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, since 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 that illegality (Kaid v Gruppo Limited [2004] 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 requirements. The Court of Appeal concluded that there was insufficient evidence that she knew of her employer’s tax fraud, so she could bring her claim. 




In Blue Chip Trading Ltd v Helbawi [2008] 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.



Courts and tribunals must consider the public policy of preventing the trafficking and exploitation of vulnerable workers when deciding whether it is appropriate to bar workers from accessing the tribunal system due to illegality in their employment arrangements (Hounga v Allen [2014] UKSC 47, Patel v Mirza [2016] UKSC 42, Okedina v Chikale [2018] UKEAT/0152/17/RN). 



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 [2007] UKEAT/0644/06). 




For the effect of illegality on claims for unfair dismissal, see page 354, Chapter 10. For the effect of illegality on claims under the Equality Act 2010, see page 210, Chapter 7.