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Dismissal and Discrimination: Illegal workers1 in England and
Australia
Professor Robert Guthrie and Rebecca Taseff
Curtin University of Technology, Australia
ABSTRACT
This paper deals with some topical issues in relation to illegal workers. The legal
rights of illegal workers have become an international concern. In this paper two
common law countries are examined. The engagement of illegal workers for work
raises a number of delicate employment law and policy issues. This article compares
the attitude of the courts in the England and Australia in relation to the question of the
rights of workers who work contrary to immigration laws (illegal workers). i In
England the courts have tended to adopt a traditional approach of not enforcing
contracts which are tainted by illegality in relation to cases involving payment of
wages and to termination of employment. This has meant that often workers employed
illegally have no rights to enforce agreements with employers who are a party to the
illegal agreement. However in relation to discrimination cases the English courts have
used a number of devises to sidestep this harsh approach and recently a number of
workers who have been engaged illegally have been successful in establishing that their
employer has discriminated unlawfully against them. In Australia in the last decade the
picture is even less clear with a mixture of outcomes in relation to cases by workers
claiming wages when they have been working illegally. No discrimination cases have
emerged in Australia although this paper speculates that the Australian courts may be
receptive to adopting the English approach.
Introduction
In England and Australia the issues concerning workers overstaying visas or working
contrary to immigration laws have become part of the political and legal discourse. This
article compares the attitude of the courts in the England and Australia in relation to the
question of the rights of workers who work contrary to immigration laws (illegal workers),
and in particular the approach taken in discrimination and unfair dismissal cases.
An example of the kind of coverage that has been appearing in Australian print media is
illustrated in an article in the Weekend Australian April 10 2004 which reported that
Four cleaners picked up this week in an immigration raid on a shopping centre in
south western Sydney are Indian nationals on visas available only to managers,
professionals and tradespeople. The men wielding mops at the Centro shopping
centre in Bankstown had entered the country on temporary business
visas….Cleaning company executives suggest that the deportation of such small
fry will have little effect on an industry corroded by the use of illegal labour.2
1
The terminology in relation to workers in circumstances where they work without lawful authority is
problematic see ILO, Towards a Fair Deal for Migrant Workers in the Global Economy, ILO
Conference, 92nd Session 2004, Report VI, para 36…. We have adopted the phrase illegal workers
for this article, although it acknowledged that almost all forms of labelling in relation to these issues
invoke stigma.
2
E Wynhausen “Illegal cleaning workers here on business visas” Weekend Australian April 10 2004
p 3 (emphasis added). See also H T Lee “Illegal Immigrants Working Next Door to PM” Workers
Online Issue 46 March 17 2000 http://workers.labor.net.au/46/news4_shonk.html (last visited March
8, 2004)
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In England the tragic case of the Morecombe Bay cockle workers in February 2004 which
involved the deaths of at least 21 Chinese illegal immigrants who drowned while picking
cockles in an area notorious for its dangerous tides, brought the plight of migrant workers
to the attention of the national media in that country.
Debate over the extent of
“unauthorised” work, the widespread practice of recruitment by ‘gangmasters’ of illegal
workers who become in effect indentured labour, and the hazardous working conditions,
low pay and vulnerability to exploitation of these workers was brought under the spotlight.
The employment of illegal workers may raise many and varied concerns, but the most
prominent appears to be that those who have overstayed visas or who are working contrary
to the strict requirements of the visa may be employed at below minimum wages rates.
Workers who are working contrary to the law may be exploited by being paid less and
employers may use these lower overheads to tender for projects with the advantage of the
lower wage costs. In addition illegal workers are less likely to cause industrial unrest,
demand safe working conditions or seek union assistance if disputes arise. Moreover
illegal workers are less likely to resort to the courts to pursue legal remedies because to do
so is tantamount to an admission of the illegal nature of their work. That said, a series of
cases have now emerged which throw some light on the rights and entitlements of so called
illegal workers.
This paper will be divided into four main parts. First, it will examine the principles applied
by the English courts with respect to so-called illegal contracts, and the possible
implications so far as the application of these principles to illegal workers. Second, it will
review a line of Australian cases which have considered the question of whether a worker
employed contrary to the Migration Act 1958(Cth) is entitled to employment protection,
and finally, this article compares the approaches taken in the England and Australia and
discusses some policy considerations which arise from these issues.
Illegality and the Contract of Employment
The common law in Australia and England requires a contract, including a contract of
employment, to be for a legal purpose and be performed in compliance with the law.3 The
law in Australia and England is that generally a contract may be unenforceable if it is
drawn up for an illegal purpose or in an illegal manner or if the contract is prohibited by
statute,4 whether expressly or impliedly. Illegality in this contractual sense is not limited to
criminal activity.
Illegal contracts are those prohibited by law, and those which are
3
It follows that the nomenclature illegal contract has an oxymoronic quality.
4
Wilkinson v Osborne (1915) 21 CLR 89 per Isaacs J at 98.
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unenforceable because their object, performance or underlying purpose is socially
undesirable.5 In the latter case the contract is said to be void as 'offending public policy'.6
Illegality may arise from either statute law7, where it is established that a contravention of
a statute has occurred8 or at common law where the courts consider that the terms of the
contract offend public policy.9 Parliament may prohibit particular arrangements, making
them illegal, or it may declare that if such arrangements occur they are unenforceable. The
issue of whether a statutory restriction will be construed as rendering the contract
unenforceable is ultimately a matter of determining the intention of the legislature and
ascertaining whether a declaration of statutory prohibition would further the objects of the
statute.10 The dilemma arises over the intersection of immigration laws which prohibit
particular types of relationships and labour laws which give rise to certain types of
enforceable rights. In Australia and England when migration and labour laws intersect hard
questions can arise which have been approached in different ways.
Working contrary to Immigration Laws in England - the Statutory Position
Historically, attempts to control illegal workers have been dealt with by the criminal law. It
has only been very recently, with the enactment of section 8 of the Asylum and
Immigration Act 1996 (UK) that employers who hire illegal workers have also been subject
to criminal sanctions.
There is no criminal offence which specifically deals with working without proper
authorisation. However, the Immigration Act 1971(UK) provides for three general
offences, all of which affect illegal workers, namely illegal entry, overstaying an
authorised period of entry and breaching a condition attached to entry or remaining in
England.11 The Theft Act 1968 (UK) is also relevant. Section 16 provides for the offence of
obtaining property by deception, including where a person “is given the opportunity to
5
Holman v Johnson (1775) 1 Cowp 341 at 343; 98 ER 1120 at 1121.
6
Public policy is not fixed and may vary according to the state and development of society and the
conditions of life in a community. See Dixon J in Stevens v Keogh (1946) 72 CLR 1 at 28.
7
Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 per Brennan and
Dawson JJ at 462.
8
It is a pre-condition of the doctrine that a statute be breached. See for example Cunningham v
Cannon (1983) 1 VR 641, which will be discussed in more detail below.
9
See for example Fender v St John-Mildmay (1938) AC 1, but note that Lord Aitkin in that case
cautioned against the application of the principle too freely, urging that the doctrine should be
invoked in clear cases where the harm to the public is incontestable (at 12).
