Illegality of contract


When managing employees, you need to be aware of the rules surrounding the provision of a contract of employment as well as what could make such a contract unenforceable in law.

Here you can find out everything about this issue and how to make sure your business is compliant.

What is illegality of contract?

It’s an employment contract that isn’t legal in the eyes of British law.

They’re voided due to their breach of the law, meaning they’re not enforceable.

Is it illegal to work without a contract of employment?

Yes, depending on how long an employee has worked for the company. Currently, all members of staff have a statutory right to receive a statement of main terms and conditions (SMT) once they reach one month of continuous employment.

You should provide them with this within two months of their commencement date, even if they leave the role after one month.

From 6th April 2019, provision of the SMT will be a day one right for employees and workers.

While not illegal to work without a contract of employment, it’s unlawful for you to not provide it.  

Alongside ensuring the provision of the SMT, also consider the potential for illegality of contract.

The types of illegal contract

In an employment relationship, types of illegality in contract law would usually include those designed to defraud the tax office, contracts for immoral or illegal acts such as prostitution.

Or those that are prohibited by specific employment law provisions.

For example, if the contract outlines the employee is to work in the UK when both parties are aware the individual doesn’t have the right to do this, the contract would be unlawful.

Simply put, a valid contract is one that includes the following:

  • An offer.
  • Acceptance of the job offer.
  • Consideration (the benefit each party receives through the contract).
  • Legal subject matter.
  • Mutual agreement.

One of the effects of illegality in a contract of employment can be that an employee is unable to enforce any contractual or statutory right, such as bringing a claim for unfair dismissal.

This is because such claims rely on an enforceable, legal contract at the start of employment.

The consequences of illegal contracts

An illegal contract may place an employee in a situation where they’re unable to bring a claim. That depends on the facts of the case.

Employment tribunals will assess whether the contract was expressly or implicitly prohibited by statute to start with.

If it was entered into with the intention of committing an illegal act or if it was legal when made but later performed illegally.

For example, the employee may still be able to bring a claim if they are able to demonstrate the contract was not illegal when they entered into it and were unaware of it later being illegally performed.

You should also remember employees involved in an illegal contract may still be able to bring a claim of discrimination.

You should take care in the drafting of all employment contracts and ensure their legality and accuracy.

Remember, unlawful contracts could result in criminal action against you—such as an employment tribunal.

Need our help?

For further information about contracts, documentation, and other common HR and employment law issues contact us on: 0800 028 2420.

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