If any term of an employment contract will involve breaking the law (or is "tainted with illegality" in the restrained language of the law) then public policy dictates that the parties should not have access to the courts to resolve disputes and that can sometimes bar otherwise good unfair dismissal claims.
The Employment Appeal Tribunal has recently considered such a situation. The fact that the case arose in the legal profession has raised some eyebrows.
Mr Connolly was offered employment as an assistant solicitor with Whitestone. He requested, however, that he be classified as self-employed for tax purposes and Whitestone agreed to this. Mr Connolly invoiced Whitestone every quarter for his services and as far as HMRC was concerned he was self-employed. Despite this, Mr Connolly worked full-time and was under an obligation personally to perform his work. Whitestone controlled his work to the same extent as they did for their other professional employees at the same level, and they paid for his practising certificate and his continuing professional development.
Mr Connolly left Whitestone in July 2009 and brought claims for unfair dismissal, breach of contract and holiday pay. The Employment Tribunal found that Mr Connolly was indeed an employee but that it would have been contrary to public policy to consider his claims because he had miscategorised his employment status to HMRC. Mr Connolly appealed to the EAT and his appeal was allowed. The EAT held that although the Tribunal was right to raise the question of illegality it had not found any additional misrepresentation, beyond the description of the relationship to HMRC.
The EAT did, however, have concerns regarding the legality of the contract (particularly as both parties to it were solicitors). It therefore asked the Employment Tribunal to look at the case again, with guidance that the contract must only be found to be illegal if Mr Connolly informed HMRC of his self-employed status knowing it was 'unsustainable' to do so. The fact that the claimant took these actions for a financial gain did not automatically render him aware that this action was unsustainable.
The case reinforces the fact that employees who deliberately misrepresent their employment status to HMRC can end up depriving themselves of their employment rights. Connolly v. Whitestone Solicitors (UKEAT/445/10).