10
Fitzgerald v F J Leonhardt Pty Ltd (1997) 71 ALJR 653 and Yango Pastoral Co Pty Ltd v First
Chicago Australia Ltd & Ors (1978) 139 CLR 410.
11
Section 24, Immigration Act 1971 (ENGLAND)
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earn remuneration or greater remuneration in an office or employment.” Furthermore, the
Forgery and Counterfeit Act 1981 (UK) creates the offence of using a false instrument to
induce someone to act to their prejudice or to possess a false instrument with the intention
of doing so. The definition of “false instrument” in the Forgery and Counterfeit Act
1981(UK) was amended in 2004 to include passports, identity cards and immigration
documents.12
As stated above, offences for employers who employ illegal workers are relatively new in
England. Tougher sanctions for employers have recently been enacted with the passing of
the Immigration, Asylum and Nationality Act 2006 (UK). This Act received royal assent on
30 March 2006 and became fully effective on 4 December 200613 and was part of a suite of
legislation14 dealing with migration issues. The Immigration, Asylum and Nationality Act
2006 (the 2006 Act) repealed section 8 of the Asylum and Immigration Act 1996 (UK)
which was the first British statute of its kind imposing fines of up to £5000 on employers
who employed people without permission to work. The Act replaced section 8 of the
Asylum and Immigration Act 1996 (UK) with more robust powers. These new powers
include a civil penalty for employers of up to £2000 for each illegal worker employed, and
a separate criminal offence of employing a person knowing they are not legally entitled to
work in the (UK), with a maximum penalty of two years’ imprisonment and/or a fine.
Whilst the monetary amount of the fines are actually lower in the 2006 Act, the intention is
that the fine imposed will reflect the number of times the employer has been in breach, and
the steps taken by the employer to check the immigration status of the workers.15
Section 15 of the 2006 Act imposes civil penalties in the form of dines on employers of
persons over the age of 16 subject to immigration control in defined circumstances. A
person is subject to immigration control if he requires leave to enter or remain in England
under the provisions of the Immigration Act 1971(UK). The defined circumstances are
that:
1. the employee had no leave to enter or remain; or
12
Forgery and Counterfeiting Act 1981(ENGLAND), as amended by the Asylum and Immigration
Act (Treatment of Claimants) 2004 (ENGLAND)
13
The main provisions took effect on 31 August 2006 by virtue of the Immigration, Asylum and
Nationality Act 2006 (Commencement No 2) Order 2006.
14
The other pieces of legislation were the Terrorism Act 2006 and Identity Cards Act 2006(UK).
15
See Immigration, Asylum and Nationality Bill: Civil Penalty for Employers: Draft Amount of
Penalty Code of Practice 2 (February 2006)
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2. his leave was invalid, had expired or otherwise prevented him from accepting
employment.
Sections 16 and 17 provide for objections on the part of the employer to the imposition of a
penalty and for appeal to the County Court against such imposition.
Section 21 provides that where an employer knowingly employs an over-16 year old
subject to immigration control he commits an indictable offence punishable by a two year
prison term or a fine.
Employers are able to avoid a penalty through compliance with certain prescribed
requirements, including the requirement that employers check and copy documents which
evidence the entitlement to work.16 This is similar to the broad defence afforded to
employers under the previous section 8 of the Asylum and Immigration Act 1996 (UK).
Performing unauthorised work involves the commission of criminal offences on the part of
both the employee and the employer. Does this mean the employee who engages in the
unauthorised or illegal work has the right to have their contract of employment enforced,
or any statutory protections they might have under the contract as against the employer?
Taxation and Employment law relating to illegal workers in England
In England the approach to illegality in relation to contracts of employment has been
mixed. The early cases showed distaste for the enforcement of contracts which were
tainted by illegality or otherwise affected by illegality. Enonchong in an in depth study17 of
English decisions in relation to illegality has detailed two policy reasons for not enforcing
illegal contracts. First is the deterrence policy consideration which is referred to in Tinsley
v Milligan18 being the notion that the court would not enforce contracts tainted by illegality
as a deterrent to the parties entering into such arrangements.
The second policy
consideration is the need to protect the integrity of the judicial system. This second policy
principle is outlined by Lord Aitkin in Beresford v Royal Insurance Co Ltd19. Lord Aitkin
also refers to the public conscience test, a test which was rejected in England in Tinsley
and in Australia in Nelson v Nelson.20
16
Need to insert reference to statue section
17
N Enonchong Illegal Transactions – LLP London 1998.
18
[1994] 1 AC 340
19
[1938] AC 586 at 599
20
(1995) 184 CLR 538
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The policy reasons for declining to enforce so-called illegal contracts have not been
universally accepted. Lord Mansfield in Holman v Johnson21 indicated that the result of
not enforcing an illegal contract may be contrary to real justice. Likewise Sachs LJ in
Shaw v Groom
22
noted that in declining to enforce some illegal contracts that injustice
could be result. Some other English judges for example Lord Devlin, say that as a matter
of public policy prevention of windfalls should also be an objective.23 Likewise academic
commentators Honeyball and Bowers suggest that cases such as Salveen v Simmons24 and
Tinsley v Milligan have rigorously applied the defence of illegality regardless of culpability
and consequently may have worked an injustice.25
A number of commentators note the uneven approach of the courts to illegal contracts
referring to agreements to evade taxation or national insurance contributions in England.26
Most reported cases in England relating to illegal contracts have in fact arisen out of
attempts to defraud Inland Revenue by failing to deduct appropriate payments. A number
of decisions suggest that such contracts are void ab initio.27 The English courts have often
determined that as a matter of public policy contracts to evade taxation are not enforced to
ensure effectiveness of the revenue collection system. Interestingly research into this area
has shown that usually the employer presses for arrangements to pay less taxation and that
this “shadow economy” tends to result in wages being paid at below correct levels.
Because of this, Modgridge has suggested that employment rights should be enforceable
regardless of illegality. He argues that the effect of making the contracts void provides a
double loss for employees in that they lose both contractual and statutory rights. Often the
arrangements to evade taxation are based on a disparity in bargaining power. 28 However
some English decisions have enforced contracts for avoiding taxation in favour of an
employee where the employer has been shown to have taken the initiative by suggesting
21
(1775) 1 Cowp 341 at 343
22
[1970] 2 QB 504 at 523
23
See St Johns Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267 at 288
24
[1995] IRLR 52
25
S Honeyball and J Bowers Textbook on Labour Law 8th Edition Oxford University Press 2004
page 37-8
26
See for example, Harvey on Industrial Relations and Employment Law Butterworths 2005 126150 at para 130 “In practice the application of the ex turpi causa rule in circumstances where the
contract has in effect resulted in a fraud on the Revenue has been somewhat variable.”
27
28
Miller v Karlinski (1945) 62 TLR 85 and Salveen v Simmons [1995] IRLR 52
C Modgridge, ‘Illegal Employment Contracts: Loss of Statutory Protection’, (1981) 10
International Law Journal 23.
