BY EMMA HARRIS
The recent crackdown against illegal working can prove costly for employers issued with a penalty for employing an illegal worker, especially where the employer is an individual. Emma Harris, barrister at Goldsmith Chambers, sets out the issues to consider when challenging a civil penalty notice.
Background
As part of the hostile environment, the Immigration, Asylum and Nationality Act 2006 (“the 2006 Act”) requires employers to step into the shoes of border officials by conducting right-to-work checks on prospective employees. Failure by the employer to carry out these checks correctly can have severe financial and reputational consequences.
If an employer fails to properly carry out a right-to-work check on an employee prior to them commencing employment, and if the employee has no right to work in the UK, section 15 of the 2006 Act permits the Secretary of State to serve an employer with a notice requiring the payment of a significant civil penalty.
According to available government data, since 2021 there has been a significant increase in the number of civil penalties being issued and in the overall value of the penalties issued for the employment of illegal workers. The number of penalties issued across the UK in the first quarter of 2024 is four times as many as in the last quarter of 2021. In a more recent development, since the election of the Labour Government in July 2024, the number of illegal working visits has increased by 34% and arrests went up 25%, compared to the same period last year.
A single first offence for employing an illegal worker currently carries a starting penalty of £45,000, increasing to £60,000 per worker for a second offence. These figures were increased from £15,000 and £20,000 respectively for all breaches occurring after 13 February 2024.
General mitigating factors, including the size and financial circumstances of the employer, are not taken into account when calculating a penalty. There are only three relevant mitigating factors according to the Secretary of State’s (SSHD’s) Code of Practice:
- There is a £5,000 reduction available where an employer self-reports the illegal worker to the Secretary of State, and
- a further £5,000 available if the employer “actively co-operates” with the Secretary of State’s investigation.
- It is only if an employer has qualified for both these reductions and can demonstrate that they have effective right-to-work checking practices in place that they can then qualify for a further £5,000 reduction.
Although the value of the penalties increased dramatically in February 2024, the value of each applicable mitigating factor has remained static and continues to reduce the fine by only £5,000 per factor.
If all the mitigating factors are applicable to a case, the Secretary of State can decide to issue a Warning Notice instead of a penalty.
When a civil penalty notice is issued, an employer must be informed of the payment deadline and accepted payment methods. It is usually possible for employers to pay in instalments. The notice will also usually offer a discount of 30% for payment within 21 days under the “Fast Payment Option”. If an employer objects to a penalty in time, a further 21 days to make faster payment will be offered from the date of the objection outcome notice.
Payment of the penalty does not constitute an admission that the penalty has been properly imposed and an employer is therefore perfectly entitled to take advantage of the fast-payment discount and, at the same time, to object and appeal against the penalty.
Challenging a Civil Penalty Notice
An employer that disagrees with a penalty must first submit an objection to the Secretary of State if it denies that it is liable to the imposition of a penalty, has a statutory excuse, and/or considers that the penalty was too high because one or more mitigating factors applied.
If the SSHD does not concede to the objections raised, then the employer will have a right of appeal under section 17 of the 2006 Act.
An appeal against a civil penalty notice is heard in the County Court and is a rehearing of the SSHD’s decision to impose a penalty. The employer does not require permission to bring the appeal. The Court is not limited to considering errors of law or public law grounds of challenge. and appeals under these provisions are more akin to trials. The Judge may make findings of fact on the evidence presented, which can post-date the original decision and which will normally include hearing live evidence from witnesses.
To date, there have been very few reported cases in this area and to some extent the courts handling such cases are still grappling with the appropriate tests to apply.
The Scottish case of Mohammed v AG for Scotland [2017] SC LIV 23 addressed the factors that a court may consider, and in SSHD v Akbar [2017] 1 WLR 1055, in addition to confirming that the Court of Appeal does have the jurisdiction to hear second appeals from the County Court in these cases, it alsoprovided, in passing, that the burden of proof is on the employer to show that it is not liable to pay all or part of a penalty.
The effect of this passing observation by the Court of Appeal has been significant as, in most cases of my experience, there has been no burden on the SSHD to prove that an employer was liable to pay a penalty.
If the employer is seeking to rely upon a statutory defence (i.e. that they did carry out the required right-to-work checks) then it makes sense that that would be something that the employer could prove; the employer would have access to their own records and could therefore produce the evidence to establish that the penalty should be cancelled. According to the passing comments in Akbar however, the burden of proof is on an employer, even where they are denying having employed the person at all. They are effectively called upon to prove a negative.
This has been the approach taken in my experience by the County Court in the majority of these cases to date and that is reflected in the standard directions which are issued when an appeal is lodged. The County Court follows Practice Direction 52B and requires the Appellant to produce their evidence first, followed by the SSHD. In the standard directions, there is usually no automatic opportunity for the Appellant to file evidence in response to the SSHD’s evidence.
The SSHD, in my experience, generally refuses any informal pre-action disclosure requests. They provide a Statement of Case with a penalty, which is a summary of the evidence they have, but these can be inaccurate and are only one person’s interpretation of the evidence they are summarising.
