Employing foreign nationals: avoiding illegal working

Andrew Osborne of Hammonds LLP begins a series of articles on employing foreign nationals with a look at the provisions on avoiding illegal working. Employers should carry out the necessary document checks on all prospective employees, in line with UK Border Agency guidance, to avoid employing workers illegally and to reduce the risk of discrimination claims arising from recruitment.

Introduction

During 2008 there was a major shake-up of the immigration system. As part of that shake-up the Government significantly tightened the rules on employing foreign nationals.

On 29 February 2008 the provisions in ss.15-25 of the Immigration, Asylum and Nationality Act 2006, which set out employers' responsibilities in relation to the prevention of illegal working in the UK, came into effect. These provisions replaced s.8 of the Asylum and Immigration Act 1996, under which employers' previous responsibilities were laid down.

Unless a prospective employee is a British citizen, or a national of the European Economic Area (EEA) or Switzerland, he or she is likely to need permission to work in the UK. Whether or not a person can work in the UK, the type of work that he or she can do, and for how long, depends on his or her immigration status. Therefore, it is essential that employers understand and comply with the rules on employing foreign nationals.

Civil penalties

Under the 2006 Act an employer that employs individuals who are not entitled to undertake the work in question because they do not have the correct immigration status (for example because they do not have the appropriate tier 2 sponsorship to work for the employer) will be liable to pay a civil penalty of up to £10,000 per illegal worker.

The UK Border Agency (UKBA), which is the executive agency of the Home Office responsible for overseeing and enforcing the immigration system, calculates civil penalties on a sliding scale. There is a Framework for assessment of level of civil penalty (PDF format, 318K) (on the UKBA website), which is designed to assist the UKBA in deciding whether or not to issue a civil penalty, and if it does, at what level. The principal factors that UKBA will take into account when determining the level of the civil penalty are: the nature of the checks carried out by the employer; whether or not the employer has reported suspected illegal workers to the UKBA; the extent of the employer's cooperation with the UKBA; and the number of offences committed by the employer in the past. Further details of the system of civil penalties can be found in the Code of practice on civil penalties for employers (PDF format, 155K) (on the UKBA website).

The UKBA states in its Key facts and figures - April 2009 (PDF format, 91K) (on its website) that its tougher enforcement campaign since February 2008 has resulted in over 1,300 fines worth around £14 million. This represents an average of approximately £10,000. The UKBA also publishes Lists of civil penalties issued to employers on its website.

Employers should also be aware that, in addition to the civil and criminal penalties regime (see below), UKBA enforcement officers are making increased use of the Proceeds of Crime Act 2002 in relation to illegal working. There have been a number of press reports of UKBA officers seizing sums of cash during enforcement raids on restaurants. The Act allows courts to issue orders to seize assets equal to the defendant's "benefit" from the crime, thereby potentially enabling the UKBA to obtain financial retribution against employers of illegal workers considerably in excess of the £10,000 civil penalty limit per worker.

Establishing the excuse

Section 15 of the 2006 Act provides that employers can establish a statutory excuse (equivalent to the statutory defence previously available under the 1996 Act) against liability for payment of a civil penalty. Employers can establish the statutory excuse by checking and copying one or a specified combination of two original documents prior to the employment commencing. There are two lists of acceptable documents: list A and list B. The lists are in the UKBA guidance for employers (Prevention of illegal working - summary guidance for employers (PDF format, 198K) and Comprehensive guidance for employers on preventing illegal working (PDF format, 1.56MB) (both on the UKBA website)). (See also the XpertHR quick reference section for details of the documents that are in list A and list B.) If only list B documents are provided, the employer must repeat the document checks in relation to the employee concerned at least once every 12 months until he or she provides documents from list A or leaves the employment.

The UKBA updated the summary guidance in April 2009. The acceptable documents set out in lists A and B in the updated guidance are the same as those first published in 2007 in advance of the changes to the rules in February 2008. The replacement of work permits by tier 2 of the points-based system has not altered the list of acceptable documents.

Identity cards

A biometric immigration document (ie an identity card) issued by the UKBA is an acceptable document under both lists A and B. In November 2008 the UKBA began issuing compulsory identity cards to foreign nationals granted an extension of their stay in the UK as a student, as a spouse or partner of a permanent resident, or as a dependant of an individual in one of these groups. Further categories of migrants granted an extension and requiring compulsory identity cards were added on 31 March 2009.

