Andrew Hochhauser QC reports on the implications on employee rights of the court judgment in Hall v Woolston Hall. Andrew Hochhauser QC is a barrister at Essex Court Chambers.

No reliable figures exist for the number of workers in the UK whose employers do not properly account for income tax and National Insurance contributions. Inland Revenue statistics show that it recovers approximately £250m each year as a result of inspections targeted on particular sectors. Large numbers of employees are affected by what the Revenue describes as a “tax irregularity”.

Are such workers protected against discrimination and unfair dismissal? Yes, said the Court of Appeal in Hall v Woolston Hall Leisure.

Jill Hall knew that her employers were not accounting properly for tax and NI on the pay rise she had received. When she queried this with them she was told: “It’s the way we do business.”

When she was dismissed for becoming pregnant, Hall won her claim of sex discrimination. However, she was unable to recover the loss of her salary resulting from her dismissal.

The employment tribunal decided that she was not entitled to recover losses from her illegally performed contract of employment.

Appearing with Charles Ciumei in the Court of Appeal, we argued that public policy compelled no such result.

The Court of Appeal held that Hall’s acquiescence in her employer’s unlawful conduct did not prevent her from recovering full damages for the loss of her job.

The importance of the decision lies firstly in the fact that the court reached this view by reference to English law alone (although it accepted that the European Directive on equal treatment would have produced the same result). This means that the decision is equally applicable to race and disability discrimination cases in which there is presently no relevant European law.

The judgment is set to have an impact on unfair dismissal claims since it narrows the circumstances in which an employment tribunal can refuse to deal with a claim. The Court of Appeal stresses that knowledge of the illegality alone is insufficient. There must be knowledge plus participation in the unlawful conduct by the employee if he or she is to lose the right to claim unfair dismissal.