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This Practice Note considers the issues that arise in relation to illegal and unlawful contractual terms that may be encountered in an employment context.

The Contract of employment may be tainted with Illegality in the same way as any other contract. Traditionally, one of the most important areas of illegality in this context has been covenants in restraint of trade (see Post-termination restrictions (Restrictive covenants) below). 

Common types of illegal contractual terms are:

1. •

   terms relating to pay which try to evade tax laws (eg by paying cash in hand)

2. •

   contracts with people who are not legally entitled to work in the UK

3. •

   contracts to do types of work which are illegal, or contrary to public Policy, such as prostitution

The contracting-out provisions in various employment legislation may render void any contractual term that purports to take away certain statutory rights.

A post-termination restriction (restrictive covenant) will be unenforceable unless it falls within one of the lawful exceptions to the restraint of trade principles of common law.