As announced in our client alert on 17 July 2013, the Home Office recently ran a public consultation regarding measures currently under consideration to reform the civil penalty scheme to prevent illegal working.

To re-cap, the key proposals were as follows:

  • an increase in the maximum penalty from £10,000 to £20,000 per illegal worker, with the maximum fine being imposed on employers which have received a civil penalty in the past;
  • simplifying the way civil penalties are calculated;
  • simplifying the way unpaid penalties can be enforced in the courts;
  • measures to allow recovery of a civil penalty from directors and partners of limited liability businesses following failure to pay by the business;
  • reducing the number of documents an employer needs to check in order to establish a right to work;
  • replacing annual follow-up checks for non-EEA nationals with checks to coincide with the expiry of permission to be in the country; and
  • simplifying the operation of the right to work process and associated guidance for employers.

The consultation period ran from 9 July until 20 August 2013 and we are grateful to all the contacts and clients who responded to us with suggested feedback for our response which included the following views:

  • Doubling the maximum penalty from £10,000 to £20,000 (for a second occasion upwards) will not serve as an effective deterrent if the Home Office is not carrying regular and consistent compliance checks leading to the levy of penalties. It is well reported that rogue employers continue to employ workers without permission even after having been fined, whilst others will not have the money and/or would simply not pay the fines in any event, whatever the amount is fixed at.  Employers are unlikely to consider the cost:risk balance acceptable at £10,000, but not at £20,000. This would imply a degree of deliberation and willingness to face conviction at some level, which is simply not realistic.
  • In almost all cases a genuine employer will not know that it is employing someone without the right to work until after the event, in which case an increased penalty would have little to no real impact at all. The key to encouraging compliance is not a reactive increase in the level of penalty but (a) more proactive comprehensive guidance on the prevention of illegal working and (b) an increase in the likelihood of being caught and the penalty actually being enforced.  It would surely be most appropriate to apply different penalties to those who have deliberately and knowingly employed illegal workers on the one hand from those who carry out right to work checks but innocently fail to do so correctly on the other.
  • The process whereby the Home Office calculates the level of a civil penalty imposed is complex.  Whilst employers would surely welcome a more simplified process in theory, it is important that the exercise of discretion be maintained as each and every scenario is different.  The system should not become too rigid as this would lead to unfairness and potential discrimination on the grounds of race. Mistakes can and do occur both by employees, for example, inadvertently submitting an invalid application and thereby finding themselves working unlawfully, and by employers quite legitimately failing to understand the complex documents or the guidance before them, the result being only a partial or an erroneous right to work check.  The Home Office’s Prevention of Illegal Working Guidance is not (and cannot be) sufficiently comprehensive to cover all scenarios such that the need for the exercise of discretion by the Home Office should be removed.  It is conceded that the Guidance has been in existence for some time but this of little assistance to new HR managers and executives using it for the first time. 
  • Carrying out of a partial check should certainly continue to be counted as a mitigating factor, particularly as it is through such checks that unlawful employment is most likely to be detected by an employer. Employers may genuinely not know that only a partial check has been completed until it is too late. This does not then mean that they are not a ‘legitimate’ employer.  As users may only know too well, the Home Office Employer Checking Service can be slow to respond and can give incorrect responses, for example as to whether an individual has a valid application pending or not.
  • One mitigating factor proposed by the Home Office in the calculation of a civil penalty is when an employer promptly reports a suspected illegal worker to the Employer’s Helpline. However, the first priority of employers who suspect that they have mistakenly but unknowingly employed someone without permission to work should be to carry out a fair potential dismissal process (including, for example, suspension on full pay and an investigation to determine whether the employee does actually have the right to work, which is often far from clear) and to explore whether the position can be quickly regularised, rather than immediately (and perhaps prematurely) reporting the suspected illegality to the Helpline.
