Could an employee claim breach of contract when she had been working illegally?

If someone is employed illegally, will they have any rights under the employment contract or any protection under employment law?

Employing someone who does not have the right to work in the UK can lead to civil and criminal penalties under sections 15 and 21 of the Immigration, Asylum and Nationality Act 2006 (IANA) (see details of these penalties below). Readers will be well aware of the obligation to carry out right to work checks to reduce the risks of employing an illegal worker. But if someone is employed illegally, will they have any rights under the employment contract or any protection under employment law?

Where a contract is prohibited by legislation from the outset, its terms will be void for "statutory illegality" and neither the employer nor the employee will be able to enforce its terms. In such cases, a tribunal will usually find that the employee cannot bring a statutory claim (such as unfair dismissal or discrimination). In exceptional circumstances, a tribunal may decide that there are public policy reasons for allowing such a claim, for example to protect the victims of human trafficking.  

Contracts may also be illegal under common law where they are legally entered into, but the contract involves conduct which is illegal or contrary to public policy. For example, where the method of payment to a worker involves a fraud on HMRC or the worker has overstayed a visa. In such cases, an employer may be able to defend an employment-related claim if it can show that the employee both knew about and participated in the illegality.

In a recent case, the Court of Appeal considered whether a domestic worker who had been working in the UK illegally could bring claims flowing from her employment contract following her dismissal.

Case details: Okedina v Chikale

Ms Chikale was brought to the UK in July 2013 to work for Mrs Okedina as a live-in domestic worker on a six-month visa. Both women are Malawian nationals. Ms Chikale remained in the UK and continued to work for Mrs Okedina after her visa expired. Ms Chikale did not know that her right to remain or work in the UK had expired. The employer kept possession of Ms Chikale's passport and misinformed her that she was taking the proper steps to sort out her visa. The job entailed very long hours and low pay. Ms Chikale asked for a pay rise in July 2015 and was summarily dismissed.

Ms Chikale brought claims in the employment tribunal for unfair and wrongful dismissal, race discrimination, breach of the Working Time Regulations, unlawful deductions from wages (including breaches of the national minimum wage rules), holiday pay and a failure to provide written particulars and itemised payslips. The employer tried to defend the claims on the basis of that the contract was illegal and its terms could not be enforced. However, the tribunal decided that the contract was not prohibited by legislation and that Ms Chikale did not knowingly participate in her illegal working. The tribunal went on to uphold all of her claims apart from those relating to discrimination.

The employer appealed to the EAT and subsequently to the Court of Appeal on the specific point of whether the effect of sections 15 and 21 of IANA is to prevent an employee succeeding in claims arising out of a contract of employment at a time when the employee's leave to remain in the UK has expired. Both courts upheld the original decision of the tribunal in favour of the claimant.

The Court of Appeal clarified that sections 15 and 21 of IANA impose a penalty (on the employer only) in the event of employment in breach of immigration rules. These sections do not prohibit someone from being a party to a contract of employment or state that the terms of that contract will be unenforceable. The Court commented that not all cases of illegal working involve culpability on the part of the employee and that there are public policy reasons why innocent employees should not be deprived of all rights arising from the employment contract. The Court determined that the employment tribunal was right to reject the statutory illegality defence and to find that Ms Chikale had not knowingly participated in the illegal performance of the contract as she had been wholly unaware that she no longer had the right to work and remain in the UK.

The courts were clearly influenced in this case by the very poor treatment of the employee and her ignorance of her own immigration status. In cases where an employee or worker is aware that they have overstayed their visa, it is more likely that an employer's illegality defence will succeed.

Sanctions for employing an illegal worker

Civil penalties

A civil penalty may be imposed if an employer employs someone without the right to undertake the work in the UK for which they are employed. The maximum civil penalty is £20,000 for each individual.

An immigration officer can visit the employer and ask to check right to work documents and can interview individuals. A civil penalty notice can then be issued setting out the level of civil penalty. If no objections are received to the civil penalty, the notice will be published on a public register. A civil penalty can lead to the revocation or downgrading of an employer's immigration sponsorship licence.

An employer is excused from paying a civil penalty if it can show that it carried out the required right to work checks. This is called the "statutory excuse".

Criminal sanctions

An employer commits a criminal offence if it employs someone who it either knows is an illegal worker, or whom it has "reasonable cause to believe” is disqualified from the employment by reason of their immigration status. On summary conviction, an employer may receive an unlimited fine or period of imprisonment of up to six months (or both). Following conviction on indictment (at Crown Court), the employer may be subject to imprisonment for up to five years.

Dismissals by reason of statutory restriction

If an employment contract becomes illegal after it has started, the employee can be dismissed for the potentially fair reason of "statutory restriction". Employers should however be aware that dismissing an employee for statutory restriction following a failed right to work check may be unfair if it is later found that the employee did in fact have the right to work in the UK.  Because of this, it is important that employers do all they can to establish that an employee does not have the right to work before dismissing on grounds of illegality. It is also important to follow a fair dismissal process including investigating the issue, meeting with the employee, allowing them to put their case and offering a right of appeal. 

If an employee is dismissed for a statutory restriction, the contract comes to an end immediately and they are not entitled to notice pay. However, if there is doubt about the employee's right to work, employers who wish to proceed to dismissal may need to consider doing so with notice (or pay in lieu of notice) for "some other substantial reason" rather than risking a breach of contract claim for failing to pay notice.