| EMPLOYMENT — Contract of employment — Illegality — Employee accepted as self-employed for revenue purposes — Parties acting in good faith and without misrepresentation — Whether contract tainted with illegality for purposes of unfair dismissal claim — Whether misrepresentation required in order to show contract illegal
Enfield Technical Services Ltd v Payne; Grace v B F Components Ltd [2008] EWCA Civ 393; [2008] WLR (D) 130
CA: Pill, Maurice Kay and Lloyd LJJ: 28 April 2008
In order to find that a contract of employment was tainted by illegality of performance, there had to be some form of misrepresentation, express or implied, or an attempt to conceal the facts of the employment relationship. A genuine claim to self-employment, unaccompanied by false representations about the work being done or the basis of payments made, did not necessarily amount to unlawful performance of the contract of employment.
The Court of Appeal so held in two cases heard together when dismissing the appeals by the employers, Enfield Technical Services Ltd and BF Components Ltd, respectively, against the decisions of the Employment Appeal Tribunal (“EAT”) [2008] ICR 30 dated 25 July 2007. In the first case the EAT dismissed the appeal of the employer from the decision of an employment tribunal sitting at Reading that the contract of employment of the employee, Ray Payne, was not illegal. In the second case the EAT allowed the appeal of the employee, Ian Grace, from the decision of an employment tribunal sitting at Brighton dismissing his claim against his employer for unfair dismissal on the ground that, for a period of time, the contract of employment was illegal.
In the first case the revenue accepted, for tax purposes, the employee’s status as an independent contractor. In the second case, the employee initially worked on a self-employed basis before signing a contact of employment. In both cases the employers contended that the employees were not entitled to make any claim of unfair dismissal on the ground that they were engaged in illegal contracts which could not be relied on for the purposes of establishing continuity of employment.
PILL LJ said that although there could be a tax advantage for employees to claim to have self-employed status, that advantage did not, alone, render a contract, subsequently found to have been a contract of employment, unlawfully performed. A characterisation of the relationship held to be erroneous did not necessarily prevent an employee subsequently claiming the advantages of being an employee. A contract of employment could be unlawfully performed if there were misrepresentations as to the facts: see Hall v Woolston Hall Leisure Ltd [1998] ICR 651 and Salvesen v Simons [1994] ICR 409. That was, however, distinguishable from an error of categorisation (as in the instant cases) unaccompanied by such false representations, even if the employee had claimed the advantages of self-employment before the dispute arose. There were, of course, limits to that principle and the circumstances in which a miscategorisation was made could amount to misrepresentation and bad faith which would deprive the employee of the right subsequently to claim the benefits of employment. A genuine claim to self-employment, unaccompanied by false representations as to the work being done or the basis on which payment was being made, did not necessarily amount to unlawful performance of a contract of employment. The EAT, accordingly, correctly held that the contracts of employment in the instant cases were not unlawfully performed and the appeals would be dismissed.
MAURICE KAY LJ agreed.
LLOYD LJ delivered a concurring judgment.
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