  • The discretion to issue warning letters on a case-by-case basis should certainly remain as there is a broad spectrum of what is termed as ‘illegal employment’. Whilst on the one hand it is certainly true that there are employers who knowingly employ staff illegally, on the other, it is common for an employer to have acted in good faith but still find that it is employing someone without the right to work following an otherwise genuine attempt to comply with the complex and changing legislation.  In our opinion, it would therefore be unreasonable to impose fines for a first offence in all circumstances. Deterrence through a warning letter may be faster, cheaper and easier to impose than a protracted prosecution plus fine, and no less effective. 
  • The consultation proposes figures of £15,000, £12,000 or £10,000 as the starting point for the calculation of a first civil penalty on the presumption that this would act as a greater deterrent to employing illegal workers. As the scheme currently stands, an employer can be fined a suggested maximum of £7,500 for a first offence where no checks have been completed and where no mitigating factors exist. Where a partial check has been completed and all relevant mitigating factors apply this can be reduced to £0 and just a warning letter issued. However, what the Home Office does not appear to have considered is that most employers are not aware of the detail of how civil penalties are applied, and therefore the proposed changes are likely to be of little significance in their daily activities. Of course, determinedly rogue employers will not take into consideration the sliding scale of how civil penalties are applied when deciding to break the law.  Genuine employers, on the other hand, will usually not even be aware of the level of a civil penalty and how the sliding scale is applied, until after the event.  The regime therefore needs to be able to tell and reflect the difference between them.
  • The level of penalty has no bearing on whether it serves as an effective deterrent - most employers, if they have any awareness at all, think that the current penalty is £10,000 as this is the figure most commonly used by the Home Office in its press releases.  Employers who knowingly break the law are unlikely to be deterred by any increase in fines. This can surely only be achieved through a system of effective enforcement and recovery. No effective recovery system appears to be in place at the present time, and it is submitted that this should be the primary focus of the Home Office, rather than seeking to change the system seemingly to no practical effect.
  • The proposal to reduce the number of acceptable right to work documents that an employer needs to review prior to employment would be welcomed.  However, the list of acceptable documents should not be amended until such time as UK immigration has itself been reformed and the system of grants of leave simplified, for example, if persons in all UK immigration categories are required to hold a Biometric Residence Permit (“BRP”). But this is likely to take a number of years to be implemented (and possibly will never apply to non-EU family members of EU citizens due to EU Regulations), and if the list is reduced before this happens, there is a significant and very real risk that employers may decline or cease to employ an individual who does not hold a document specified on the list, such as a BRP, through genuine fear of sanctions, even though that individual may genuinely hold the right to work in the UK.   This poses a parallel risk of loss of suitable candidates and race discrimination proceedings.
  • The Home Office is also considering removing the current annual right-to-work check regime whereby an employer is able to claim a statutory defence against any civil penalty for 12 months between each annual check in the event that the Home Office finds an employee to be working illegally. Instead it is proposed that the follow up check should be linked to the expiry date of employee’s permission to stay in the UK. This would most certainly reduce the burden on employers - as long as the employer would not be liable if a migrant worker’s circumstances changed prior to their expiry date so that they were no longer entitled to work in the UK. However, employers should still be left with the choice to continue to carry out annual follow-up checks, as this can be beneficial to employers with a more transient workforce (for example large organisations employing a high number of Tier 4 students).  Annual checks are also likely to reduce the risk of an illegally-employed worker going undetected.  Employers who continue to do annual follow-up checks should receive credit for this if they are then found to be unknowingly employing an illegal worker. In general, employers should have the choice as to whether they conduct annual checks or not and be provided credit for doing this accordingly.
  • There is already a recommendation in the Home Office’s Prevention of Illegal Working Guidance for employers to carry out a repeat check on or before the expiry date of an employee’s visa regardless of when the last 12-month check was carried out. However, the consequences of failing to do this are unclear.  Carrying out an annual check currently provides a statutory excuse for 12 months. However, if the employee’s permission expires before the next 12-monthly check and a dutiful employer has kept a record of that expiry date, it could be found to be ‘knowingly’ employing an illegal worker after that date, rendering the 12 month statutory excuse meaningless.