A Guide to Home Office Civil Penalties for Illegal Working

If your business is facing a civil penalty for illegal working, it needs urgent specialist legal advice to avoid or reduce the fine.

In this guide, our UK Immigration Solicitors and Employment Lawyers outline the law on illegal working, civil penalties, and the Home Office investigative process.

Contact OTS Solicitors for expert legal advice.

Civil penalties for illegal working

A civil penalty sounds innocuous, a bit like a parking ticket. However, a Home Office civil penalty could have a devastating financial impact on your business’s profit margin and ability to sponsor overseas workers.

Fines can add up quickly, ranging from £45,000 to £60,000 per worker employed in breach of illegal working legislation. The size of the fines and the broader implications of receiving a civil penalty notice from the Home Office mean businesses need to know how to avoid a fine and what to do if they receive one.

Avoiding civil penalties for illegal working

The only way a business can avoid a civil penalty notice is to comply with the law and verify that all employees have the right to work in the UK before employing them. That sounds easy, but in practice, it's far from easy. Whether your business is an SME or a multinational, there is always room for human error or system failures.

The best ways to avoid civil penalties for illegal working 

The five best ways to avoid civil penalties for illegal working are:

1. Ensure that your key personnel are chosen with care, understand the importance of their job and receive regular updated training.
2. Use Sponsorship Licence Lawyers where appropriate, to provide a full Sponsor Licence Management Service, sector-specific training to key personnel and HR staff, or to conduct internal audits and compliance checks.
3. Make sure systems and processes are not overcomplicated and that HR staff and key personnel have sufficient time to complete checks and to update the sponsor management system.
4. Encourage openness and self-reporting if a system failure occurs.
5. Talk to your UK Immigration Solicitors as soon as you become aware of a potential breach of the illegal working legislation.

If your business acts quickly and takes specialist legal advice, you may be able to challenge the civil penalty or may be able to persuade the Home Office to issue a warning rather than impose a fine.

There are strict deadlines to respond to the Home Office. Therefore, you should not ignore any communication from the Home Office and should consult Immigration Lawyers in London with expertise in handling sponsor licence compliance and advising on civil penalty notices.

The law on civil penalty notices for illegal working 

Under Section 15 of the Immigration, Asylum and Nationality Act 2006, the Home Office can impose a civil penalty (fine) if:

1. An employer employs someone who does not have the right to work in the UK, and
2. The employer does not have a defence or statutory excuse to the imposition of a civil penalty.

Defences to the imposition of a civil penalty notice

An employer is not required to pay a civil penalty for employing a worker without the right to work if they can show they conducted the prescribed checks before the worker was employed.

The prescribed checks are the government-mandated right-to-work checks, carried out in accordance with the latest Home Office guidance. If an employer can show that they carried out a right-to-work check correctly, they have a statutory excuse and will not receive a civil penalty unless it was reasonably apparent that the worker did not have the right to work in the UK despite the check.

To have a defence to the imposition of a civil penalty notice, employers need to:

1. Understand who needs to have a right to work check carried out and when.
2. Follow the latest Home Office guidance on the conduct of right to work checks.
3. Carry out repeat right-to-work checks if the worker has time-limited leave to remain.
4. Keep a record of the right to work check.
5. Ensure that photographic evidence of identity is checked against the worker’s appearance.

Civil penalty fines  

The Home Office can impose two types of maximum fines for employing a worker who does not have the right to work in the UK:

1. Up to £45,000 for a first breach of the law on illegal working, or
2. Up to £60,000 for a repeat breach within three years of an earlier breach.

The fine applies to each worker, not to each system failure. Therefore, if HR staff did not follow the latest Home Office guidance on conducting right-to-work checks, the fines could amount to nearly £150,000 for employing three employees without the correct checks, despite the fines arising from a single system failure.

Sponsorship Licence Lawyers recommend that resources be devoted to understanding Home Office civil penalties for illegal working, as the size of the fines does not account for the size of the business, the industry or sector, company profitability, or ability to pay.