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the tax evasion arrangements.29 Likewise other commentators note that the line between
defrauding the Inland Revenue and tax avoidance is a fine one. For example contracts to
avoid taxation by attempting to alter the employment status of a worker which results in
artificial arrangements to disguise employer/employee relationship as in Young & Woods
Ltd v West30where such an arrangement was declared a sham. In Young the worker was
entitled to seek remedies under the contract of employment despite the effort to portray the
relationship as a contract for services. It was noted that in Young both parties to the
contract honestly believed the contract to be one of services.31
Honeyball and Bowers suggest that the relatively recent decision in Hewcastle Catering
Ltd v Ahmed32 shows a different pragmatic approach. Hewcastle was a case of Value
Added Tax (VAT) fraud where the employee did not benefit from the fraud committed by
his employer who failed to pay the appropriate tax. The employees were required to
implement the scheme. The employer had dismissed the employees when they gave
evidence for the prosecution in an action by Inland Revenue to recover the tax. It was held
that the employee could enforce the contract to seek a remedy for unfair termination of
employment. A similar pragmatic approach was taken in Hyland v JH Barker (North
West) Ltd33 by the English Employment Appeals Tribunal which attempted to avoid the
harsh consequence of irregular unlawful payments to an employee noting that the
employee in that case had received an allowance for lodgings upon which tax was not paid
when it should have been. The Tribunal held that the contract was only void for the period
in which the allowance was paid, not for the entire period, although this decision had the
effect of breaking the employee’s continuity of service.34 By contrast in Lightfoot v DJ
Sporting Ltd35 a contract to avoid taxation by making payment to the employee’s wife was
29
See Laurie v Holloway [1994] ICR 32 where it was held that if the employee is not aware of the
illegality he/she does not lose the statutory rights and Newland v Simons & Willer (Hairdressers)
Ltd [1981] IRLR 359 where it was held that if the employee continues working after knowing of
the illegal mode of performance by the employer then they are affected by that knowledge and
will lose there rights under the contract and statute – but the contract is not affected merely
because they should have known but did not know of the irregularity. See also Wheeler v Quality
Deep Ltd [2004] ECWA Civ 1085 Times (2004) 30 August where the employee’s poor English
skills were taken into account in allowing a case to proceed despite the under-declaration of
earnings.
30
[1980] IRLR 201
31
Harvey on Industrial Relations and Employment Law, Butterworths 2005 126-150 at para 137.
The authors also noted that they should be able to benefit from any doubt – for the court not to act
on the mere suspicion of illegality
32
[1991] IRLR 473
33
[1985] ICR 861
34
Noted in H Desmond and D Antill Wells Employment Law Sweet & Maxwell 1998 at 304-306
35
[1996] IRLR 64
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held not to be unlawful and could be enforced even though the payments were regular. It
appears from the above cases that a lot may depend on the employee’s apparent state of
mind in arriving at a conclusion that the employee was not involved in the plan. The test is
subjective – what did that employee know and understand during the period of
employment? By this approach the employee may be put on notice if normal deductions
not taken out of the pay and any rights to enforce the contract.36
Yet the approaches vary. Annadale Engineering v Samson37 is an example where the
specialist tribunal, the EAT has been wary of finding illegality. 38 In Annandale occasional
payments were made to employee kennel hands of winnings from dog racing without the
winnings being declared for taxation purposes. The EAT considered the winnings were
not to be regarded as regular income payments (such as tips for waiters) and therefore were
incidental to the employment contract as opposed to arising from the contract (as with tips
etc) and therefore did not invalidate the contract of employment. Coral Leisure Group Ltd
v Barnett39 was another case of apparent illegality which was considered incidental to the
contract but not a term of the contract.
In Barnett the applicant procured and paid
prostitutes in the course of carrying out his legitimate duties. This form of procurement
was seen as a method of preserving the employer’s good will rather than an act which
invalidated the contract and the employee was allowed a remedy. The applicant also knew
nothing of the requirement or encouragement to procure prostitutes until after he had taken
up employment.40 The employee was held to be entitled to relief under the contract for
unfair dismissal. The employer denied the allegation that it was a part of the job to procure
prostitutes for customers although the tribunal does not seem to have accepted this
submission. Arguably Barnett was a case of a lawful contract being performed unlawfully
rather than a contract to do unlawful acts, so the public relations executive was entitled to
36
Davidson v Pillay [1979] IRLR 275 - where both employer and employee were held to be involved
in the fraud resulting in the contract being declared void. See also Tomlinson v Dick Evans ‘U’
Drive [1978] ICR 639 where part of the remuneration was paid from petty cast to avoid tax – claim
for unfair dismissal not allowed.
37
(1994) IRLR 59
38
Annadale was noted along with Lightfoot v DJ Sporting Ltd [1996] IRLR 64 in Dix Crump &
Pugsley Contracts of Employment 7th Edition Butterworths London 1997 (at 37) as an example
where occasional payments made to the employee without deduction of taxation would not vitiate
the contract. This was a payment of about 6 times a year.
39
[1981] ICR 503
40
Noted in H Desmond and D Antill Wells Employment Law Sweet & Maxwell 1998 at 304-306
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rely on the contract which was not entered into with the intention of doing anything
unlawful although this rationale is not universally accepted.41
Discrimination decisions in relation to illegal workers in United Kingdom
Recent English anti-discrimination cases show a similar unwillingness to hold so-called
illegal contracts void because the courts have held that such cases which are based on
statutory remedies (rather than contractual relationships) the applicant is not required to
base the claim in contract. For example Leighton v Michael42which was followed in Hall v
Woolston Hall Leisure Ltd43 which were both cases related to claims for workplace
discrimination which were defended on the grounds that the contract of employment was
void. In both cases the applicant was held to be entitled to a statutory remedy for loss of
feelings, but not loss of earnings. Selwyn notes that in Hall loss of earnings was not paid
as to do so the court would have had to rely on the contract of employment.44 Deakin
suggests that Hall is decided on a sound basis because the Court of Appeal considered that
unlawful methods of payment should not make a contract void and should contrasted with
the unlawful purpose contacts discussed above where the mere knowledge of the illegality
was not enough to invalidate the contract where the employer instigated the process and
the employee did not actively participate in the illegality.
Deakin asserts that “it is
inappropriate to operate the illegality doctrine in a rigid way where the effect of doing so
is to deflect the intended application of protective legislation:”45 In Hall the court found
for the employee on the basis that her involvement in illegal performance of her contract of
employment was not “directly, immediately or inextricably connected with the
discrimination of which she complained”. That is, in the absence of participation in the
illegality, there can be no illegal conduct which can be said to be “causally linked with the
discrimination claim.”
41
Barnett has been heavily criticised by N Enonchong Illegal Transactions – LLP London 1998 at
294 – as ignoring the fact that the contract was performed in a illegal manner – this too could lead to
it being unenforceable – citing Johal v Adams 1996 unreported as authority for this. See Miller v
Moore (1911) 17 WLR 548 Canadian case – where a builder who made additions to a prostitutes
house with the knowledge that she intended to use it to advance her immoral trade was denied
recovery under the contract.
42
[1996] IRLR 67. This decision has been criticised by Enonchong supra at 51 – considering this was
a distortion of the rules which prevented reference and therefore reliance on an illegal contract – see
Marles v Philip Trant & Sons [1954] 1 QB 29 – also notes Johal v Adams unreported EAT 11
January 1996 as being contra to Leighton v Michael - but note he was writing before Hall.
