status meant that after six months, she was working illegally. She brought a claim having worked for two years, when she would have ordinarily gained unfair dismissal rights.

Not surprisingly, the Respondent employer argued that the Claimant had been working unlawfully and had no right to make any such claim due to her alleged breach of immigration law. The initial tribunal rejected that argument, finding that she had no knowledge of that illegality.

The Respondent employer appealed, arguing that the employment contract was void from the outset because it was not a temporary contract, it had been intended as permanent. Being void from inception is grounds for illegality which makes the contract completely invalid, i.e. it is treated as if it never existed from the very beginning.

But the Appeal Tribunal agreed with the original tribunal’s decision and rejected the employer’s argument. The contract was terminable upon six weeks’ notice and therefore was not ‘void from inception’, and therefore not in breach of immigration law.  The EAT decided that the legislation relied upon did not invalidate the contract, as even if it provided for a criminal offence, it said nothing about the validity of a contract entered into by an employer.

Furthermore, the EAT considered that in the interests of public policy, it was still appropriate to allow the enforcement of the contract in this case; allowing enforcement is always a matter of public policy, and this has always been the aim of established case precedents in this area (such as Hall v Woolston Hall Leisure Ltd.)

So what conclusions can we draw from this?

From the point of view of employers, it is necessary that all employers check the immigration status of their employees properly and have proper documentation. Not only could employing workers unlawfully result in criminal penalties, you could face a tribunal claim from an employee who technically was working in breach of his/her entitlement to work, or some other illegality.

And from the point of view of employees, the case is positive news in that it solidifies employees’ rights. But obviously it is vital to ensure that you are not breaching your immigration status and we are certainly not suggesting that it is an appropriate risk to take to work unlawfully for any reason. The law is still full of many uncertainties.

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Kuldeep S. Clair