Illegal Working: the New Law, Increased Fines and How Businesses Can Protect Themselves

The direction of immigration law today is towards a more rigorous and controlling system than ever before. This trend is readily apparent in the new Code of Practice on Preventing Illegal Working which came into force on May 16, 2014. The new code must be read with a collection of linked guidance documents now published on the Home Office website. Employers will be delighted to hear that instead of one handy guide there are now eight or nine separate new guides to become familiar with. To further complicate matters some of these guidance documents were updated on July 28. To assist those without a spare afternoon to read these various publications I summarise the keys items to be aware of in this article.

The new code works in conjunction with the Immigration, Asylum & Nationality Act 2006, specifically sections 15 through to 25. The 2006 Act came into effect on February 29, 2008 and introduced civil and criminal penalties for employers. While the criminal sanctions are unaltered under the new code there are important changes to the civil penalty regime under section 19 of the 2006 Act. Companies will need to update their processes and polices in light of these changes.

Increased fines and a new method of calculation

The new code introduces a two-tiered penalty system for the first time. Organisations can now receive a maximum fine of up to £15,000 or £20,000 per illegal worker which is dependent on their past immigration record. If the organisation has a clean immigration record for the past three years then the civil penalty calculator starts off at a maximum fine of £15,000 which can then be reduced if one or more of three mitigating factors exist. These are:

• Mitigating factor 1: If the organisation self-reported its suspicions regarding the illegal worker — which is likely to be a rare event! If this mitigating factor is met, the Home Office will reduce the fine by £5,000;
• Mitigating factor 2: If the organisation actively cooperated with the Home Office the fine will be reduced by a further £5,000;
• Mitigating factor 3: If the organisation has evidence of effective document-checking practices and a record of compliance then a further £5,000 reduction is possible. However, this is only the case if mitigating factors 1 and 2 are also met.

It is therefore possible that if all three mitigating factors are met the fine could be reduced to zero, in which case the organisation will only receive a warning notice. If however £15,000, £10,000 or £5,000 remains payable, the organisation will be given the option of fast payment which means that the fine is reduced by 30 percent if it is paid within 21 days.

However, where an organisation has received an illegal working fine in the past three years a more costly and less flexible regime will apply. In that scenario the calculation starts off with a maximum fine of £20,000 and is reduced by £5,000 if mitigating factors one or two set out above are met. Furthermore, mitigating factor three is not available and therefore the minimum penalty an organisation will receive is £10,000 per illegal worker. Note also that there is no warning notice available and no fast payment option for these repeat offenders.

It is of course important to appreciate that these penalties apply in the case of innocent mistakes only. Where an organisation 'knowingly' employs someone who does not have permission to work in the UK this remains a criminal offence under Section 21 of the 2006 Act and the organisation and culpable individuals within it (including HR managers) can face an unlimited fine and a two-year prison sentence.

Establishing the statutory excuse

Businesses can reduce their risk profile by establishing a 'statutory excuse' to a civil penalty by taking certain steps. The basic structure of these checks under the new code remains unaltered and can be summarised as: 

• Step 1 — check specific acceptable documents before the worker begins employment;
• Step 2 — assess the genuineness of the documents and check that the prospective employee is the rightful owner; and
• Step 3 — make copies in a specified format and retain for a certain period.

The new code has however brought in important changes. The key changes under the new code are:

• Employers can now only accept original documents from newly revised Lists A and B and the person must be present in person or via a video link when the documents are reviewed. The video link option is new but employers will still need to receive the original physical documents to make the necessary copies;
• Note that List A and List B, which set out which documents are acceptable to evidence right to work, have been changed by the new code. List A documents show an on-going right to work in the UK, for example a British passport holder. If an employee produces a document under List A, an excuse is established for the duration of their employment and no follow-up check is required. List B however indicates that there is a time limit on how long the employee can stay in the UK; for example, a Tier 2 migrant or spouse of a British citizen.
• There is no longer a need to check time-limited migrants every 12 months. This is a positive change but the way this has been implemented is complex.
• The general principle is that a follow-up check will only be required towards the end of the employee's time limit — hopefully after the employee has obtained an extension. If however a time-limited employee claims that they have made an application to the Home Office before their leave to remain expired, but are yet to receive the decision, the employer must now verify this claim with the Home Office's Employer Checking Service. Hopefully, what is produced by the Home Office is a positive verification notice. The statutory excuse is then valid for six months from the date specified in the positive verification notice and the employer will need to make a further check upon its expiry.
• A further key change here is that some documents within List A and B must now be 'current' to be acceptable. This will most commonly be an issue where a prospective employee has an indefinite leave to remain stamp contained in an old passport; this is no longer an acceptable document.Employers should copy the personal details and visa page of passports but there is no longer a need to copy the cover page. We recommend that employers annotate the copy and mark 'original seen', print their name, sign and date it. Indeed, the new code now says that employers must record the date on which the check was made and must keep the documents securely either in unalterable electronic or hard copy format. This therefore requires password protection for soft copies and hard copies under lock and key. These copies must now be kept for the duration of the employees' employment and for a further two years (an increase from one year previously).
• One important change that has not been well publicised concerns students. Many students have a restricted right to work for up to 20 hours a week during term time and full time outside of term time. The new code now requires the employer to obtain and copy evidence from the university or college confirming the term and vacation times for the duration of their study. Without this evidence on file the statutory excuse will not be valid even if copies of the usual documents have been taken. The extra evidence now required can be in the form of a printout from the university or college website, but I recommend obtaining a letter from the university itself naming the student and expressly setting out their term times.
• The new code now extends the grace period to 60 days for conducting checks following a TUPE transfer. This is an increase from the previous 28 days and is a useful development.

Recent history tells us that negligent immigration checks can happen to the best of us. Some readers will have followed the story of the resignation of the immigration minister, Mark Harper, in February this year due to his cleaner's lack of permission to work in the UK. The lesson for all is that if mistakes can happen to the immigration minister then they can happen within any business, large or small. Companies would therefore do well to note the changes to the right to work regime and put rigorous systems in place to ensure future compliance.

Owen Jones is a partner at Doyle Clayton, the UK's largest specialist employment law firm, and heads up the firm's Business Immigration Service.

This article, written by Owen Jones, was originally published on Thomson Reuters Accelus at http://www.complinet.com/hr/news/article.html?ref=174060