43
[2000] IRLR 578
44
NM Selwyn Selwyn’s Law of Employment 13th Edition Butterworths 2004 at pages 73-75
45
S Deakin and G Morris Labour Law 3rd Edition Butterworths 2001 London Pages at 157
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By contrast with Hall and Leighton, in Vakante v Governing Body of Addey and Stanhope
School (No 2)46 the EAT upheld a tribunal decision that a Croatian asylum seeker who was
in breach of conditions of leave to remain in England by taking up employment with the
respondent school was barred from making a race discrimination claim under the Race
Relations Act 1976 (UK) when he was dismissed from that employment. The tribunal
purported to apply the Hall test and said that it was entitled to hold that public policy on
illegality outweighed the public policy against discrimination in employment.
One
commentator notes that if a person is an asylum seeker who is deceiving his employer
about his immigration status, his employment is so closely connected with the illegality of
the contract as to render it unenforceable.47 The matter went on appeal.48 The EAT said (at
para 70-72)
It appears to us that in those circumstances it is open to the tribunal to find (and
it did find) that the illegal conduct infected the entirety of the contract and
indeed created an employment relationship which would not otherwise have
been created, which was not entitled to exist at all because the applicant was not
entitled to be in employment and which could and would and should have been
terminated during every day that it operated.
…In those circumstances in our judgement all the ordinary events of such a
contract would likely to be found to be inextricably linked up with the illegal
conduct. We conclude that there is a possible way of differentiating so that any
concept of outlawry can be firmly eschewed.
…In our judgment where a contract caused and continued, when it would not
otherwise be by criminal and fraudulent conduct of the employee, then he or she
would have not complained about acts of discrimination if they consist of an
alleged discriminatory manner of operating the contract.
The Court of Appeal upheld the EAT and found on the facts in Vakante that the
discrimination suffered by the applicant employee related to the operation of the contract
and therefore he was not entitled to recover. However the Court also explored the
possibility that discrimination could be extrinsic to the contract, such as vicarious
discrimination by a co-employee against an applicant as in the case of gratuitous racial
abuse which would be nothing to do with the employment context. In this case the Court
that the discrimination was not extrinsic gratuitous discrimination.
46
[2004] ICR 279 see Harvey on Industrial Relations and Employment Law Butterworths 2005 126150 at 128.
47
See Selwyn’s Law of Employment NM Selwyn 13th Edition Butterworths 2004 73-75 at 75
48
[2004] EWCA Civ 1065
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The main differences between the Hall case and the Vakante case were that in Vakante the
illegal conduct was that of the employee rather than the employer (Vakante falsely claimed
that he did not need a work permit, and provided a false national insurance number). The
conduct arose at the formation of the employment contract, and went to the heart of the
employment relationship. The culpability of the employee barred him from making any
claim. The Court of Appeal in Vakante considered that the illegal “employment situation”
operated so as to prevent any complaint being made under the Race Relations Act.49 So
long as the contract was formed illegally, the employee will have no recourse. This seems
at odds with the decision in Hall which required the Tribunal to consider whether the
allegations of discrimination in the claim are sufficiently connected to the illegal act that
the Court would be condoning the illegal act should it allow the claim to proceed.
Vakante does however leave open the question of whether there is any room for
discrimination claims brought by workers who know they are in breach of immigration
laws and who have knowingly deceived their employers as to their true legal position.
Where the discrimination claim relates to the employment relationship Vakante is authority
for the proposition that these claims will not succeed.50 However, Vakante suggests that
there is a narrow range of claims which fall within an “extrinsic” category which may
succeed. However, this was not addressed by the Court of Appeal’s decision.
There is other English authority to the effect that illegal workers will not be afforded any
employment protection due to the fact that they are working in the country illegally. In
Rastegarnia v Richmond Design51 the applicant who came from Iran had been granted a
work permit for a specific job. Without obtaining permission from the Department of
Employment he changed his job and went to work for the respondents. He was
subsequently dismissed and his claim for unfair dismissal was rejected on the basis that his
employment was unlawful and he could not obtain any lawful rights there under.52 In a
similar fashion, in Sharma v Hindu Temple53 the claimant employee, an Indian national,
was not authorised to work in England. His complaint of unfair dismissal was dismissed at
49
Per Mummery J at para 5-8 and 34
50
See also Mayor and Burgesses of the London Borough of Hounslow v Klusova 2006 WL 3485368
(EAT 5 October 2006), an unfair dismissal case where the Employment Appeals Tribunal
considered that, following the reasoning in Vakante, the respondent’s unfair dismissal claim
ought to have been disallowed on the basis that she knew her immigration status precluded her
from working.
51
Unreported noted in NM Selwyn Selwyn’s Law of Employment 13 th Edition Butterworths 2004 at
74
52
Id at 74
53
[1991] EAT 253/90
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first instance on the grounds that the contract of employment was tainted by illegality and
therefore unenforceable. On appeal, the EAT considered whether or not the contract of
employment was enforceable despite the fact of the employee being in breach of his visa
conditions. The Tribunal, following the judgment of Devlin J in St John Shipping
Corporation v. Joseph Rank Ltd54 considered that if the worker was held knowingly to be
in breach of the condition of his entry into England, then the contract of employment will
be illegal in its formation. The Tribunal went on to say that even if this was not the case,
then the Tribunal had to consider whether the contract is tainted with illegality contrary to
public policy such that it is unenforceable. The Tribunal said that the issue of a contract
being tainted with illegality “is so important that employers should ensure that immigrants
are legally entitled to be employed in the United Kingdom.”
In Bamgbose v Royal Star and Garter Home55 the plaintiff remained in England after his
leave to remain had expired. He took up employment without permission and by doing so
was in breach of the criminal provisions of section 24(1) of the Immigration Act
1971(UK). He was working illegally for about a year. Subsequently he obtained the
requisite paperwork so that his immigration status was regularised. When he was later
dismissed he brought a claim for unfair dismissal.
Under the relevant statute, the
Employment Protection (Consolidation) Act 1978(UK)56 an employee must be in
employment for at least 2 years before he or she is entitled to bring an unfair dismissal
claim. However Bamgbose was dismissed with less than 2 years service after his
immigration status had been regularised. Therefore he sought to include the period during
which he was working illegally in order to give him the two years required. The EAT held
(consistent with Annadale Engineering v Samson above) that the employee could not rely
on the illegal period of the contract since throughout that period the contract remained
unenforceable by him. As he could not show the two years qualifying without the illegal
period, his claim for unfair dismissal failed. The Tribunal however rejected the argument
put by the employer that the contract of employment was tainted by illegality throughout
its entirety because of the period where the employee was working “illegally”, instead
considering that the contract was severable and only tainted by up until the period his
immigration status was regularized.
54
(1957) [1 QB 267 at 283]
55
[1996] EAT 841/95
56
See section 64(1)(a)
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In Bakersfield Entertainment Limited v Church and Stuart57 the Employment Appeal
Tribunal revisited the test for illegality, confirming that in deciding whether an
employment contract is so tainted by illegality, either in its making or its performance, that
the tribunal has no jurisdiction to hear a claim arising from it, the correct approach is
considering the degree to which there has been active participation by the employee in that
illegality. In Bakersfield two company directors agreed to a proposal from the company's
controlling directors to pay half their salaries to fictitious service providers. The directors
were informed that other directors were operating the same scheme and received advice
from the controlling company's tax adviser. The service providers provided no actual
services and were created for the sole purpose of enabling half the salaries to be paid gross
and without deductions for tax and national insurance. Both directors claimed unfair
dismissal. It was argued that the claims could not be heard as the contracts were illegal.
