Generally speaking prohibited contract terms are those prohibited by the Employment Rights (Northern Ireland) Order (as amended) (the ERO) and those which are otherwise illegal.


Prohibition by the ERO

Article 245 of the ERO prohibits the use of terms in an employment contract which have the effect of excluding employment or limiting statutory employment rights. Such clauses will be void subject to certain exceptions – limited provisions of a collective agreement, an agreement reached with use of a (LRA) conciliation officer or a compromise agreement (provided statutory conditions are met).

Any term which attempts to prevent an employee from bringing an employment claim will also be void. Most employment statutes, have provisions preventing such attempts to contract out of claims. These are known as the ‘contracting out’ provisions. Any agreement reached between parties that purports to prevent the making of, or proceeding with, claims to an employment tribunal is void. Again this is subject to the exceptions of agreements reached by way of conciliation and compromise agreements.

There are some notable claims subject to contracting out provisions which cannot be settled by conciliation or compromise agreement – claims for failure to notify employee liability and failure to consult under TUPE 2006 (Regulation18), claims under the Agency Workers Regulations (NI) 2011 for failure to provide certain basic rights (Regulation 15) and failure to consult on a collective redundancy (s288 Trade Union and Labour Relations (Consolidation) Act 1992).

Terms purporting to exclude or limit liability for death, personal injury will also be void.


Illegal contracts and terms and their enforceability

The most common types are clauses which attempt tax evasion, illegal immigration, contracts for illegal work (such as prostitution or selling stolen or counterfeit goods). A contract may be illegal because of the illegal intention of the parties, it is prohibited by law, or in the way it is performed.

As a rule illegal terms and contracts cannot be enforced, the courts will treat them as void from the outset – as if they never existed. They cannot be relied upon by employer or employee. This means that anyone working under an illegal contract is not considered to be an employee and cannot enforce their statutory rights such as holiday or the right not to be unfairly dismissed.

This also means that anyone working under the contract is not considered to be an employee and so they do not have the right to claim any statutory rights such as unfair dismissal.

However there are always exceptions:

• small or occasional illegality will not necessarily void the entire contract. A court or tribunal may be willing to separate and remove a minor illegal term, where the illegal term does not impact the whole of the employment relationship.
• if an employee is unaware that his employer is acting illegally they may still be able to enforce their rights under the contract (where an employer was defrauding HMRC -Newland v Simons and Willand (Hairdressers) Limited [1981] IRLR 359).
• where one party is benefitting from the illegality the other party may still enforce their rights under the contract.

 
Discrimination

The contracts of illegal workers are obviously illegal, making it difficult for the exploited worker to bring any claims. Importantly in 2014 the Supreme Court decided that this was not an absolute bar on claims for discrimination (Hounga v Allen [2014] IRLR 811). Ms Hounga was 14 year old Nigerian who had been trafficked by Mrs Allen to the UK. She was forced work for her in her home without pay and was not allowed to leave the house on threat of being reported to the police for being in the country illegally. After being thrown out of the house by Mrs Allen she brought a claim for discrimination saying that her treatment was on the grounds of her race. The Supreme Court found that the public policy in support of the defence of illegality (not allowing a person to profit from illegal conduct) should give way to the public policy against trafficking and for the protection of victims. Ms Hounga was successful in her claim for discrimination. The court considered the definition of ‘trafficking’ in the Palermo Protocol and the guidance of the International Labour Organisation on forced labour. This may be something a tribunal will have to consider in deciding whether an employee is a victim of trafficking and so should benefit from the public policy of protection.


Restrictive covenants

Restrictive covenants are an attempt at restraint of trade and will be unlawful and unenforceable unless they are drafted to fall within limited exceptions. The purpose of the covenant must be to protect a legitimate business interest and must be limited in scope as to geography, time and the type of activity that is restricted.