When a person is found to be working illegally in the UK, depending on the facts, they may be deprived of the ability to bring a breach of contract claim against their employer due to the defence of ‘illegality’ of contract.

Background

The basic principle is that the law should not uphold or condone illegal arrangements.

So in broad terms, if the underlying contract is found to be illegal (in whole or in part) a court or Tribunal can bar a person from enforcing contractual or statutory rights that rely on the performance of the illegal contract.

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Much depends on the nature and the circumstances of the breach that gives rise to the illegality, and in particular, the extent to which the Claimant was aware of and participated in the illegal conduct. There are also policy factors to consider, since barring exploited migrants from enforcing their rights in all cases would not comply with the government’s committments to combat trafficking and modern slavery.

In Okedina v Chikale [2019] EWCA Civ 1393, the Court of Appeal found in favour of the Claimant, Ms Chikale, an illegal worker who brought contractual claims against her ex-employer. In doing so, the Court gives important guidance on the operation of the defence of illegality.

The facts

The Claimant was originally employed to look after the Respondent’s parents in Malawi. In 2013, the Respondent brought the Claimant to the UK on a domestic worker visa to work in the Respondent’s home. (It is unclear whether the Claimant was ever accepted as having been trafficked but the Tribunals refer to her as a potential victim of trafficking).
The Respondent required the Claimant to work 7 days a week for very long hours for about 2 years, for which she was paid a total of £3,300. (I make that a day rate of approximately £4.52).

The Claimant’s leave to remain expired after 6 months but she continued working in breach of the Immigration Asylum and Nationality Act 2006, which creates both civil penalties and a criminal offence to punish employers who allow a person to work when they do not have leave to remain (and permission to work) in the UK.

After the Claimant asked for more pay, the Respondent summarily dismissed her. The Claimant brought claims against the Respondent in the Employment Tribunal for unfair dismissal, wrongful dismissal, unpaid wages, breach of the Working Time Regulations 1998, failure to pay National Minimum Wage (‘NMW’), failure to provide written particulars of employment, itemised wage slips and for direct race discrimination.

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The Respondent contended that the contract of employment was illegal from the date on which the Claimant’s visa had expired and the contract should not be enforceable.

The Employment Tribunal concluded that the Claimant here did not knowingly breach UK immigration law but had trusted the Respondent who assured her that her visa was being taken care of. (In fact, the Respondent had made an application for an EEA family permit for the Claimant based on false information, had retained her passport and pursued an unsuccessful immigration appeal on her behalf, all without the Claimant’s knowledge).

The Employment Tribunal upheld the Claimant’s claims for unfair dismissal, NMW, holiday pay and unpaid wages but rejected a claim of race discrimination.

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Image: rawpixel.com from Pixabay.

The Employment Appeal Tribunal proceedings

The Respondent appealed to the EAT which found that the contract of employment (whether initiated in Malawi, or in the UK) was not illegal from the outset.

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In Okedina v Chikale UKEAT/0152/17/RN, Her Honour Judge Eady QC considered the guidance in the Court of Appeal case of Hall v Woolston Hall Leisure Ltd [2000] EWCA Civ 170. In that case, the Court had recognised three types of illegality case:

30. In two types of case it is well established that illegality renders a contract unenforceable from the outset. One is where the contract is entered into with the intention of committing an illegal act; the other is where the contract is expressly or implicitly prohibited by statute …

31. In a third category of cases a party may be prevented from enforcing it. That is where a contract, lawful when made, is illegally performed and the party knowingly participated in that illegal performance.’

Applying these principles (and those of subsequent cases from the higher courts) to the facts, the EAT concluded that the contract in Okedina fell within the third rather than the second category in Hall.

The effect of sections 15 and 21 IANA 2006 was not to render any contract entered into by the employer with a person whose immigration status was precarious void even if it led to criminal sanctions (see § 49 of the EAT’s judgment).

Furthermore, the Employment Rights Act 1996 at section 98(2)(d) provides for such a contract to be fairly terminated where it transpires that a person has no right to work. That, in itself, supported the Claimant’s case that the contract was not void. Here, the Claimant was not knowingly complicit in the illegality and there was no challenge to the Claimant’s knowledge of these matters. The EAT dismissed the Respondent’s appeal.