At first instance, the Tribunal held that the contracts were not illegal, and therefore the
claims could be heard on their merits. On appeal, the Employment Appeals Tribunal
disagreed, considering that there was clear evidence of illegality and the tribunal had failed
to establish whether the contracts had been performed illegally and examine the extent to
which the directors had participated in that illegality. McMullen J considered that if the
directors had knowingly participated, then, on the basis of Vakante they would not be able
to rely on the contracts to support their tribunal claims. The case was remitted to the
tribunal to consider the degree of the directors’ participation in the illegal performance of
their contracts.
It can be observed that the approach of the English courts has been mixed. In relation to
discrimination cases the courts have sidestepped the issue of illegality by allowing
remedies which are not grounded in contract. There are two points which should be made
about this method. First, there is some analogy to be drawn with the tort cases where the
trend seems to be that recovery is appropriate for the injured worker because tort claims
are not grounded in contract but are based on a duty of care which exists regardless of the
contractual circumstances. Second, and paradoxically the argument that discrimination
cases are not based in contract seems very dubious given that the basis upon which the
claims are made is that the discrimination occurred in the course of the employment or
some other work engagement, which necessarily requires some contractual relationship.
Then there is the mixed approach to the taxation cases where the courts seem to have been
attempting to weigh the culpability of the employee against that of the employer. If the
57
UKEAT Appeal /0523/05/ZT 3/4th November 2005
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employee enters into the contract with knowledge of the illegality then the trend in
England seems to be that the employee will be without remedy under the contract. Finally,
there are the recent cases of illegal workers, working contrary to immigration laws. These
cases seem to be decided on traditional grounds, namely that the contracts entered into
were tainted with illegality.
Working contrary to Immigration Laws in Australia
Many tourists come to Australia on working holidays. A Working Holiday Visa allows a
stay of up to 12 months from the date of first entry to Australia, regardless of whether or
not a person spends the whole time in Australia. Working Holiday Visa holders are
allowed to do any kind of work of a temporary or casual nature, but work for more than
three months with any one employer is not permitted.58
Working Holiday visas holders have to leave the country when the visa expires as the
Working Holiday is only granted for 12 months maximum and can only be issued once in a
lifetime. It is possible to apply for a change of visa status to obtain a Tourist Visitor visa
and remain in Australia for up to 6 more months. The Tourist Visitor visa does not allow a
person to work.59
Notwithstanding the restrictions on Working Holiday and Tourist Visitor Visas it is clear
that considerable numbers of visitors overstay their visas and work beyond the time
allowed under the requirements or work contrary to the visa.60 In each case the person
working may be in breach of various provisions of the Migration Act 1958 (Cth). As at 31
December 2005, it was estimated that some 46,400 people were unlawfully in Australia.61
By comparison, the scale of illegal workers in England is much bigger. Whilst official
figures do not appear to be kept, recent estimates given put the number of illegal workers
in England at about 310,000 – 570,000.62 The number of illegal workers deported each
year is approximately 25,000.
58
http://www.immi.gov.au/allforms/visiting_whm.htm (last visited March 19, 2004)
59
http://www.workinaustralia.net/faqs/visa.html (last visited March19, 2004)
60
61
62
In 2004-2005, the Department of Immigration and Citizenship located over 18,000 visa
overstayers and people breaching visa conditions: see Explanatory Memorandum, Migration
Amendment (Employer Sanctions) Bill 2006.
See Explanatory Memorandum, Migration Amendment (Employer Sanctions) Bill 2006.
The Sunday Times, 17 April 2005 “500000 illegal migrants, says Home Office”
http://www.timesonline.co.England/tol/news/England/article382035.ece (last accessed 7 February
2007); 19 May 2006 http://news.bbc.co.England/1/hi/England_politics/4995764.stm
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In the meantime, the question arises whether working contrary to the various provisions of
the Migration Act 1958 (Cth) in Australia, or the, Asylum and Nationality Act 2006 (UK)
in some way invalidates the work arrangements or disentitles the worker to protection
under Australian or British employment laws. The starting point for the examination of this
question is consideration of the common law contract of employment.
At present illegal workers who work in Australia commit an offence under s235 of the
Migration Act 1958 (Cth). It is an offence under s235 of the Migration Act 1958 (Cth) for:

an unlawful non-citizen to do any work in Australia, whether for reward or
otherwise;

and a non-citizen, who holds a visa that is subject to a work condition, to work in
Australia in contravention of that condition.
Section 83(2) of the Migration Act 1958 (Cth) is also relevant. This section provides:
Where a person who is an illegal entrant performs any work in Australia without
permission, in writing, of the Secretary of the Department of Immigration the
person commits an offence…
Australian employers who employ and labour suppliers who supply illegal workers also
face criminal offences. In February 2006 the Federal Parliament passed the Migration
Amendment Employer Sanctions Act 2006 (Cth). This Act amends the Migration Act 1958
(Cth) to include new offences for employers and labour suppliers who knowingly or
recklessly employ or refer illegal workers. Individuals convicted of these offences will face
fines up to $13,200 or 2 years imprisonment while companies will be fined up to $66,000.
The Act contains higher penalties for “aggravated offences” where an illegal worker is
being exploited through forced labour, sexual servitude or slavery.
Penalties for
aggravated offences are up to five years’ jail with fines of $33,000 for individuals and
$165,000 for companies. It is expected that the Act which is currently before the Australian
Parliament will come into effect sometime in 2007.
The four types of offences created for employers and labour suppliers under the Act are:
s245AB - allowing an unlawful non-citizen to work;
s245AC - allowing a non-citizen to work in breach of a visa condition;
s245AD - referring an unlawful citizen for work; and
s245AE - referring a non-citizen for work in breach of a visa condition.
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The Explanatory Memorandum to the Act refers to the “problems” of having non-citizens
working illegally as being at odds with an ‘orderly migration’ program. It also refers to the
economic and social implications where employers employ non-citizens, including people
being paid below official rates, people paying no tax, closing opportunities for ‘legal
workers’ to obtain jobs when illegal workers get them, presenting health problems to the
Australian community due to people bypassing health checks normally taken in relation to
lawful long term residents, presenting safety risks to the Australian community due to
people bypassing rigorous character checks normally undertaken in relation to long term
residents and increasing the chances of illegal workers being exploited through low wages
and poor working conditions, particularly in the sex industry.
The Federal Department of Immigration and Citizenship keeps official estimates of illegal
workers in Australia. In 2004-05, there were said to be 3,870 confirmed illegal workers in
Australia, 14% up on 2003-04. In 2004-05, the Dept of Immigration issued 2,280 warning
notices to employers and labour suppliers about illegal workers, a 20% increase on the
previous year. There are said to be 46,000 illegal over-stayers in Australia. A significant
proportion of these over-stayers may be presumed to be working to support their continued
stay.
There has been far less judicial consideration of the issue of illegal workers enforcing
employment rights in Australia as there has in England. This is not surprising given,
among other things, the differences in population size between the two countries, and
Australia’s geographical isolation from the rest of the world. Further, given recent Federal
legislative changes to the unfair dismissal regime which have made it considerably more
difficult for “legal” workers to pursue legal remedies for unfair dismissals,63 it seems
hardly surprising that illegal workers would be willing to call attention to their immigration
status through employment litigation.
