Illegal contract terms 



If the employer proposes something illegal in the contract such as avoiding tax by paying “cash-in-hand”, paying part of the salary as “expenses” or dividends, employees need to be wary. It may mean that they cannot enforce any of the contract, including their statutory rights under it. 



However, an employee is only likely to be barred from enforcing employment rights because of illegality if they knew of and actively participated in the illegality (Kaid v Gruppo EAT/0546/03). 



In Wheeler v Qualitydeep [2004] EWCA Civ 1085, a Thai employee only received two pay slips in three years. Although her husband was a native Englishman, she barely spoke English and was unaware of HMRC’s requirements. The Court of Appeal concluded that there was insufficient evidence that she knew of her employer’s tax fraud, so she was allowed to bring her claim. 



In Blue Chip Trading Ltd v Helbawi UKEAT/0397/08, a foreign student exceeded the working hours allowed under his visa. He was allowed to claim the national minimum wage, but only for the hours he was legally permitted to work. The fact that he had breached the terms of his visa did not stop him bringing any claim at all.



Employees who positively misrepresent the position, for example, by falsely pretending that part of their wages are expenses, are likely to be denied employment rights (Enfield Technical Services Ltd v Payne UKEAT/0644/06). 



For the effect of illegality on claims for unfair dismissal see page 382 of Chapter 10. 



For the effect of illegality on claims of discrimination under the Equality Act 2010, see page 231, Chapter 7.