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The Court of Appeal judgment

The Respondent appealed to the Court of Appeal and was granted permission on the sole issue of whether sections 15 and 21 of the 2006 Act prevented a person whose leave to remain had expired from bringing contractual claims against their employer for the period of time they did not have leave.

Those sections made no express reference to a prohibition on contractual claims so the question was whether such a prohibition could be implied.

The authorities suggested that where a statute imposes a penalty on one party to a contract, it did not follow that the statute necessarily rendered a related contract void. This would depend on public policy considerations in light of the purpose and nature of the statute and the effect of an implied prohibition on the innocent party (see Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216 at pages 273 to 274 per Lord Justice Kerr as he was then).

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The Court recognised the public policy in favour of outlawing illegal working by foreign nationals who required leave to remain in the UK but did not have it. However, the policy debate did not end there because there were many instances where a migrant worker may be unknowingly working illegally or without active participation in the offence:

48. … there is a well-recognised problem of vulnerable foreign nationals being brought to this country for exploitation of various kinds: usually, though this is not of the essence, they will be victims of trafficking within the meaning of the Anti-Trafficking Convention. Sometimes they will know that their presence and/or their employment is illegitimate, but sometimes they will be told, and believe, that it is legitimate when it is not. And even outside that context there may be circumstances where an employee is genuinely mistaken about his or her immigration status, sometimes because of their own mistakes but sometimes also because of their employer’s (it is of course not unusual for larger employers to take responsibility for obtaining the necessary permissions for foreign employees). Nor will such mistakes necessarily be unreasonable: some aspects of the relevant rules are complicated or unclear, and wrong advice can be given, sometimes by the Home Office itself. In short, not all cases of illegal working involve culpability on the part of the employee.

Blocking such innocent persons from bringing contractual claims against their employers would not serve the public interest. Courts can always resort to the common law doctrine of illegality to bar contractual claims from individuals who have been complicit in illegal working.

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Image by Michal Jarmoluk from Pixabay

For these reasons, the Court rejected the Respondents appeal and upheld the Tribunal’s decision to allow the Claimant’s contractual claims.

Comment

Okedina highlights the need for clarity of thought and discussion where legality of a contract is in issue. Parties (and Judges) should consider which specific type/s of illegality may apply:

  • Statutory illegality: where the contract is expressly or impliedly prohibited by statute; and/or
  • Common law illegality: where the contract’s formation, purpose or performance involves illegality or is contrary to public policy and it is appropriate in public policy terms to bar its enforcement.

Frequently, these two separate parts of the doctrine have been conflated, (including by senior Judges).

Some uncertainty lingers, however, for two main reasons.

  1. Firstly, in its judgment, the Court noted that since 12 July 2016, it has been a criminal offence for a person without leave to remain in the UK to work, including under a contract of employment, by section 24B of the Immigration Act 1971. As the period of employment in Okedina fell before the introduction of this offence, it may be argued by employers that the analysis should change to reflect the impact of section 24B in cases post-12 July 2016.
  2. Secondly, the Court observed that the related UK Supreme Court case of

    Hounga v Allen [2014] UKSC 47 contains some ambiguous suggestions that in cases of exploited and/or trafficked migrant workers, the anti-trafficking legal and policy framework may well enable a claimant who was complicit in an illegal contract to nevertheless rely on it, despite the defence of common law illegality.

In this evolving legal landscape shaped by competing public policy concerns, the Court of Appeal’s judgment may be a mere pit-stop on route to the Supreme Court.

Either way, kudos is due to the lawyers for the Claimant, (Freshfields Bruckhaus Deringer LLP, David Reade QC and Grahame Anderson) who acted pro bono from the Employment Tribunal upwards.

Posted by Ben Amunwa

Founder and editor of Lawmostly.com. Ben is a commercial and public law barrister with The 36 Group. He gives expert legal advice on employment, public law and commercial disputes to a wide range of clients.

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