1. The Appellant was employed by the Respondent as a manager of one of its pubs. He is an Indian national. On 10 June 2009 he was summarily dismissed. On 2 August 2010 an Employment Tribunal at Reading held that his dismissal had been unfair. There was a remedy hearing on 8 November 2010 before a Tribunal, again sitting at Reading, chaired by Employment Judge Hardwick. The Appellant sought reinstatement or re engagement as his primary remedy, but he claimed compensation in the alternative. The Tribunal gave its decision at the conclusion of the hearing and subsequently provided written Reasons, which were sent to the parties on 30 November. Its decision was that reinstatement and re engagement should be refused. One of the reasons for that decision, though not the only one, was that it believed that the relevant immigration rules meant that the Appellant could not lawfully have worked for the Respondent after 11 January 2010 (we will return to the significance of that date in due course), and it would accordingly be unlawful for him to be re engaged or reinstated. For the same reason it held that his compensation, so far as it related to loss of earnings, should cover only the period up to that date. On that basis the parties were able to agree compensation in the sum of £8,124.02.

1. The Appellant appealed against that decision. On the sift I ordered a preliminary hearing. That was heard before this Tribunal, chaired by HHJ McMullen QC, on 18 March 2011 at the same time as a preliminary hearing of the Respondent's appeal against the decision on liability. The latter was dismissed, but the appeal against remedy was allowed to proceed as regards the cap on compensation (it having been held that there was no arguable ground of appeal against the other basis on which the Tribunal had refused reinstatement or re engagement).

1. What is before us is thus an appeal against the decision to cap compensation as at 11 January 2010. The Appellant has been represented by Mr Simon Harding of counsel, appearing pro bono: he did not appear before the Tribunal. He has done a good deal of work on the case, and we have been grateful for his skeleton argument and succinct oral submissions. The Respondent has written to this Tribunal saying that in the interests of saving costs it would not be represented, but that it wished to rely on its Respondent's Answer and on the written representations submitted for the purpose of the preliminary hearing. We have given full consideration to those.

1. We should start by setting out the position about the Appellant's immigration status. The Respondent was issued with a work permit on 20 December 2004 entitling it to employ the Appellant for a period of 60 months from the date of leave to enter. At that point the Appellant was in India, though he had worked for the Respondent before. On 11 January 2005, armed with that permit, he was granted entry clearance, which under the Immigration (Leave to Enter and Remain) Order 2000 took effect as leave to enter expiring at the same time as the period specified in the work permit. On 1 February 2005 he entered the UK and then or shortly thereafter re commenced his employment with the Respondent.

1. On 11 January 2010 - that is to say, the last day of the five year period identified in the work permit, by which time of course his employment with the Respondent had terminated - the Appellant applied for indefinite leave to remain. That application was in due course refused; but he appealed to the Immigration and Asylum Chamber of the First Tier Tribunal. That appeal was heard on 28 October, only a week before the remedy hearing in the Employment Tribunal. The decision was reserved, but the appeal was subsequently dismissed. The Appellant made a further appeal to the Upper Tribunal with the assistance of Mr Harding. That appeal was successful and his original application for indefinite leave to remain was remitted for reconsideration by the Secretary of State. He has now, we are told, been given six months' leave to remain, with permission to work, which expires next month. The question of what happens thereafter remains to be seen.

1. The question for the Employment Tribunal in assessing the Appellant's loss of earnings depended on what would have happened if the Respondent had not unfairly dismissed him. This is not a case in which it was contended, or in any event found, that he would or might have been fairly dismissed at or shortly after the time that he was in fact dismissed; in other words, it is not a Polkey case. There is thus no reason to suppose that the Appellant would not still have been in employment at the time that his leave to enter expired on 11 January 2010. Nor, crucially, is there any reason to suppose that he would not have then done what he in fact did, namely apply for indefinite leave to remain. Indeed, he would have had all the more reason to do so since he would still have been in employment with his original employer. The crucial question is what effect such an application for leave to remain would have had on his right to remain in employment with the Respondent.

1. Section 3C of the Immigration Act 1971 reads, so far as material:

"(1) This section applies if—

(a) A person who has limited leave to enter or remain in the United Kingdom applies to the Secretary of State for variation of the leave,

(b) the application for variation is made before the leave expires, and**

(c) the leave expires without the application for variation having been decided.

(2) The leave is extended by virtue of this section during any period when—

(a) The application for variation is neither decided nor withdrawn,

(b) an appeal under section 82(1) of the Nationality, Asylum and Immigration Act 2002 could be brought while the appellant is in the United Kingdom against the decision on the application for variation (ignoring any possibility of an appeal out of time with permission), or**

(c) an appeal under that section against that decision, brought while the appellant is in the United Kingdom, is pending (within the meaning of section 104 of that Act). […]"

In short, and ignoring the various subtleties, the effect of an application for a variation of limited leave to enter, including an application for indefinite leave to remain, is that leave to enter is extended until the outcome of that application and any appeals.

1. Both the Appellant's actual application and the application that he would hypothetically had made if he had not been unfairly dismissed fall within the terms of section 3C and his leave to enter is, or would have been, extended accordingly. It will, however, be observed that the section does not in terms say anything about entitlement to work. The Tribunal believed that that meant that there was no corresponding extension of the entitlement to work, which derived, as it saw it, from the original work permit: it thus became unlawful for him to work, notwithstanding that he was entitled to remain in the country. In reaching that conclusion, it did not itself review the relevant provisions: rather, it relied on an opinion from specialist immigration counsel lodged by the Respondent. It is fair to say that that opinion was primarily directed to the question of whether, if the Tribunal made an order; and that reinstatement or re engagement, the Respondent would be in breach of the immigration legislation if it complied with that order; and that question was complicated by the fact that the entire work permit regime had in the interval between the grant of the work permit and its expiry date been replaced. The latter complication does not affect the issue before us, but it would have been at least arguably relevant to any order for reinstatement or re engagement, in as much as those might be said to involve fresh employment. But the opinion did nevertheless require consideration of the question of the Appellant's entitlement to work, and it was counsel's view on that question which the Tribunal adopted and on which the Respondent also relies in its written representations.

