Illegality of contract based on employment status

09 Sep 2011

In the case of Connolly v Whitestone Solicitors, the Employment Appeal Tribunal (EAT) considered whether a solicitor could be deprived of his employment rights on the basis that his contract had been ‘tainted by illegality’ as a result of his misrepresentation of his employment status to HMRC.


Mr Connolly left Whitestone in July 2009 and brought claims for unfair dismissal, breach of contract and holiday pay.


The Tribunal considered that it would have been contrary to public policy to consider Mr Connolly’s claims because Mr Connolly had deliberately miscategorised his employment status to HMRC.


Mr Connolly brought an appeal on the basis that the case of Enfield Technical Services Ltd v Payne established that a mischaracterisation of the legal status of individuals is not enough to establish illegality.  Express or implied misrepresentation, or an attempt to conceal the true facts of the relationship, are necessary.


The EAT stated that the Tribunal was right to question the legality of the contract.  However, the Tribunal had not found any express or implied misrepresentation, beyond the set up of the relationship in relation to HMRC, which the case of Enfield had shown was a requirement.  It also found that it did not necessarily follow that the solicitor’s desire to gain financially meant that he knew that this preference was unsustainable, which would have rendered his contract illegal.  It was also significant that the parties were solicitors and that the employee had initially been offered employment, rather than a consultancy contract.


The EAT therefore allowed the appeal and sent the case back to the Tribunal for a fresh hearing.


The practical outcome of the case and the issue to be decided at the Tribunal is that where an employee deliberately represents to HMRC that they are self employed, this may be considered to be a misrepresentation, resulting in the employee losing their employment rights.