The UK government launched a consultation on the prevention of illegal working on 9 July 2013. The proposed changes to the civil penalty regime signal a tougher approach to dealing with businesses that employ illegal workers and those who have overstayed their visas. The government tightened its stance on illegal working in February 2008 by imposing fines on employers of up to £10,000 per illegal worker, along with a requirement for businesses to carry out annual employment verification checks on all non-EEA nationals subject to immigration control. In December 2012, our article on this subject reported that the Home Office had issued over 300 civil penalties across the UK between 1 January 2012 and 31 March 2012, at a total value of over £3m. A recent report from the Home Office confirms that nearly 250 civil penalties were issued between 1 October 2012 and 31 December 2012, at a total gross value of over £2m. While in many cases fines have been reduced on appeal, the civil penalty regime still provides the government with a large revenue stream. The government’s recent proposal to increase the maximum civil penalty from £10,000 to £20,000 is likely to result in an increase in the value of fines issued across the UK.
The Home Secretary, Theresa May MP, states in the recent consultation document, ‘Strengthening and simplifying the civil penalty scheme to prevent illegal working’:
‘We (the government) are proposing to refine the requirements to get tougher on rogue employers who continue to exploit illegal labour and undercut legitimate businesses, and to simplify processes to make it easier for compliant employers to fill their responsibilities’.
The consultation, which will close on 20 August 2013, sets out the following proposed changes.
Increasing the size of the civil penalty
The maximum civil penalty is currently set at £10,000 per illegal worker. The government is proposing to double this penalty to £20,000. It is thought that this figure better reflects the unfair advantage that ‘rogue employers’ would have through the non-payment of taxes, NI contributions and so on. There are also costs to the taxpayer in enforcing action against employers and removing illegal migrants.
Simplifying the calculation of civil penalties
The Home Office currently applies a sliding scale to calculate the civil penalty in each case. The government admits that the approach can be unclear for employers and, therefore, wishes to clarify the mitigating factors which will be taken into account in calculating the size of the penalty. It is proposed that a maximum civil penalty of £15,000 will apply to ‘first-time offenders’ and £20,000 will apply to ‘repeat offenders’.
Two mitigating factors, which will lead to a £5,000 reduction in the civil penalty issued, have also been proposed:
- reporting the suspected illegal worker to the Home Office employers’ helpline; and
- active co-operation in the Home Office investigation.
The absence of obstruction will no longer be sufficient to qualify for this mitigation, nor will partially completed legal right to work checks (ie where not all key documents have been obtained by the employer to meet its obligations under prevention of illegal working legislation, or the verification process of an employee’s right to work has not been carried out on an annual basis).
Other proposed changes to the civil penalty regime are:
- An increase in the reduction of a fine from 20% to 30% where employers make payment within 21 days of the penalty being imposed (known as the ‘fast payment option’), for first-time offenders only.
- Removing the current process of serving warning letters rather than a civil penalty on first-time offenders. The government is of the view that employers should now be aware of their obligation to undertake checks on employees.
- Reducing the range of documents to evidence a migrant’s right to work in the UK. The government is proposing to base future checks around biometric residence permits (BRPs), which is considered to be a secure immigration document containing key information with respect to non-EEA nationals.
- Removing the requirement to carry out annual right to work checks on employees with time-limited permission to be in the UK. The employer would simply be required to conduct a follow-up check to coincide with the expected expiry of their employee’s permission to be in the UK.
Other proposals include: requiring employers to exercise their right to object before pursuing an appeal (at present, both an objection to the Home Office and an appeal to the Civil Courts can be lodged concurrently); faster enforcement action so as to enable the government to recover the penalty; the ability to recover the ‘debt’ from directors or partners if the business does not/cannot make payment.
The proposed changes appear to target businesses that repeatedly breach their responsibilities under the prevention of illegal working legislation, as well as trying to help employers by simplifying the document checking process for new and existing employees. The current obligation to carry out document checks on non-EEA nationals who are subject to immigration control can be cumbersome for many businesses.
However, the proposal to remove the process of issuing warning letters before issuing a civil penalty notice may mean that more new businesses will face civil penalties for the first time. While the government assert that the civil penalty regime has been in place since 2008 and therefore employers have had long enough to be aware of their obligations, ‘start-up’ businesses may not be as aware and the government should ensure that new businesses are properly informed as to their responsibilities under the prevention of illegal working legislation. In addition, the government may not be able to implement the proposal to reduce the number of acceptable documents for right to work checks for some time, given the large percentage of non-EEA nationals who still do not have biometric residence permits and will need to rely on the ability to produce other acceptable documents to establish their ability to work in the UK.
Following the accession of Croatia to the European Union on 1 July 2013, employers also have a legal obligation to prevent the illegal employment of Croatian nationals in the UK. The maximum penalty which may be imposed on businesses for each Croatian national employed in breach of the Accession of Croatia (Worker Authorisation and Immigration) Regulations 2013 (the 2013 Regulations) is £5,000. The guidance for employing Croatian nationals makes it clear that the only mitigating factors that will reduce the fine are reporting the suspected illegal worker and/or active co-operation with the Home Office. It is clear from the current consultation, and the duties imposed by the 2013 Regulations, that employers are facing the threat of larger civil penalties and a positive obligation to work with the government to ‘stamp out’ illegal working.
By Rekha Husbands, managing associate, Magrath LLP.