Claimant v The Caledonian Bar Ltd

Outcome

Facts

The claimant was employed as Bar Manager from May 2022 at £12 per hour, paid through the books with tax and NI deducted. In April 2023, following discussions about a pay rise to £15 per hour, the respondent offered the claimant the option to remain on the books or come off the books. The claimant agreed to be paid '£15 per hour tax free' and thereafter received cash payments with no deductions. When the employment relationship ended in September 2024, the claimant brought claims for unfair dismissal and holiday pay.

Decision

The tribunal found that although the claimant remained an employee throughout (not self-employed as the respondent argued), the parties had entered into an illegal contract from April 2023 whereby the claimant was paid cash-in-hand without tax or NI deductions. The tribunal concluded the claimant knowingly agreed to this arrangement and could not have believed the employer would pay the tax on his behalf given his employment experience. The claims were dismissed as they could not proceed due to illegality.

Practical note

Legal authorities cited