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Illegality

Produced by in association with Briony Richards at Charles Russell Speechlys LLP
Employment Tax
Guidance

Illegality

Produced by in association with Briony Richards at Charles Russell Speechlys LLP
Employment Tax
Guidance
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Introduction

A contract of employment may be (or become) illegal when the contract is expressly prohibited by statute, in which case it cannot be relied upon by either party (‘statutory illegality’). Furthermore, a contract may be unenforceable at common law by the principle of illegality if the contract, or some provision in the contract, has a criminal purpose or requires criminal action (‘common law illegality’).

Common types of illegal contractual terms are:

  1. •

    terms relating to pay which try to evade tax laws (eg by paying cash in hand)

  2. •

    contracts with people who are not legally entitled to work in the UK

  3. •

    contracts to do types of work which are illegal or contrary to public policy, such as prostitution

There are a number of factors that will affect whether a contract is deemed unenforceable by reason of illegality, as set out below.

Factor-based approach

Prior to 2016, any contract tainted by illegality was unenforceable. The rules-based approach sometimes led to injustices and counter-intuitive decisions. In Patel v Mirza,

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  • 15 Nov 2022 16:44

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