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Illegal contracts – do they affect discrimination claims?

The Employment Appeal Tribunal has recently released its judgment in Wijesundera v Heathrow 3PL Logistics Limited and Natarajan. In this case, the EAT considered whether an employee’s sex discrimination claim was affected by the fact that she worked under an illegal contract.

Mrs Wijesundera is a Sri Lankan who worked at the offices of H3PL and Mr Natarajan (its agent) from August 2009. During this period, she knew that she did not have a work permit (and so was working illegally).

Whilst working, Mrs Wijesundera was allegedly the subject of sexual harassment. H3PL eventually obtained a sponsorship licence for her in 2011 (allowing her to work legally), but at this point Mr Natarajan dismissed her.

Mrs Wijesundera raised sex discrimination and harassment claims against H3PL and Mr Natarajan. The Employment Tribunal accepted her version of events, but dismissed her discrimination claims. In doing so, it remarked that her claims were “founded on illegality” and her employment was “unlawful from top to bottom and from beginning to end”.

On appeal, the EAT observed that the correct approach to assess illegality “is whether the applicant’s claim arises out of or is so clearly connected or inextricably bound up or linked with the illegal conduct of the applicant that the court could not permit the applicant to recover compensation without appearing to condone that conduct”. It agreed with Mrs Wijensundera’s argument that it is “inadequate and wrong legal reasoning” to view sex discrimination claims arising out of illegal employment as “inevitably and always bound up with the illegality so as to defeat the claims”, and partially upheld her appeal on this point.

This case illustrates that illegality does not prevent a successful discrimination claim. If employers discover that they are employing a staff member under an illegal contract, they should take care not to act in a discriminatory manner when dealing with this issue.

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