Challenging civil penalties

There are ways an employer can challenge a civil penalty:

1. Argue that the worker was not an employee and should not be classed as an employee, or
2. Argue that the Home Office was wrong to impose a civil penalty because the business had a successful statutory excuse, as they carried out a right-to-work check, or
3. Say that the fine was too high.

The decision to challenge a civil penalty notice is time-critical. There are deadlines, and early payment of the first breach fine can significantly reduce it.

Reducing a civil penalty

With civil penalties amounting to £45,000 per worker, it's essential to understand the four ways a civil penalty can be reduced:

1. Getting a warning notice instead of a fine.
2. By reporting the breach to the Home Office.
3. By actively cooperating with the Home Office investigation.
4. By paying the civil penalty notice early.

A company may use only these four reduction methods for a first breach of the illegal working legislation. They are not available to use if the breach is classed as a second breach.

Warning notice in place of a civil penalty

The Home Office can agree to send an official warning notice instead of a fine if:

1. The breach is classed as a first breach, and
2. The company self-reports the breach, and
3. The company actively cooperates with the Home Office investigation, and
4. The business can show that it has effective systems in place.

Any company facing a civil penalty notice for a second breach cannot receive a warning instead of a fine.

Action required to reduce a civil penalty

The main point UK Immigration Solicitors stress is the need to act quickly if your company is presented with information showing that right-to-work checks have not been carried out, have been conducted contrary to the latest guidelines, or have not been repeated as required for workers with time-limited leave to remain. That is because there are time pressures to take steps to reduce the fine amount.

On a first breach, the company must self-report to qualify for a £5,000 reduction from the £45,000 fine. The fine can be reduced by an additional £5,000 if the business actively cooperates with the investigation.

A fine reduction can also be achieved by paying the fine within 21 days, reducing the amount due by 30%. However, UK Immigration Lawyers stress that it's important that legal advice is taken to check:

1. If the civil penalty notice has been issued incorrectly.
2. If there are grounds to replace it with a warning.
3. That there are effective systems in place to conduct right-to-work checks, as without that reassurance, the penalty will not be reduced.

Specialists in employment law, including illegal working and right-to-work checks, can urgently provide expert legal advice on whether there are grounds to challenge the civil penalty notice and, if so, on the process to do so. It is worth taking this specialist advice because Home Office officials can make mistakes, just like mistakes can occur when right-to-work checks are not fully compliant with Home Office guidance.

The civil penalty notice process

There are seven stages to the civil penalty notice process:

1. Home Office investigation.
2. Referral to the compliance team if further investigation is warranted.
3. Referral notice.
4. Information request.
5. Decision stage.
6. Issue of no-action, warning notice or civil penalty notice.
7. Decision to accept the civil penalty notice or to challenge.
8. Payment within the prescribed timeframe.

Home Office investigation and compliance referral

A Home Office investigation can be triggered for various reasons, such as a business being in a perceived high-risk sector for illegal working, whistle-blowing by a British worker or competitor, or an investigation by another agency, such as HMRC, that raises red flags for the potential employment of staff who do not have the right to work in the UK.

The Home Office investigative process can involve:

1. An announced site visit, or
2. An unannounced audit by compliance officers, or
3. A remote digital audit.

Home Office officials decide on the nature and format of their investigation. If your company operates in a high-risk sector for compliance visits, you should consider engaging Business Immigration Solicitors to conduct annual file audits and to review company policies and procedures to ensure that right-to-work checks are carried out and recorded in accordance with the law. Sponsorship Licence Lawyers can also provide a full Sponsor Licence Management Service when key personnel are struggling with workloads after a successful first sponsor licence application, or are absent on parental or sick leave.

As soon as your business becomes aware of an investigation, it's best to seek legal advice on your right to work and sponsor licence compliance to determine how to approach the investigation and cooperate with the process.

Referral notice and information request

The Home Office’s civil penalty and compliance team informs businesses that they are under investigation by sending a referral notice. This is followed up with an information request.

