Employment Bill [HL]

moved Amendment No. 27A: 27A: After Clause 17, insert the following new Clause— ““Employment and illegality In any claim made to an employment tribunal by an employee or worker, which relies upon or involves a contract of employment, the tribunal shall take no account of the fact that the contract is, either in its formation or in its performance, unenforceable by reason of illegality, except where that employee or worker either— (a) had knowledge of, or (b) participated in, the illegality to such an extent or degree that it would be inequitable to grant him any remedy.”” The noble Lord said: This is not a party matter. It rests on the basis of the Law Commission paper of 2005. It deals with the following kind of situation: you are my employer and you sack me, let us say, quite arbitrarily; I bring my claim for unfair dismissal to the employment tribunal and you say, ““You cannot rest on your contract of employment because I did not pay any PAYE or any national insurance contributions and, therefore, the contract is affected by illegality. Certainly in its performance, if not in its formation, it is an illegal contract, so you cannot rely on it in a claim for unfair dismissal””. There have been a number of judgments in this area. Some judges use the old law to say that the employee could not sue on an illegal contract, either as concluded or as performed, because that would be contrary to public policy. I am sure that all Members of the Committee have an adequate legal education to know that they relied on the old maxim ““ex turpi causa non oritur actio””—you cannot rely on an illegal base to set your action going. Other, perhaps a little more modern, judges noted not only that the parties cannot contract out of the employment protection legislation concerned—which is an important point—including unfair dismissal, but that the law of contract does not require that the doctrine of illegality be applied to employees so harshly. That second view has become the preferred choice of commentators. Four cases are the basis of that approach, which I shall mention simply to get them on the record. They comprise the Enfield Technological Services case, 2007; James v Greenwich Council, Court of Appeal, February 2008; New Testament Church of God v Stewart, 2007; and perhaps the basis of the approach of those cases, Percy v Church of Scotland, 2006, House of Lords Appellate Committee. The Committee will notice that a number of those cases involve religious employers, as we would now put it. The courts had to grapple with the early assertion of certain judges that no clergyman, pastor, priest and so on could possibly be a servant of any organisation because he was a servant of God. These bizarre judgments had to be overcome by later reasoning in the appellate courts. We shall note cases of that sort when we come to the rather extraordinary Amendment No. 28, which I am very surprised to see on the Marshalled List in view of my knowledge and activity with my noble friend Lady Turner in relation to what is appropriate to have on the Marshalled List and what the Companion tells us should be done, which we have followed to the letter. I hope that Amendment No. 27A can be accepted by the Government, at least in principle. I am quite sure that its drafting is inadequate. The Government will obviously use the normal offices of the parliamentary draftsman to make it better. But the reason for enacting it is to get over what is still a doubt—despite those cases to which I referred, which are all in the Industrial Relations Law Report—as to just how the court will go. Our amendment—I am grateful to my noble friends for putting their names to it—says that the doctrine of illegality, such as the employer who does not pay national insurance contributions, either in performance or in conclusion of the contract of employment, is not to be taken into account in claims such as unfair dismissal where it is needed for the basis of the claim, "““except where that employee or worker either—""(a) had knowledge of, or""(b) participated in,""the illegality to such an extent or degree that it would be inequitable to grant him any remedy””." That leaves the court a discretion which I think is absolutely necessary. Of course, it will be an employment tribunal or, on appeal, the Employment Appeal Tribunal and then the Court of Appeal. They will have discretion when an employer says, ““You knew that I did not pay national insurance contributions””, and when they find that the employee knew about that, or participated in that to such a degree that he or she should not have any remedy. It will still be open to the court to deny a claim, such as for unfair dismissal. The reason for enacting that is to make it quite clear which of the two views that I described to your Lordships is correct and to provide for that discretion of the court in addition. That should appeal to the Government, because it is aimed at having less litigation in the employment tribunals and indeed in any court at all. Parties who have a complaint will be able to negotiate much more freely with employers if there is what they claim to be unfair dismissal and will be able to settle the matter on the principles of this section as it would become in the Bill. I beg to move.