Sheibani v Elan & Co LLP

An Employment Tribunal must tell the parties when it is considering deciding a case on the basis that a contract of employment was illegal as performed, particularly where the conclusion involves a serious allegation of fraud or possible criminal conduct. The parties must have a fair opportunity to address the allegation, call relevant evidence and make submissions. Where answering questions may expose a party to self-incrimination, the Tribunal should give an appropriate warning. A failure to do so may amount to a denial of natural justice, not merely a procedural irregularity, even if the existing evidence appears to lead inevitably to one result.

The Employment Tribunal dismissed an accountant employee’s claims for unfair dismissal, breach of contract and holiday pay. It also dismissed the employer’s contractual cross-claim. The Tribunal concluded, without the issue having been raised at the hearing, that the employment contract was illegal as performed because part of the employee’s remuneration had been paid without deductions for tax and national insurance.

The Tribunal relied on authorities concerning illegality, including Enfield Technical Services Ltd v Payne, without inviting submissions on them. The employee appealed, arguing that the procedure denied him a fair hearing. The central issue was whether the Tribunal was required to alert the parties to the possible finding of illegality before deciding the case on that basis.

1. Appeal allowed. The Tribunal’s failure to raise illegality with the parties was more than a procedural irregularity. It denied the employee a fair hearing and breached natural justice.
2. A fundamental element of natural justice is that a party must know the case to be met. That includes knowing of any serious allegation capable of causing substantial professional, civil or criminal consequences. The parties should have been given an opportunity to explain the payment arrangement, challenge the allegation and address the relevant authorities.
3. Where possible criminal offences are under consideration, fairness also requires the Tribunal to warn a party that he need not answer questions if doing so might incriminate him. The absence of such a warning reinforced the conclusion that the hearing was unfair.
4. The apparent strength of the evidence could not cure the defect. Oral evidence, cross-examination and submissions might have differed if illegality had been identified as a live issue. The outcome might therefore have been different.
5. The decision was remitted to a differently constituted Employment Tribunal. The original Tribunal had made adverse findings about the honesty and integrity of both witnesses, making reconsideration by the same Tribunal impracticable.
6. The Tribunal’s factual findings were otherwise findings it was entitled to make, and the remaining grounds would have been rejected. Those observations were unnecessary to the disposition because the procedural defect required the decision to be set aside.

• Employment Appeal Tribunal: Allowed the appeal against the Employment Tribunal’s decision and remitted the matter to a differently constituted Tribunal.