Misrepresentation Needed to Make Contract Illegal

For a contract to be unlawfully performed, there has to be a misrepresentation of the facts – a factor that was to benefit two men who claimed that they had been unfairly dismissed.

Two cases reached the Court of Appeal by way of the Employment Appeal Tribunal (EAT). Both dealt with workers who had worked for companies on a self-employed basis and dealt with their affairs as self-employed persons for tax purposes, but who were advised by their employers that they were employees. They were both dismissed from employment by their employers and brought claims for unfair dismissal.

The employers argued in each case that the claims for unfair dismissal were invalid because the men could not establish a continuous period of employment of more than one year, or that if they could, then the contract of employment that existed was 'tainted with illegality' because the parties to it had represented the men as self-employed.

In one case, the EAT threw out the employee's claim. In the other, however, the EAT ruled that the employee had a valid case. The Court of Appeal ruled that whilst a contract was illegal if the two sides entering into it had knowingly misrepresented the nature of their relationship, in these cases there had been an error of categorisation of the employees, which did not negate their claims. Accordingly, the claims of the employees were successful.