1. In Klusova v London Borough of Hounslow [2008] ICR 396 the employee, like the Appellant in the present case, had leave to enter with the benefit of a work permit for a limited period. Before the expiry of that period she applied for an extension. The employer received advice from an immigration official that she was not entitled to work while the application was pending and accordingly that it was unlawful for it to continue to employ her after the expiry of the initial period. She was accordingly dismissed. An employment tribunal held that that dismissal was unfair. The matter eventually came before the Court of Appeal. It upheld the finding of unfair dismissal. It held as part of its reasoning that the advice given by the immigration official had been wrong. The relevant part of the headnote reads as follows:

"A person lawfully in the United Kingdom under a limited right to remain and entitled to undertake employment who made a valid application to extend her leave to remain before it expired was permitted by virtue of section 3C of the Immigration Act 1971 to continue in employment when the leave expired pending determination of her application."

That reflects a statement by Mummery LJ at paragraph 63 (page 407 E F) to the following effect:

"As already explained, immigrants who are in the United Kingdom under a limited right to remain and who make a relevant in time application are permitted by the legislation to continue employment pending the determination of the application."

The phrase "as already explained" appears to us to refer back to paragraph 9 of the judgment, which reads as follows:

"According to a Code of Practice issued by the Secretary of State under section 8A of the Asylum and Immigration Act 1996 it is lawful to employ people who were entitled to work and are awaiting the outcome of a request for an extension to that permission made before it ran out (paragraph 17). […]"

We should also read part of paragraph 49 of the judgment, which recites what is described as "common ground" between the parties. Point (5) reads as follows:

"Under the relevant immigration legislation, if a person who has limited leave to remain in the UK applies to the Secretary of State for variation of the leave and the application for variation is made before the leave expires, and the leave expires without the application for variation having been decided, the leave is extended by the legislation during any period when the application for variation is neither decided nor withdrawn: section 3C of the Immigration Act […]."

1. Mr Harding has been unable to obtain, as indeed was counsel who gave the opinion relied on by the Employment Tribunal, a copy of the Code of Practice referred to at paragraph 9 of the judgment, which is of course now obsolete. The nearest that he has been able to come is the answer to an FAQ currently to be found on the UK Borders and Immigration Agency website. Covering applications for indefinite leave to remain, it reads as follows:

"What is my immigration status while my application is being decided?

If you make an application before your authorised stay ends, your existing immigration status will continue until your application is decided, even if the decision is not made until after the end of your permitted stay. If your existing visa or other permission to stay here allows you to work, you can continue to do so until your case is decided."

1. On the face of it, the passages to which we have referred in Klusova are directly applicable and are binding on us. They also appear to correspond to the current guidance from the Borders and Immigration Agency. The decision in Klusova was not referred to by the Tribunal itself, and although it was mentioned and briefly considered by counsel in his opinion, the focus of his argument, as we have already noted, was such that he only had to consider it obliquely, and we have to say that we do not fully understand what he says about it. It is fair to say, however, that although Mummery LJ refers to "legislation" having the effect that he sets out, the only actual legislative provision to which he refers, namely section 3C, does not explicitly address the question of entitlement to work. We thought therefore that we should ourselves try to understand the legislative basis; it was on this aspect that Mr Harding was able to be particularly helpful. We need not reproduce his exposition in full. The heart of it is that a work permit under the old regime was not in itself a document with a direct effect on the position of employer and employee. Rather, it was a key to leave to enter, and the relevant position once leave to enter has been granted depended not on the permit itself but on the terms of that leave to enter. The relevant rule under the Immigration Rules is rule 129, which reads:

"A person seeking leave to enter the United Kingdom for the purpose of work permit employment may be admitted for a period not exceeding the period of employment approved by the Home Office (as specified in his work permit), subject to a condition restricting him to that approved employment, provided he is able to produce to the immigration officer, on arrival, a valid United Kingdom entry clearance for entry in this capacity or, where entry clearance is not required, provided the immigration officer is satisfied that each of the requirements at paragraph 128(i) (vi) is met."

On a careful reading of that rule, the limit (in the present case, the five year limit) deriving from the work permit operates to set the limit of the period of the leave to enter, but it does not form part of the condition that attaches to that leave, which is only that the employee should continue to work in the approved employment (i.e., in the present case, for the Respondent). The extension effected by section 3C thus extended the entitlement to work, subject to that condition. It is for that reason, no doubt, although it was not spelled out, that the Court of Appeal expressed itself in the way that it did in Klusova.

1. It follows that the Tribunal was wrong, albeit entirely venially, in its conclusion that the Appellant would not have been entitled to work for the Respondent following 11 January 2010. This appeal must be allowed, and the issue of compensation will be remitted to the Employment Tribunal to assess compensation on a basis which is not subject to any cut-off as at that date. That issue may itself not be straightforward, but we need not and should not express any view on the potential issues that may arise. It seems from what Mr Harding has helpfully told us that he may be available to help guide the Tribunal through the labyrinth of any immigration issues that may still be relevant to the assessment of compensation. There is no reason why the matter should not be remitted to the same Tribunal; nor, however, does it seem to us necessary that it should be. That question can be determined by the Regional Employment Judge in the ordinary way. If this is a case where the parties, with the benefit of the skilled legal advice available to both of them, are willing to consider compromise, that would plainly be a course worth considering.