Unfair Dismissal of Illegal Workers in Australia
In Australia there is no High Court64 determination of the issue of the rights of illegal
workers in relation to termination of employment. However in Chen v Allied Packaging
Co Pty Limited65 the Federal Court dealt with an appeal in relation to an application for reinstatement of employment under the then current section 170DE of the Workplace
63
These changes include excluding employees who work for employers with less than 100
employees from bringing claims, excluding employees who are terminated for “operational
reasons”.
64
The Superior Court in the Australian hierarchy.
65
(1997) 73 IR 53.
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Relations Act 1996 (Cth) which provided remedies for employees whose dismissal was
found to be harsh, unjust and unreasonable. The facts of the case are worth setting out at
length. In a short judgement, Wilcox J noted that (at 54);
Mr Chen commenced employment with Allied Packaging in November 1993.
He was employed as a guillotine operator. On 4 June 1996 he sustained an
injury to his back when a wheel on a trolley he was pushing became stuck in a
hole in the factory floor. Despite the injury, he continued to work; but he later
took time off work to obtain medical advice. He notified his employer that he
was unfit for work. He has not worked with Allied Packaging since 13 June.
He attended work on 18 June to give a medical certificate to his employer. He
rang his employer a day or two later and reported that the doctor had told him
he would be off work for a further two weeks. On the following day Mr Ray
Doherty, the managing director of Allied Packaging, telephoned the applicant
and asked him to come in to work. He did so and he was given a letter
terminating his employment. The reason stated in the letter was that the
company was acting on advice received from the Department of Immigration
and Ethnic Affairs.
It appears from the evidence that, on or about 20 June, Mr Doherty contacted
Mr Jim Kerr of the Compliance Section of the Department at Rockdale. He
sought information about Mr Chen’s entitlement to work. On 20 June Mr
Kerr wrote a letter to Mr Doherty in which he referred to the applicant,
correctly identifying his date of birth - that was verified in evidence this
morning - and stating: "I hereby confirm that the following employee has been
identified as a non-citizen who is not currently entitled to work while he is in
Australia. He should not be re-employed by you unless he is able to provide
evidence of his right to work in Australia." The letter said the evidence may
be in the form of evidence of Australian or New Zealand citizenship, a valid
visa or written permission to work provided by the Department.
Mr Chen conceded this morning that he was not an Australian or New
Zealand citizen in June 1996 and did not hold either a valid visa or written
permission to work provided by the Department.
After termination of his employment, Mr Chen approached the Department
for permission to work. This was granted. He then asked Mr Doherty to reemploy him but Mr Doherty refused.
I have considerable sympathy for Mr Chen's position. Although the facts have
not been investigated in full, it seems, prima facie at least, that Mr Doherty
contacted the Department only because Mr Chen had gone off work injured
and was on workers' compensation. Mr Chen said to me this morning that Mr
Doherty used his illegal status as an excuse to terminate his employment.
This may be correct. Nonetheless, it seems clear that the Judicial Registrar
was correct in holding that Mr Chen's continued employment was illegal,
unless and until he succeeded in obtaining either a temporary visa or a work
permit.66
On the face of it the termination was harsh, unjust and unreasonable and indeed unlawful
as being in breach of section 170CK (2) of the Workplace Relations Act 1996 (Cth) which
prohibited termination due to temporary illness. Chen, however, was an "unlawful noncitizen" for the purposes of the Migration Act 1958 (Cth), as he did not hold a permit to
work in Australia. Section 235(3) of that Act provides;
66
Emphasis added
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An unlawful non-citizen who performs work in Australia whether
for reward or otherwise commits an offence against this
subsection.
Chen was in fact granted permission to work after his termination, but this did not prevent
the Federal Court from dismissing his application for reinstatement. Wilcox J noted that
any action to continue to employ Chen after the employer was made aware of Chen's
unlawful non-citizen status but before a visa was granted would have itself been unlawful.
The Court accepted that the employer had a valid reason to terminate Chen because of the
breaches of the Migration Act 1958 (Cth), and further opined that it did not have power to
order re-employment (as opposed to re-instatement). It does not seem to have been in
issue that Chen could apply to the Court for a remedy; jurisdiction was not contested. Nor
does it appear from the judgement of Wilcox J that the contract of employment was
regarded as illegal.
The application seems to have been limited to the issue of
reinstatement which on the facts was not possible. Nor does not seem to have been in
doubt that Chen was entitled to workers’ compensation whilst he was absent from work. It
is noteworthy that Section 235(3) of the Migration Act 1958 (Cth) did not actually preclude
work by Mr Chen, rather it created an offence for him engage in work. At the time Chen’s
case was decided there was High Court support in Fitzgerald v F.J. Leonhardt Pty Ltd67
and the earlier decision of the High Court of Yango Pastoral Co Pty Ltd v First Chicago
Australia Ltd & Ors68 that the issue of illegality by reason of a statutory prohibition was a
matter of statutory interpretation.
Yango, which was referred to in Fitzgerald, is an
important decision because the judgement of Gibbs ACJ and Mason J indicated that
statutes which impliedly or expressly prohibited contracts (such as the Migration Act 1958
(Cth)) led only to a prima facie conclusion that the contract was illegal, void or
unenforceable. It was open for the court to examine the statute more closely to ascertain a
contrary legislative intention.69 Even if the issue of Mr Chen’s employee status was
argued it could comfortably be asserted the intention of the relevant provisions of the
Migration Act 1958 (Cth) as they then were was to impose a penalty rather than to make
the contract of employment void. It should be pointed out that the matter does not seem to
have been argued at a high level, as it has been noted that Mr Chen appeared on his own
behalf.
67
(1997) 71 ALJR 653
68
(1978) 139 CLR 410
69
Gibbs ACJ at 413 and Mason J at 423
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Chen’s case was considered in Cunningham v Bensons Building Services Pty Ltd.70
Cunningham involved a case in relation to a business visa. The facts were set out by
Commissioner Huxter of the Industrial Relations Commission of South Australia as
follows;
The applicant first met with the respondent early in 1996 during a visit to
Australia from Britain. There was a discussion about a possible business
venture in which the applicant would provide his expertise in passive fire
protection and the respondent would set up a business structure and arrange to
finance the venture.
The respondent agreed to sponsor and assist the applicant in obtaining a visa
entitling him to work in Australia whilst the applicant returned to Britain to
discuss licensing arrangements with the suppliers of various fire proofing
materials.
Various communications passed between the parties by telephone and facsimile
during the period following the applicant's return to Britain; (Exhibits A2 to
A8). These related to various technical matters and to aspects of the applicant's
intended residency and work in Australia.
The applicant was duly granted a working visa and arrived back in Australia in
September 1996, commencing work with the respondent as a Contracts
Manager. His salary was agreed at $38,000 per annum, although by some error
he was paid gross wages of $825 per week.
The applicant and Benson had a good working and social relationship until after
Christmas 1996. Although during this period there was one occasion on which
Benson spoke to the applicant about complaints from a client alleging he was
arrogant in dealing with people, this was not in the nature of a warning of
possible dismissal.
