[Thanks to Ed McFarlane of EEF for providing this case summary]
The EAT (Slade J) has handed down its decision in San Ling Chinese Medical Centre v Lian Wei Ji , which is authority for the proposition that a contract of employment is not tainted with illegality merely by circumstances that could lead to a work permit being revoked; actual revocation of a work permit is required.
On the facts, the employee was pressured to reduce her declared salary without varying her work permit. The employer issued two sets of payslips, showing the actual and ostensible pay.
The employee had not colluded in illegality and there was no tax evasion. The test for illegality in the third category in Hall v Woolston Hall Leisure Ltd, where an otherwise lawful contract becomes unlawful in performance, was not met.
The judgment follows a trend of judicial narrowing of the scope of the illegality defence, see bulletins 26th July 2007 and 20th November 2008.