In the "Supporting Documents for Sponsored Persons (Principal Applicant and all Family Members)" section of the checklist, 1. Identity Documents, Travel Documents, and Passports, the second checkbox in that section says:
"If you (the applicant) are living in Canada, provide proof of your status in Canada (e.g. copy of temporary resident visa, study permit or work
permit, temporary resident permit, including out of status documentation). If you do not have status in Canada, please provide an
explanation on a separate piece of paper, as well a copy of any paperwork you have that is relevant to your status"
That was where you needed to explain your husband's status.
In their background checks that they WILL do on the applicant (your husband) I imagine working illegally on an expired work permit is something they will find. The old work permit will be in their records (along with the restoration of status denial and the removal order), and tax records for his SIN will show income after his work permit expired. I dont know exactly what they get to dig into when they do their background check, but it's not hard for them that he worked on an expired permit. I'd say the chances of them finding out are very close to 100%.