Sometime early in 1997, probably early March, the relationship between the
parties began to sour. A number of factors likely contributed to this. 71
Ultimately Cunningham was dismissed.
One of the questions for consideration was
whether the State Commission was entitled to make an order that the respondent re-employ
Cunningham. The Industrial Relations Act 1994 (SA) allowed the Commission to order
re-employment pursuant to section 109. The Commission observed in relation to Chen’s
case that;
The obtaining of a working visa may be within the bounds of possibility, making
re-employment possible. Orders could be made conditional upon the obtaining
by the applicant of an appropriate visa. The decision in Chen v. Allied
Packaging Co Pty Ltd. (1997) 73 I.R. at 53 does not convince me that the
discretion of the Commission has been removed. However, the possibility of reemployment is not the test.
In the end result the Commission found that re-employment of Cunningham was not
appropriate as the employment relationship had soured. In its place compensation was
ordered.
The distinction between Cunningham and Chen is that in the first place
70
[1998] SAIRC 26 (12 March 1998)
71
Emphasis added
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Cunningham was entitled to work under his visa conditions, whereas Chen was not, in the
sense that it was an offence for him to do so, and in the second place Chen’s case was dealt
with under Federal legislation which did not empower the Commission to order reemployment. Under the Workplace Relations Act 1996 (Cth) the Australian Industrial
Relations Commission only had power to reinstate a worker whereas the South Australian
Act allowed for re-employment, the former remedy having the advantage of retaining the
continuum required to preserve employee benefits such as superannuation and the latter
having the advantage of allowing some flexibility in approach, but breaking the continuum
but providing employment for the worker. Both remedies presume that the worker has an
entitlement to work and can enter into a valid contract of employment.
Chen’s case was also distinguished in Su Hong v Rainbow (Australia) Pty Ltd.72 As in
Cunningham above the applicant in Su Hong was in Australia pursuant to a three month
business visa. The Australian Industrial Relations Commission held that it had jurisdiction
to deal with the matter even though it was argued that the applicant was first employed by
the respondent in China. The applicant was unfairly dismissed by the respondent. The
Commission held that it had jurisdiction to reinstate the applicant but that this was not
appropriate due to the deterioration in the employment relationship. As in Cunningham
compensation was awarded. 73
It can be concluded that in Australia in circumstances where a visa holder is entitled to be
employed, such as a tourist with a working holiday visa or a business visa they may be able
to seek re-employment or reinstatement where their contract of employment is terminated
in circumstances which are harsh unjust or unfair or otherwise prohibited by law such as
termination on the grounds of race, gender or temporary illness. If the worker is not
entitled to work as in the case of an illegal non-citizen then Chen’s case makes it clear that
no remedy is available to a worker who is terminated even if prima facie that termination
may be contrary to law.
72
1341/97 M Print P6491 (10th November 1997); (1997) 43 AILR 3-684(140)
73
Finally in a recent decision not involving an immigration matter the Queensland Industrial Relations
Commission in Orchid Avenue Realty v Percival [2003] QIR 368 (30 July 2003) 173 QGIG 1262
also distinguished Chen In Percival it was observed that Chen’s case did not apply to a situation
where a real estate agent had worked contrary to Property Agents and Motor Dealers Act 2000 (Qld)
and she was entitled to proceed with an application to the Commission for compensation for unfair
dismissal on the grounds that the contract would not be void for illegality.
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Taxation and Wages in relation to Illegal Workers in Australia
As noted one of the key concerns arising out of the issue of illegal workers engaged in
England and in Australia is the matter of underpayment of wages, non payment of taxation
and general exploitation of workers. These matters arise because employers and workers
agree to “contract out” of legislative obligations.
“Contracting out” relates to the
avoidance of statutory obligations such as the requirement to pay appropriate wage rates
and taxation. Industrial laws in all Australian States and Federally prevent parties from
contracting out the provisions of the legislation. Attempts to contract out of the industrial
legislation and similar industrial laws are of no effect. 74 This is important because the
majority of workers in Australia are paid pursuant to some kind of industrial tribunal
determination (an award) or by an agreement registered and enforceable through an
industrial tribunal. For example, in the South Australian case of Dean v Tempo Services
Ltd,75 an agreement by an employee to accept temporary work after she had been a
permanent part-time worker for several years, was held to be contrary to the award
governing her work. As the award was made pursuant to the Industrial and Employee
Relations Act 1994(SA) it amounted to a form of contracting out and therefore the
agreement was unenforceable. The effect was that the employer was obliged to pay the
employee according to the award.
The prohibition on “contracting out” does not make the work illegal, but does prevent
employers from denying benefits due to the employee under the relevant legislation, award
or agreement. In Wright v Hodgeman Enterprises Pty Ltd,76 the parties to the contract of
employment agreed that the employee would be paid below the award rate, provided that
the employer did not deduct taxation from the wages. While the conduct was in breach of
taxation laws and contrary to the award, the contract was not considered illegal as the
objects (namely the performance of certain work) of the contract were legal. 77 In stark
74
Section 114 of the Industrial Relations Act 1979 (WA) prohibits contracting out. Similar provisions
appear in most state industrial laws. A federal example is AFMEU & Ors v Alcoa of Australia Ltd &
Ors (1995) AILR 3-008, where the Australian Industrial Relations Commission refused to approve
an agreement that sought to avoid paid rates obligations under an existing award. It is noteworthy
that such agreements would now be possible under the Workplace Relations Act 1996 (Cth).
75
[1997] SAIRC46
76
[1992] SAIRC 4.
77
Another approach is for the courts to enforce parts of a contract that is not illegal where these parts
are severable from the rest of the contract. . Where illegal consideration does not extend to the
whole contract that part may be severed. See McFarlane v Daniell (1938) 38 SR (NSW) 337.
Illegally is usually a consideration in relation to breaches of Truck legislation. In WA the Truck
legislation is now part of the Minimum Conditions of Employment Act 1993 (WA). See sections
17 A-D.
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contrast to the approach noted above adopted by some English courts and tribunals the
South Australian Industrial Magistrate noted:
From the point of view of applying equity and good conscience this situation
creates somewhat of a dilemma. Why should the employer be entitled to rely on
the applicant’s agreement to accept tax-free money to overcome its
responsibilities pursuant to the award? Furthermore why should the applicant be
entitled to come to this court seeking the benefit of an award when he had
agreed to enter into an illegal contract in accepting bonuses on which he paid no
tax?78
The employer was ordered to pay wages at the award rate, conditional on full disclosure to
the Taxation Department by the employee.79 The reference to equity and good conscience
in the comments of the Magistrate refer to the statutory requirement to determine industrial
disputes accordingly. This exhortation is usually applied from a procedural perspective to
mandate the principles of natural justice. In a Solomon like manner the Magistrate appears
to have applied this approach in a substantive way to the outcome rather than to procedure.
In KP Welding Construction v Herbert80 an agreement of a similar nature would have
proven fatal in a workers’ compensation case where it was held that the strict Northern
Territory provisions applied to prevent an injured person from gaining the protection of the
Work Health Act (NT) unless he had agreed to PAYE tax deductions. An attempt was
made to argue that the applicant was entitled to be considered a worker on the grounds that
PAYE deductions should have been made but were not. It was held that the applicant was
not entitled to the protection of the Act even though he may have been an employee at
common law. Kearney J acknowledged that an agreement not to pay PAYE tax would not
have made the contract illegal, but would simply have attracted a penalty under the
relevant taxation laws. The Wright case, above, contained elements of contracting out and
illegality, but the commission still dealt with the matter. 81 Wright’s case highlights the
difference between the concept of a void contract and one that is unenforceable. If a
contract is unenforceable, it is one which a civil court will not enforce, but may
78
79
80
81
At page 3.