The Home Office may require the following types of information:

1. Confirmation that the company employs specified individuals and their date of employment.
2. Confirmation that right-to-work checks were completed before the individual’s employment.
3. The date of the right to work checks.
4. Clarification on whether the individuals passed right-to-work checks or not, and the action taken.

Companies typically have ten days to provide the requested information. It's vital not to ignore the information request, as doing so will mean the company is not actively cooperating with the Home Office investigation.

Taking specialist right-to-work legal advice at this stage of the investigative process can be helpful, as UK Immigration Solicitors can help frame a response and explanation to help secure a no-action decision or a warning notice.

Sponsorship Licence Lawyers and Employment Solicitors focus on providing the Home Office with relevant information about:

1. The company records on completion of right-to-work checks.
2. The company’s policies and effective strategies for conducting and checking right-to-work checks.
3. The company’s compliance record.
4. The cooperation provided by the company during the Home Office investigation.

Outcome of the Home Office right to work investigation

At the decision stage, Home Office officials can decide to take:

1. No action.
2. Warning notice.
3. Civil penalty notice.

The Home Office may decide on no action, a warning notice, or a reduced civil penalty following representations made on behalf of the company, particularly where the information request has been followed by active cooperation and a demonstration of effective systems for completing right-to-work checks.

Decision to accept the civil penalty or to challenge  

If the civil penalty and compliance team issues a civil penalty notice, the employer may either accept and pay the fine or challenge it. Employment Lawyers can assess whether a company has grounds to challenge the civil penalty notice and advise on the likely fine amount. For example, the Home Office may have erroneously treated the non-compliance as a second breach, but it falls within the definition of a first breach because more than three years had passed since the earlier incident.

Payment of the civil penalty notice

An employer has 28 days to decide whether to:

1. Challenge the notice.
2. Request an instalment plan.
3. Pay the fine in full.

If an employer elects to challenge the civil penalty notice, it could result in the notice being cancelled or, in the worst case, the fine being increased. That’s why it's important to take expert legal advice on the advisability of challenging a notice. If the Home Office refuses to accept the challenge, a company can appeal to the court.

A company may request payment in instalments if it is unable to pay the fine immediately. Information will be required to explain why the fine cannot be paid in full. The Home Office may allow up to 24 months to pay by instalments, but the timeframe may occasionally be extended.

In first breach situations, a company may be offered a fine reduction by using the fast payment option. This option can reduce the fine by 30%, but the fast payment option cannot be combined with instalment payments. The fast payment requirement is payment of the reduced fine within 21 days.

It is possible to object to a civil penalty notice, and if the notice is upheld, you still have the option to use the fast payment option by paying within 21 days of the new decision date. However, by objecting, you risk the notice being upheld and a larger fine being imposed after a review of the representations and the circumstances.

Impact of a civil penalty notice

The impact of a civil penalty notice isn’t always immediately apparent. In addition to a hefty fine, an employer may also face:

1. Criminal prosecution.
2. Compliance audit and the suspension or revocation of its sponsor licence.
3. The loss of all sponsored employees if the licence is revoked.
4. Public naming and therefore reputational damage.
5. Financial impact of additional recruitment costs because of the need to replace sponsored workers or the inability to fulfil contracts because of staff shortages.

These consequences need to be carefully considered when deciding whether to invest in a professional Sponsor Licence Management Service to manage a sponsor licence, or to seek specialist legal advice upon receiving notice of an investigation.

Help with a right-to-work or sponsor licence compliance investigation

When your company is facing a Home Office investigation into its conduct of right-to-work checks or sponsor licence compliance, it's easy to either ignore the problem or go into panic mode. Neither approach works.

At OTS Solicitors, our Business Immigration Lawyers specialise in helping business owners with sponsor licence troubleshooting and full-blown Home Office investigations. We provide:

• Calm strategic advice.
• Commercially focused advice on challenging Home Office notices.
• Unflappable legal advice in putting together comprehensive and compelling representations.
• Urgent turnaround of expert legal advice to meet Home Office deadlines.
• Help in putting together effective systems and policies to comply with Home Office guidance on right to work checks and sponsor licence management.

 Contact OTS Solicitors for expert legal advice.

 

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