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Illegality and misrepresentation of employment status

Posted on 13th September 2011
Case law

Where a contract is performed illegally and the employee knows they cannot bring a claim based on that contract.

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there needed to be a representation by the claimant that he was self-employed and that he knew that was unsustainable

Connolly v Whitestone Solicitors UKEAT/0445/10

Background

Stephen Connolly (C) was employed by Whitestone Solicitors (W) between 2006 and 2009 as a solicitor. Throughout he was treated as self employed, paid gross and presented himself to HMRC as self employed. C's engagement came to an end and C claimed he had been an employee and had been unfairly dismissed. C was found to be an employee but the employment tribunal considered whether the contract was illegal and whether C was prevented from proceeding with his claim.

The decision

Where a contract is performed illegally and the employee knows of the facts making it illegal they cannot bring a claim based on that contract. The Employment Judge concluded that C told W that he wished to be engaged on a self employed basis because it was more beneficial to him financially. It was therefore 'deliberate' that he was treated as self-employed. However, the EAT concluded that, in addition, there needed to be a representation by C that he was self-employed and that he knew that was unsustainable. This was not the case here and W could not avoid liability for unfair dismissal on this basis.

In practice

Illegality is a possible way for 'employers' to avoid the consequences of employment rights for people originally engaged as self-employed but subsequently found to be employees. It is often the case that an organisation will agree to engage an individual on a self-employed basis because of the financial advantages of doing so. It is also common for individuals to request it. This case reminds us that this does not of itself render the contract illegal. The individual must know that the representation that they are self-employed is unsustainable. This may be difficult for employers to establish and therefore avoid the potential consequences and protections of that individual being an employee.

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