Under the identity card scheme, which will be phased in up to April 2011 for all foreign nationals extending their stay in the UK or coming to the UK on visas for more than six months, applicants are required to provide their biometrics (ie fingerprints and photograph), which are checked by the UKBA against existing records and stored in the UKBA systems and within the microchipped card. The cards provide evidence of the holder's nationality, identity and status in the UK and are intended to help employers to check more easily migrant workers' right to work in the UK.

Procedural steps

The UKBA guidance sets out the procedural steps that employers should follow for every prospective new recruit, prior to the commencement of his or her employment.

Step 1: Employers should require prospective employees to provide one original document (or two original documents in defined combinations) from list A or list B.

Step 2: To establish the excuse and (if documents have been provided from list B) to retain it, employers must check the validity of each document provided, and satisfy themselves that the prospective or existing employee is indeed the person named in the documents presented.

Step 3: Employers must make a copy of the relevant page or pages of the documents in a form that cannot subsequently be altered (for example a photocopy or scan).

Further information on each step is contained in the guidance.

Knowingly employing illegal migrants

Under s.21 of the 2006 Act, an employer commits a criminal offence if it knowingly employs an illegal migrant. An employer guilty of such an offence is not entitled to a statutory excuse and cannot rely on the fact that it has checked and copied the required documents.

An employer will be treated as knowing a fact about an employee if a person who has responsibility within the organisation for an "aspect" of the employment knows that fact. In effect, the employer will be liable for its employees' actions. If the offence is committed with the consent or connivance of an officer (who, under the Act, may be anyone who is, or purports to act as, a director, manager or company secretary and potentially including any employee with responsibility for employing people), the officer as well as the employer will be treated as having committed the offence. As a result, company directors and other officials may face fines and/or prison sentences and company directors could also face disqualification as directors.

On summary conviction (ie before a magistrates' court) an employer may be fined no more than the statutory maximum fine by lower courts (currently £5,000) for each person employed illegally, and/or imprisoned for up to six months. This will increase to 12 months in England and Wales when the relevant provisions of the Criminal Justice Act 2003 come into force. Following conviction on indictment (ie in the Crown Court) there is no upper limit to the level of the fine that the Crown Court can impose and the employer, in the form of the responsible employer (ie the relevant director manager), may be imprisoned for up to two years.

Code of practice on avoiding unlawful discrimination

Employers must check documents in relation to all recruits, regardless of their apparent immigration status or racial or ethnic background. Failure to do so could result in an employer employing an individual illegally or potentially discriminating on racial grounds in recruitment. The UKBA has published a code of practice (Prevention of illegal working - guidance for employers on the avoidance of unlawful discrimination in employment practice while seeking to prevent illegal working (PDF format, 183K) (on its website)) with the aim of providing employers with guidance on avoiding a civil penalty for employing workers illegally and not acting in a way that could be deemed discriminatory on racial grounds.

In Osborne Clarke Services v Purohit [2009] IRLR 341 EAT, the Employment Appeal Tribunal held that the employer's policy of not considering candidates from outside the EEA simply because they required a work permit (now a certificate of sponsorship) to work in the UK amounted to indirect race discrimination and could not be justified. Many employers have a policy of not accepting applications from non-EEA nationals, particularly in relation to graduate recruitment schemes. However, Purohit means that employers can no longer assume that such an approach is lawful. Employers that have such a policy should consider amending it and may also need to consider applying for a sponsorship licence to avoid an inference of indirect race discrimination. A future article in this series will look at the process for obtaining a sponsorship licence.

TUPE transfers

Employers that acquire staff as the result of a business transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) have, according to the comprehensive guidance, a grace period of 28 days to undertake the appropriate document checks following the date of transfer. Although the UKBA previously indicated that this part of the guidance could be ignored, it has recently indicated that it should be followed.

There is a risk to the transferee that there will be a loss of key employees post-transfer as it will be unable to continue to employ migrant workers for whom it has not completed satisfactory documentation checks, and/or civil penalties or criminal prosecution if it fails to carry out the checks within the 28-day grace period. Even if the transferor carries out the checks prior to the transfer, the transferee will need to carry out the checks itself post-transfer to retain the excuse. It cannot rely on warranties from the transferor that the relevant checks have been carried out already, as a defence to proceedings.

Next week's article will look at the points-based system and will be published on 13 July.

Andrew Osborne is Partner, Sports Group and Head of Business Immigration at Hammonds LLP (Andrew.Osborne@hammonds.com).

Further information on Hammonds LLP can be accessed at www.hammonds.com.