This decision demonstrates a Solomon-like wisdom. In fact a similar solution was recommended
in the English context in H Carty, ‘Illegal Contracts of Employment: Void or Contractually
Unenforceable?’ (1981) 131(6015) New Law Journal 871 at 873 in response to a series of
disappointing cases that had declared that contracts to defraud Inland Revenue were void, where
in fact only a portion of the wages claimed would have been subject to non-payment of taxation.
(1995) 102 NTR 20 at page 15.
A similar approach has been suggested in England, where parties have contracted to avoid
payment of taxation. See the discussion in A G Henderson, ‘Employment Law and Illegal
Contracts’, (1977) 127(5792) New Law Journal 232-233 which was critical of a decision by an
Industrial Tribunal that declared an employment contract void due to the employer’s failure to pay
required insurance under the National Insurance Act 1965 (ENGLAND). These decisions have
probably been overtaken, if not overturned by those referred to in footnote 33 above.
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nevertheless be valid and in existence and capable of forming the basis of a statutory claim,
made in an industrial tribunal such as a claim for unfair dismissal or denial of contractual
benefits.82 If a contract is void, it is one which from the start of the apparent agreement has
had no legal effect, and as such is not a contract at all. If the contract is void, it cannot
form the basis of a statutory claim.83 Arguably, it is because of the limitations of the
common law that statutes such as the Industrial Relations Act 1979 (WA) and other State
industrial laws provide remedies in addition to the common law.84
There other areas in which the contracting out provisions apply. It is not uncommon for
employer and/or insurers to attempt to negotiate away workers compensation entitlements,
especially with workers whose employment may be tenuous. In General Motors-Holden
Limited v D’Andrea,85 the full court of the Supreme Court of South Australia noted that a
worker would still be entitled to workers compensation, despite an early retirement
agreement accepted by the worker. An agreement, which attempted to prevent any future
claim for compensation following termination of employment, would be contrary to the
contracting out provisions.86 Likewise in the complex case of Matchett v Wincol Homes
Pty Ltd & Ors,87 involving a number of putative employers, some of whom were uninsured
and one of whom had applied for relief under the Bankruptcy Act 1966 (Cth), the
Compensation Court of New South Wales observed that any attempt by the parties to agree
that the worker would not pursue certain rights under the relevant compensation
legislation, so as to facilitate a settlement of the compensation claim and various matters in
the Federal Court, would be void as contravening the contracting out provisions. In such a
82
As provided for under section 29(2) (b) of the Industrial Relations Act 1979 (WA). But note that
the English approach may be different. For example in Horner v Rymer (as cited in Mogridge)
the English Employment Appeal Tribunal held that an employee could not take action for unfair
dismissal where she had not declared a bonus to the taxation department. Mogridge has suggested
that fraud on the revenue is a common means of avoiding employment contracts. See C Mogridge,
‘Illegal Employment Contracts: Loss of Statutory Protection’, (1981) 10 International Law
Journal 23. In taxation law it has long been the case that income gained through illegal purposes
is subject to taxation, see Charles Moore & Co (WA) Pty Ltd v FCT (1956) 95 CLR 344 More
recently in Taxpayer v FCT [2000] AATA 625 the AAT held that a taxpayer was entitled to claim
deductions on illegal earnings.
83
H Carty, ‘Illegal Contracts of Employment: Void or Contractually Unenforceable?’ (1981)
131(6015) New Law Journal 871 at 872.
84
For example the common law only provides a remedy for wrongful dismissal. The concept of unfair
dismissal is a creature of statute.
85
(1985) 122 LSJS 301 See C J King at 307.
86
In that case section 86 of the Workers Compensation Act 1971 (SA) was applied.
87
[1995] 11 NSWCC 294.
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case, the worker could not be prevented from seeking any lawful entitlements to
compensation.88
Any attempt to agree (either orally or in writing) that a worker receives less than a lawful
entitlement to compensation would also be contrary to such provisions.89 It follows that
the reverse would also apply. Namely, that an agreement to pay compensation, contingent
on the worker/employee resigning, would breach contracting out provisions where the
agreement purported to prevent any claim under industrial laws. It follows that all of these
principles can be applied to tourists and visa holders. An employer who negotiates to
underpay any worker, whether or not they are entitled to work would be in breach of
industrial laws. Likewise an agreement not to pay workers compensation because the
worker was being paid cash or bonuses in order not to make a claim would be void.
Conclusions and Policy Considerations
Is a worker who is subject to unlawful discrimination or unfair dismissal at work barred
from making a claim against their employer (or anyone else) because they are working
contrary to the immigrations laws? As noted in England there is a line of cases which
supports claims by some workers who are working contrary to some employment or
taxation laws that they are entitled to claim. Those cases generally relate to situations
where the employer and worker attempted to circumvent taxation laws. Where the worker
is working contrary to immigration laws the decisions suggest that the worker is less likely
to be successful as the breach of immigration laws seems to go to the heart of the
relationship and makes the contract of employment illegal and therefore void. No cases in
Australia exist on this point. Arguably, anti-discrimination legislation, which is intended to
be beneficial legislation to promote and protect the rights of less advantaged members of
society, should not be used to deny illegal workers statutory employment protections
which their co-workers enjoy. This is particularly the case for many illegal workers who
might be subject to racial discrimination. Further, arguments as to the “culpability” of
illegal workers should not be used to absolve employers from their responsibilities under
the discrimination laws. On the other hand as was shown in Vakante the balancing act may
be difficult, with the courts having to have regard to the legislative intention of the
immigration laws which in most instances put in place processes and procedures designed
to limit work unless appropriate approvals have been obtained.
88
Section 272 of the Workers Compensation Act 1987 (NSW) was applicable.
89
Lourdes House Hospital v Wheeler NSWSC (94040145) 3 October 1996 per Clarke J A and Duncan
v Royal Perth Hospital (unreported CM (WA) 64/00 23 June 2000): BHP Steel (AIS) Pty Ltd v
Birtasic [1995] NSWCC 34.
June 24-26, 2007
Oxford University, UK
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2007 Oxford Business & Economics Conference
ISBN : 978-0-9742114-7-3
In relation to attempts to circumvent taxation laws, the English cases have been uneven,
tending to favour the worker where the employer has taken the lead in setting up
arrangements to avoid taxation. The small sample of Australian cases on record indicate
an interesting problem solving approach to the issue, requiring compliance with the
relevant laws before a remedy can be obtained. This suggests that illegal workers might in
some Australian jurisdictions be able to seek remedies for underpayment of wages,
provided they comply with taxation laws.
The approach in both countries to the rights of so-called illegal workers is unclear and in
many ways unsatisfactory because, left standing, it may provide continued encouragement
for some employers to exploit workers whose status relegates them to an almost powerless
human resource and yet whose labour is continually in demand.
June 24-26, 2007
Oxford University, UK
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