Is an employee’s contract automatically unenforceable if they work illegally?

When faced with an employment claim, businesses often try to argue that, because the employee’s contract is illegal, the employee should be prevented from bringing that claim – this is known as the defence of “illegality”. The question of how far this defence could stretch was considered in the recent Court of Appeal case of Okedina v Chikale.

What happened?

Ms Chikale was employed by Mrs Okedina to look after her parents.  Both women are Malawian nationals, and Mrs Okedina applied for Ms Chikale’s domestic worker status to enable her to work in the UK but provided a lot of false information in the visa application.

The Home Office granted Ms Chikale a 6-month visa, meaning that any work beyond this would be illegal. Following expiry of the visa, Mrs Okedina assured her employee that she would take care of its extension. Although Mrs Okedina did make an application to extend, she again provided false information (including that Ms Chikale was a family member). Despite this extension being refused Mrs Okedina allowed her employee to unknowingly continue working illegally until June 2015, when she was dismissed without notice.

Ms Chikale began proceedings in the employment tribunal (ET) for unfair dismissal. Mrs Okedina argued in her defence that Ms Chikale had no right to bring a claim, because the employment contract breached immigration laws and therefore was illegal.

The ET, and the the Employment Appeal Tribunal (EAT) on appeal, rejected this argument stating that an employee must have knowledge of the illegality. The EAT was satisfied that Ms Chikale hadn’t knowingly worked illegally. In fact, she had trusted her employer, who assured her that the visa had been “taken care of”.

Mrs Okedina then appealed to the Court of Appeal (CA).

What was decided?

There are two different types of the “illegality” defence:

  • statutory illegality where the making of a contract is prohibited/unenforceable, and
  • common law illegality where the formation, purpose or performance of a contract involves conduct which is illegal

The CA decided that neither applied in this case, dismissed the appeal, and found in favour of Ms Chikale.

For statutory illegality, the Court had to ask whether Ms Chikale’s employment breached the Immigration, Asylum and Nationality Act 2006, which makes it illegal for an employer to employ an individual without leave to remain or permission to work in the UK. Although the Act imposes penalties on employers in these circumstances, nothing in it makes a contract “illegal”.

For common law illegality, it was a question of whether Ms Chikale knew of the illegal conduct and participated in it. Its answer was in line with the EAT’s decision – there was no such knowledge or participation, and so Mrs Okedina couldn’t rely on the defence.

What does this mean in practice? 

This case is unusual in that employees in these circumstances are usually aware of, and participate in, the illegal conduct. However, it’s clear that public policy factors are vital in assessing the limits of this defence – as is the need for parties to knowingly enter into and/or perform an illegal contract.

Employers should always take advice before relying on this already-limited defence, or before asserting that an employee’s contract is ineffective. On the other hand, despite the Court finding in favour of the employee here, foreign nationals should always take ownership in checking that they do in fact have the right to work in the UK – despite what their employer may promise.