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19th May 2020

Does an immigration breach automatically render a contract unenforceable?


19th May 2020

Does an immigration breach automatically render a contract unenforceable?

No, an immigration breach does not automatically render a contract unenforceable. While the Immigration, Asylum and Nationality Act 2006 (‘the Act’) imposes both civil and criminal penalties on an employer when they employ a foreign national working illegally, this does not necessarily make the contract of employment unenforceable due to that illegality.

Immigration breach example case

We set out an example of an immigration breach involving Ms Chikale and Ms Okedina.

Ms Chikale (‘the Claimant’) was offered a position by Ms Okedina (for simplicity referred to as ‘the Appellant’) as a live in domestic. Both the Claimant and the Appellant were Malawian nationals.

The Appellant applied for a domestic worker visa for the Claimant. The Appellant included a lot of information which she knew to be false. A six month visa was granted and the Claimant started work in July 2013.

The Appellant kept the Claimant’s passport and told her that she was applying for an extension of her visa. She forged the Claimant’s signature and again supplied false information. The visa was refused. An appeal was lodged in the Claimant’s name but was also refused. The Claimant had no knowledge of the proceedings or the fact that she did not have a current visa.

In June 2015, the Claimant asked for a pay rise, and was summarily dismissed by the Appellant. The Claimant was paid only £3,300 during the time she worked for the Appellant. She brought proceedings to recover unlawful deductions of wages, for unfair and wrongful dismissal, unpaid holiday pay, breaches of the Working Time Regulations, failure to provide written particulars and itemised payslips, and race discrimination.

Employment Tribunal

The Employment Tribunal rejected the race discrimination complaint but upheld the contractual claims. It rejected the illegality defence put forward by the Appellant. The Appellant was permitted to appeal to the EAT on the illegality point only.

Employment Appeals Tribunal

The EAT rejected the illegality argument. The case then went to the Court of Appeal.

Court of Appeal

Underhill LJ gave the primary judgment, with which Davis LJ and Davies LJ agreed.

His Honour identified the two distinct grounds of illegality in contracts. These were:

  • Statutory Illegality: where legislation prohibits the making of a contract or a term of the contract to render it unenforceable by the parties. Knowledge of a breach is irrelevant under statutory illegality – there is a statute which must be obeyed.
  • Common Law Illegality: where a contract involves conduct that is illegal or contrary to public policy and denying the right to enforce the contract to one or both parties is appropriate.

The Appellant’s arguments focused on the statutory illegality defence. Given the evidence that the Claimant was unaware of the issues with her visa, it would be harder to argue common law illegality – she had no knowledge that she did not have a valid work visa. 

In relation to statutory illegality, Underhill LJ drew guidance from the authorities and noted that:

  • ‘… in the absence of an express prohibition a court should only find that Parliament has intended to prohibit a contract of a particular kind, or in particular circumstances, where the implication is clear’ (noting St John Shipping Corporation v Joseph Rank Ltd).
  • Where there is unilateral prohibition (ie; one party is prohibited from entering into a contract and/or a penalty may be imposed on that party if it does so) it does not follow that the contract itself is void. There may be serious injustice caused to the other party otherwise (Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd).
  • In cases of unilateral prohibition, public policy factors should be taken into account in determining whether there is an intention to prohibit such a contract. These include:
    • what the statute is aiming to prevent;
    • the language, scope, and purpose of the statute;
    • the consequences for the innocent party; and
    • any other relevant considerations that should be taken into account.

It was noted that in this case, the Act expressly imposed a penalty on the employer for employing a person with no working rights. In these circumstances, it could not be presumed that parliament had intended to prohibit the contract. Underhill did not consider that the public interest in preventing foreign nationals from working illegally required the relevant sections of the Act to be construed as making these contracts unenforceable. 

The appeal was ultimately dismissed. The Appellant was to pay the Claimant £72,271.20.

There needs to be careful consideration where issues involving the right to work in the UK arise. The case of Baker v Abellio London Limited involved a Jamaican bus driver who had rights of abode and a right to work in the UK, but who was unable to provide his employer with documentation to support this. The employer was advised by the Home Office that the employee had relevant working rights, however the employer was under the (mistaken) impression that they needed to have copies of the relevant documents or they would be in statutory breach. After a couple of months where the employer attempted to obtain the documents from the employee, the employee was dismissed. At first instance the ET found that the dismissal was fair and that the employer had acted reasonably. However, the EAT overturned this decision and remitted the matter back for redetermination.

Take Home Point

Employers should not assume that an immigration breach will automatically make an employment contract unenforceable.

If you have any immigration related issues you would like to discuss please contact a member of the Employment team. Our Immigration – Business page gives more details of the immigration law we can help you with.

This blog was co-written by Aleksandra Golat, Solicitor and Jane Biddlecombe, Associate.

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