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In Okedina v Chikale, the Court of Appeal recently considered the question of whether a contract of employment could be said to be illegal due to the operation of immigration law. The decision is of particular significance where employers may seek to rely on the defence of illegality when facing claims by illegal migrant workers.

Illegality & employment contacts

The doctrine of illegality, generally, operates as a defence to prevent a court from enforcing illegal contracts. The rationale is public policy related in order to prevent prospective claimants from basing a claim on an illegal act and to prevent the successful enforcement of illegal contracts.

Illegality can be relied upon as a defence to a claim on two distinct grounds. The first ground is one of ‘statutory illegality’ in that a legislative provision prohibits the formation of a contract altogether or stops a contract, or a particular term of a contract, from being enforceable. The second ground is ‘common law illegality’, a concept that determines illegality and unenforceability based on the whether the formation, purpose or performance of a contract or term is illegal or contrary to public policy.

A crucial distinction between the two grounds of defence is whether there was ‘knowledge’ of illegality by a contracting party. Statutory illegality will hold a contract illegal irrespective of whether a contracting party had knowledge of said illegality, whilst common law illegality requires both participation and knowledge.

Okedina v Chikale

The case concerned two Malawian nationals living in the UK. The Appellant, Ms O, was a self-employed businesswoman. Whilst living in Malawi in 2010, she employed the Respondent, Ms C, to look after her parents. When Ms O moved from Malawi to the UK in 2013, she made arrangements for Ms C to travel over and continue working for her. Ms C was subsequently employed as a live-in domestic worker for Ms O on a six month visa.

Following the expiry of that visa after six months, Ms O informed Ms C that she would undertake the necessary steps for the visa to be extended and Ms C then left the extension entirely in the hands of Ms O. In November 2013, Ms O made a fraudulent application for an EEA permit for Ms C on the false basis that she was a family member. The application was refused, and so too was the subsequent appeal. However, despite the extension refusal, Ms C continued to work for Ms O.

Ms C was eventually summarily dismissed in June 2015 for asking for more money. She had earned £3,300 over the course of her employment at a rate of £4.52 per day, whilst often working for twelve hours or more seven days a week. Ms C brought proceedings against Ms O in the Employment Tribunal (ET) on various grounds and Ms O argued her defence on the basis of illegality. Essentially, Ms O argued that the claims against her could not succeed on the basis that Ms C was working illegally and in breach of immigration law. Therefore, the employment contract was unenforceable.

The Tribunals

The ET found that the contract was not illegal at its inception, and Ms C was successful in claims of unfair and wrongful dismissal, unlawful deductions, failure to pay National Minimum Wage, unpaid holiday pay, breaches of the Working Time Regulations and a failure to provide written particulars and payslips.

For the ET, the employment contract entered into in 2010 was not inherently unlawful. The ET did find, however, that the contract had been performed illegally after 29 November 2013 on expiry of Ms C’s visa, but they ultimately relied on the common law doctrine of illegality to reject the defence. At common law, the illegal performance of a contract cannot be enforced by a party who knowingly participated in the illegal performance. As Ms C was unaware of the illegality of the contract, in that she was misled by Ms O as to her immigration status, she did not knowingly participate. The defence of common law illegality did not apply and the contract was not, therefore, unenforceable.

Ms O appealed the decision to the Employment Appeal Tribunal (EAT) on the basis that the immigration rules had prohibited the contract from being legal, and thus the contract was unlawful from the outset. The EAT upheld the decision of the ET and dismissed Ms O’s appeal, finding that the ET had not gone wrong in its approach. Regardless of whether the contract was entered into in Malawi in 2010 or on arrival in the UK in 2013, it was not illegal from the outset. Moreover, nowhere in the immigration legislation relied upon by Ms O was there express reference sufficient to invalidate a contract where an employee continued to work beyond the expiry of a visa. Further, applying the common law principles to the facts, the EAT was satisfied that the illegality defence did not apply where Ms C did not knowingly participate.

Ms O was then granted permission to appeal to the Court of Appeal solely on the issue of statutory illegality. Whilst the ET and EAT had understood the question to be whether the contract was unlawful at its inception, the question around the statutory defence was now namely whether certain sections of the Immigration, Asylum and Nationality Act 2006 (the Act) could be read as impliedly prohibiting contracts of employment, in making them unenforceable, where an employee did not have the appropriate immigration status.

The Court of Appeal

The Court of Appeal (the Court) rejected Ms O’s appeal and determined that the statutory illegality defence did not apply in this case. Essentially, the purpose of the Act was to create civil and criminal penalties on employers who continued to employ someone following the expiration of their visa and without a right to work in the UK. Ms O had contended that the Act could therefore be said to imply that Ms C’s employment contract was illegal, and thus unenforceable. Ms O argued that the intention of the Act was that a person who had no visa should be prohibited from relying on an employment contract.

The Court of Appeal considered whether this could be implied from the Act. The test was held to be one of necessity. The Court agreed with the ET and EAT that Ms C’s original contract of employment with Ms O was not illegal at the outset and it was not in breach of the immigration rules when entered into.  Crucially, in any event, public policy did not support allowing the appeal.

In coming to their conclusion, the Court agreed with Ms O that the Act was not designed to protect migrant workers. However, the Court determined that it was not ultimately Parliament’s intention to render contracts unenforceable for vulnerable foreign nationals where there was no culpability on the part of the employee. A person who has overstayed their leave to remain may be genuinely mistaken, or misled, as to their immigration status. It could not be Parliament’s intention to deprive innocent employees of all contractual remedies against their employer in such circumstances. Particularly in instances of human trafficking, to interpret the legislation as to deny vulnerable workers protection would simply go too far.

The appeal was dismissed and the Court accordingly upheld Ms C’s contractual claims.

Comment

The case illustrates how the courts and tribunals are willing to apply the doctrine of illegality in interpreting statutory provisions where the issue of the protection of vulnerable workers is in question. Few would disagree that with the Court’s comment that the outcome “fortunately also accords with the merits of this particular case.”  The Court of Appeal clarified that public policy will not justify the use of ‘blunt weapon of statutory illegality’ in every case. The ET, EAT and Court of Appeal were all highly sympathetic to Ms C’s situation of modern slavery and proportionality remained at the heart of their decision.

For employees, it is accordingly clear that even where they are found to be working illegally, in certain circumstances, they may still be able to enforce their contract of employment. For employers, the onus is on them to ensure that they are compliant in respect of immigration law requirements. Whilst there remains a broader public interest in preventing foreign nationals from working in the UK illegally, in the absence of evidence of culpability of the employee, the defence of illegality will be a difficult one to rely on.

If you have any queries in relation to the above please get in touch with a member of the Stronachs Employment Team.

Eric Gilligan, Partner, and Pete Tolmie, Trainee Solicitor

Chambers Leading Firm 2019

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