Employing Illegal Workers: Investigations and Penalties

The Insolvency Service, which reports on the latest company directors to be disqualified for a range of misdemeanours, often includes examples of bans that have been handed down to company owners for employing illegal workers. Directors of a vehicle valet company, restaurants and a clothing company have been disqualified in the last couple of months for between five and seven years for this very reason often the result of a winding up petition.

Companies gain an unfair advantage by employing individuals who do not have the right to work in the UK. The UK Border Agency works to bring those who flout employment and immigration laws to justice by removing this advantage and ensuring all UK workers receive the employment rights they are entitled to.

What is not always understood is the distress and sleepless nights caused to directors by the use of personal liability notices and security bond requirements.

UKBA’s Illegal workers investigation process

The UK Border Agency (UKBA) has clamped down on the employment of illegal workers by introducing tough new penalties which can result in a maximum fine of £20,000 per employee.

If illegal workers are encountered during a UKBA compliance inspection, as the employer, you will be given the opportunity to show you have complied with the law. To do this, you must demonstrate that you have correctly carried out the necessary right to work document checks, and establish a statutory excuse against liability for a civil penalty.

To establish a statutory excuse against a civil penalty, you must carry out the following BEFORE you employ a worker:

1. Obtain the individual’s original documents
2. Check them in the presence of the holder
3. Make and retain a clear copy of the document
4. Record the date of the check

If the individual is a student and is subject to a condition that limits the number of hours they can work each week during term time, you must also obtain and retain details of their terms and vacation dates.

At this point, UKBA officers will decide whether to issue you with a no action notice or a referral notice. A no action notice informs you that no action will be taken and the case has been closed. A referral notice on the other hand, informs you that your case is being sent to Home Office officials, who are responsible for administering the civil penalty scheme.

Referral notices go to Civil Penalty Compliance Team

A copy of the referral notice along with the evidence gathered in the case will be sent to the Civil Penalty Compliance Team within 14 days of the initial inspection. You will then be sent an information request asking for the relevant evidence and information. You will be asked to confirm:

• Your business’s details
• If you have carried out any document checks on the employees in question
• If you have reported any suspicions about the right to work of the illegal workers
• If you have any supporting documentary evidence

Your response form should be completed and returned, along with any supporting evidence, by the deadline given in the information request. Once the deadline has passed, a decision will then be made as to the penalty you will receive based on the evidence the compliance team hold. If you do not respond to the information request, the decision will be made based on the information the compliance team holds.

The decision

The evidence will then be passed on to a case worker, who will determine whether you are liable for a penalty. They will decide on the appropriate action to take by answering the following four questions:

1. Who is the employer?
2. What is the worker’s immigration status and employment start date?
3. Has a breach of section 15 of the Immigration Act 2014 occurred?
4. What is the appropriate penalty level and amount?

There are three possible outcomes to the case worker’s decision. You will either receive a civil penalty notice; a warning notice; or a no action notice. Each notice will include a statement which sets out the evidence and explains why the decision has been made.

Penalties for Employing Illegal Workers

Civil Penalty Notice

If the case worker decides you are liable for a civil penalty for your role in employing one or more illegal workers, you will receive a civil penalty notice for a specified amount. The notice will determine who is responsible for the penalty you personally or the limited company or both. The notice will tell you why you are liable for a penalty and which worker the fine applies to. The penalty notice will also state:

• The breach date
• The amount you have to pay
• The date the payment is due
• Whether a fast payment is available (This reduces the penalty amount by 30 percent if full payment is made within 21 days)
• How you can object to the penalty
• How the penalty will be enforced if you refuse to pay

Warning Notice

In some circumstances, you might receive a warning notice. To be liable for a warning notice, you will have employed illegal workers without a statutory excuse, but you will not have been issued with a civil penalty notice or a warning notice previously, nor will you have been convicted under section 21 of the Immigration Act 2014 within the last three years. You will also have met all the UKBA’s mitigating factors to prevent a civil penalty.

The warning notice will also include details about why you are not being issued with a financial penalty on this occasion. However, you are receiving a formal warning that will be taken into account if you were to employ illegal workers in the future.

If you receive a civil penalty or a warning notice, but fail to conduct the necessary employment checks in the following three years, you could receive the maximum civil penalty of £20,000 for each illegal worker.

No Action Notice

If you have established a statutory excuse for the employment of the illegal workers, you will be issued with a no action notice. This means no further action will be taken, and will not be taken into account if you are found to be employing illegal workers in the future.

Enforcement action

If you fail to pay the penalty, or exercise your right to object or appeal by the deadline given, you could be subject to enforcement action. Enforcement action will involve action in the civil court to recover the unpaid penalty, which could result in a disqualification for company directors. The court’s decision on the enforcement action will also enter the County Court Register of Judgments. Banks and other finance providers can check this register before agreeing to offer credit or other services, which can impact on your ability to secure credit in the future.

Be aware your company can be required to provide a security bond which must be provided before being allowed to continue to trade so this kind of notice is very serious and should not be ignored. This kind of bond is often supported with a personal liability notice (PLN) making the director responsible.

Your Right to Object

If you receive a civil penalty notice, you have 28 days from the date of the notice to object. An objection form will be included with the civil penalty notice. To object, you should indicate on which of the three grounds you are objecting the decision, giving your reasons and providing supporting evidence.

You can object on the grounds of:

• You are not liable to pay the penalty (i.e. you are not the illegal worker’s employer)
• You have a statutory excuse (you carried out the relevant checks)
• The penalty is too high (the penalty was calculated using the wrong scale, or mitigating evidence has not been taken into account)

A caseworker will review the objection, and issue one of five potential outcomes:

• A warning notice
• The civil penalty is increased
• The civil penalty is maintained
• The civil penalty is reduced
• The civil penalty is cancelled

Employing illegal workers and failing to carry out the necessary checks could result in a maximum £20,000 and a lengthy director disqualification. Acting in the proper way and always meeting your obligations as a company director is the only way to keep your business out of trouble.

You ignore this advice at your peril as I can testify we have seen a significant increase in the last 3-6 months in this kind of action against directors resulting in significant fines and bans. We have had some success however when negotiating with the relevant government bodies to be allowed to complete a pre-pack or company voluntary arrangement allowing the business to continue trading.

If you are unsure of what action to take, call 08000 746 757 to speak to someone who can provide discreet immediate help.

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