The claimant began working for the employer in March 2007. The terms of her contract stated that she would be responsible for the tax and national insurance on her remuneration. She did not declare or pay any tax between 2007 and 2014 at which point the employer became aware of that fact. The claimant asserted in or around July 2014 that she had a contractual right to be paid net of tax, with the consequence that the employer would be responsible for the unpaid tax. In March 2017 he informed the claimant in writing that her contract would be terminated if she failed to account for the tax due between 2007–2014. In May 2017 the employer wrote a further letter summarily dismissing the claimant for reasons that included her failure to account for the unpaid tax. The claimant brought a claim inter alia for ordinary unfair dismissal. The employment tribunal accepted the employer’s defence of illegality by the claimant and dismissed the unfair dismissal claim. The Employment Appeal Tribunal allowed the claimant’s appeal against the tribunal’s conclusion and remitted the claim for unfair dismissal to the tribunal for consideration of remedy.
On the employer’s appeal—
Held, appeal dismissed. When determining a claim for unfair dismissal in the context of the defence of illegality, the employment tribunal should consider whether the claim arose out of or was so clearly connected or inextricably linked with the claimant’s illegal conduct that the tribunal could not grant the claim without giving the impression of condoning the conduct. In considering whether to allow such a claim would be contrary to the public interest as being harmful to the integrity of the legal system, it was relevant to ask whether there was a sufficient causal link between the illegal conduct and the claim. While not decisive, it was a relevant consideration in performing the required proportionality exercise, namely to consider (a) the underlying purpose of the prohibition transgressed and whether it would be enhanced by denying the claim, (b) any other relevant public policy on which such a denial might impact and (c) whether denying the claim would be a proportionate response to the illegality bearing in mind that punishment was a matter for the criminal courts. While the employee’s knowledge and participation in the illegal performance of the contract were still necessary requirements, they were no longer sufficient and subject to the proportionality conditions set out above. In the present case, the Employment Appeal Tribunal had not erred in its approach. Accordingly, there were no grounds for interfering with its decision (paras 49, 50, 56, 57, 69, 70, 81, 85, 90, 94, 147, 148, 149).
James Laddie QC and Mark Greaves (instructed by B P Collins LLP, Gerrards Cross) for the employer.
Heather Williams QC and David Stephenson (instructed by TMP Solicitors LLP) for the claimant.