The SSHD usually issues these penalties on the basis of observations and interviews carried out by immigration officers during visits to business premises. It is normally only an officer’s note of the interview that is made available and the interviews are not routinely recorded or transcribed word for word. If an employer is not present when the visit takes place, they are not usually contacted for questioning separately and will first hear about it when they receive an Information Request. Information Requests contain no information about the evidence so far obtained by the SSHD beyond the name of the alleged illegal employee.
Interviews that lead to penalties have also been known to take place at police stations. A person without the right to work in the UK who has been arrested in relation to other offences might be referred for interview with immigration officers and asked how they support themselves financially in the UK. They might name somewhere they claim to have worked, and that identification can then be used as the basis for issuing a penalty against the employer identified.
Early refusals by the SSHD to give disclosure may well be relevant to costs applications that follow unsuccessful appeals, particularly because deadlines to bring an appeal can be so tight that it would rarely be expedient or cost effective to make a formal application for pre-action disclosure.
I have had recent success in arguing that it is the SSHD who should bear the burden of proving:
- the identity of the alleged employee,
- that the alleged employee had no right to work in the UK, and
- that they had been employed by the employer.
Counsel for the SSHD conceded these points on this occasion, but unfortunately the case is unreported, and these arguments will need to continue to be made in each and every relevant case.
Because Practice Direction 52B does not reflect that this type of appeal is unusual and that the burden of proof will not always be on an Appellant in an appeal, it will also be necessary in almost every case to make arguments about the relevant burden of proof in the grounds of appeal. It may also be necessary to seek a variation of the standard directions at an early stage so that, where relevant, it is the SSHD who is required to produce their evidence first with the aim of giving the Appellant the opportunity to respond to it.
Employment or Work
There is no clear guidance from the courts on the type of work that constitutes employment for the purposes of this regime.
Section 15(1) of the 2006 Act provides that it is contrary to this section to “employ” an adult subject to immigration control if they are not lawfully in the UK or if their leave is subject to a condition preventing them from accepting “employment”.
Section 25(b) of the 2006 Act provides as follows:
(b) a reference to employment is to employment under a contract of service or apprenticeship, whether express or implied and whether oral or written
In a couple of cases, the argument has been successfully made that this wording intentionally mirrors the wording of section 230 of the Employment Rights Act 1996 and that case law defining employment as something more than merely work is relevant and applicable. In particular, judges have been persuaded to accept that ad hoc work arrangements, volunteering and self-employment, where there is no mutuality of obligation between employer and worker, do not fall foul of the 2006 Act.
This argument has been opposed by the SSHD who has invited judges instead to find that employment for the purposes of the 2006 Act has a wider meaning than in employment law.
Individuals
Those who act as employers in their individual capacity also need to realise that right-to-work checks are not only required where the employer is a business. We are starting to see cases where individuals who employ household staff are being issued with penalties as well.
There is no difference between the level of penalty that a business receives compared to an individual. There is no scope within the Codes or Guidance for the size or financial circumstances of a business to be taken into account as mitigation and nor is it considered relevant if the employer is an individual.
As well as receiving a penalty, the government also publishes a quarterly list of non-compliant employers. Whilst a business might be concerned with the reputational damage of having their name and address published on the government website as the employer of an illegal worker, an individual who wrongly employs someone in their home is likely to have more significant concerns about their privacy because it is their personal name and home address that might be appearing online if they are found to be liable to a penalty.
The purpose of naming and shaming is specifically cited as being “a warning to other businesses not to employ illegal workers”. It is not clear if the same motivation applies to the publication of an individual’s details, but it is nonetheless taking place.
The publication of those liable for penalties is discretionary and there is no published guidance on how names are selected. Anyone concerned about the effect of publication, as a business or an individual, should make representations to the SSHD at an early stage in the process to ensure that they are properly considered. It was not very long ago that law firms and hotels were targeted with violence for lawfully providing services to immigrants. In light of this, it is hoped that the SSHD would carefully consider representations not to publish the names and addresses of businesses and individuals who raise legitimate concerns about the implications of publication.
The directors of businesses can also expect to experience a further level of enforcement if they are found liable for a penalty, especially if they decide to wind up the business without paying the penalty. The Insolvency Service is increasingly pursuing such directors and they can expect to be banned from directly or indirectly becoming involved in the promotion, formation or management of a limited company for between six to ten years as a further result of employing illegal workers. They can also expect to have to pay the costs of enforcement.
Conclusion
With the increase in penalties being issued against individuals and businesses in the past few years, practitioners will certainly benefit from being aware of the way that this regime operates in practice. As the penalty amounts have increased significantly this year, it is also more likely that there will be appetite from employers to challenge the penalties and that the upfront legal cost of doing so will seem less disproportionate than it had before.
Emma Harris is a barrister at Goldsmith Chambers where she specialises in all aspects of immigration, refugee and asylum and public law, as well as commercial litigation, contractual disputes, property litigation (including landlord and tenant and housing law) and actions against the police.
ILPA invites members and other leading experts to contribute articles to its monthly blog. The views expressed in all blog posts are the authors’ own and are not necessarily those of ILPA.
Related Training
WEB 3079 Prevention of Illegal Working
Thursday 16 January 2025, 10:00 am – 1:00 pm
- Document Date
- Tuesday December 17, 2024