Enfield Technical Services Ltd v Payne; Grace v BF Components Ltd [2008] EWCA Civ 393

Illegality in employment contracts

Contracts generally may be void for illegality. In the employment sphere, if the contract is void for illegality then the 'employee' will not be able to claim for breach of that contract, for example in cases of wrongful dismissal, or for unfair dismissal. The nature of the illegality necessary to render the employee outwith of employment protection was considered by the Court of Appeal.

The appellant employers in these joined proceedings appealed against an EAT decision that the employees had not acted illegally in the performance of their contracts The employees (P and G) had worked on a self employed basis and were treated as such by the Inland Revenue. They later claimed unfair dismissal, arguing that they were really employees, rather than self-employed.

The EAT found that they were employees but had believed in good faith that they were self-employed and had not made misrepresentation to the Inland Revenue, and were entitled to claim unfair dismissal. The employers claimed that as the employees had participated in an illegal performance of th contract, they were not entitled to protection.

The Court of Appeal dismissed the appeal. The employees were entitled to claim unfair dismissal. The employees had committed 'insufficient' illegality. A contract of employment may be unlawfully performed if there are misrepresentations as to facts. However, that is distinguishable from an error of categorisation which is unaccompanied by false representations, as had occurred in this case.