Draft legislation toughens penalties on ‘rogue employers’

IMPACT – HIGH

What is the change? The U.K. has submitted draft legislation that would raise the maximum penalty to £20,000 against employers who hire undocumented workers.

What does the change mean? Assuming this secondary legislation passes, it will double the maximum civil penalty for employing an illegal worker in the U.K.

• Implementation timeframe: The proposal is highly likely to come into force from April 6, 2014.
• Visas/permits affected: All U.K. employers and their employees, particularly foreign workers under the points-based system, foreign nationals with family visas and other forms of leave to remain that permit work.
• Who is affected: All employers hiring in the U.K. (whether intentionally or unintentionally hiring foreign nationals subject to immigration control).
• Impact on processing times: None – the illegal working regime affects recruitment and onboarding, not immigration applications to UKBA.
• Business impact: The increased penalties significantly raise the cost to employers who repeatedly employ undocumented workers. In addition, all employers face increased risks associated with onboarding employees in the U.K.
• Next steps: Conduct compliance reviews or audits of illegal working documentation, and first-day and 12-month document check procedures.

Background: Under the Immigration, Asylum and Nationality Act 2006, the Secretary of State has authority to serve civil penalty notices on employers who hire undocumented workers. In 2008, the maximum penalty was set at £10,000 per illegal worker as a deterrent. The Act also carves out an excuse from liability for employers who perform face-to-face checks of employees’ right-to-work documents. The scheme was meant to encourage compliance but not penalize employers who make honest mistakes.

The Home Office is now concerned that the maximum penalties, which have not been raised since 2008, are too low to deter employers who hire workers illegally, and do not adequately reflect the economic advantage from using illegal labor. The government has submitted a draft amendment to double the maximum penalty to £20,000 (roughly US$33,000) per undocumented worker.

“[T]he government intends to reform the scheme so that it becomes tougher on rogue employers by increasing the level of the maximum penalty to £20,000 per illegal worker,” the Home Office said in a statement accompanying the draft order. The Home Office noted it would continue to follow the current practice of imposing the maximum penalty only on employers found to be repeat offenders.

BAL Analysis: The significant hike in penalties sends a clear message. The government intends to increase operational enforcement under the Immigration Bill 2013, while it has also promised to reduce the regulatory burden on employers by simplifying document check procedures. All U.K. employers – even those who do not employ large numbers of migrant workers or assignees – are encouraged to perform compliance reviews of their onboarding processes and right-to-work check procedures to make sure they are applying rules consistently and methodically.

This alert has been provided by the BAL Global Practice group in the United Kingdom. For additional information, please contact uk@bal.com.

Copyright © 2016 Berry Appleman & Leiden LLP. All rights reserved. Reprinting or digital redistribution to the public is permitted only with the express written permission of Berry Appleman & Leiden LLP. For inquiries please contact copyright@bal.com.