Court of Appeal 2008 - EWCA civ 393

Key Facts

Two employees who had been treated for tax purposes as self employed were not, the Court of Appeal held, precluded from claiming unfair dismissal by the doctrine of illegality.

The doctrine of illegality is often argued by employers when faced with an employment law claim such as unfair dismissal where it is arguable that the Claimant is self employed for tax purposes (or for any other purposes) or that the contract of employment is in some other way illegal or inconsistent with employment status. If the Claimant is found not to be an employee then the many of the employment rights granted by statute will fail.

Comment

The Court of Appeal found that a finding of illegality in such circumstances would only be possible if there had been some form of misrepresentation or deceit or attempting to conceal the true facts of relationship by the employees. It held that it is not enough for the arrangements to have the effect of depriving HMRC of tax to which it is entitled to. It held that there must be some deliberate attempt to conceal the true facts of the relationship before a contract is rendered legal for the purposes of this doctrine. An employment contract may be unlawfully formed if there are misrepresentations expressly or implied as to the facts of that relationship.

The decision is another pro Claimant decision by the Court of Appeal and is a reminder again that the Courts will wherever possible try to find an employment relationship where it considers that not to do so will deprive the Claimant of the legal rights to which they may be entitled.