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Law for Business

Knowhow - guidance - precedents

11 SEP 2012

Illegal contracts and suspension of pay

In Okuoimose v City Facilities Management, the Employment Appeal Tribunal (EAT) looked at whether an employer's reasonable belief that an employment contract was illegal, and that it would suffer penalties as a result, gave it a defence to a claim for unlawful deduction of wages.

The claimant was the family member of a European national and had the right to work in the UK throughout the period in question, although the stamp in her passport that confirmed this had an expiry date. On the expiry date, she was suspended without pay and asked to bring in evidence of her right to work. The following month, the claimant advised she had applied for a renewed permit. Her employers contacted the UK Border Agency and were told that the agency could not confirm that she was currently entitled to work in the UK. The agency's letter also said: ‘unless your employee is able to provide you with appropriate evidence of their entitlement to work, you will not have a statutory excuse against liability for payment of a civil penalty for employing an illegal migrant worker.' The employer therefore dismissed Mrs Okuoimose on the grounds of illegality but rescinded this when proof of right to work was subsequently provided. Mrs Okuoimose made a claim for unauthorised deduction of wages during the period she was suspended.

The EAT held that for the purposes of this claim, the correct test was whether or not the contract was legal and enforceable at the time - this was a question of law. The employer's reasonable belief was irrelevant. As the claimant did have the right to work, her contract was valid and her wages claim succeeded.

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