Introduction

The immigration status-based civil penalty employment scheme is to be extended beyond employment cases to other work characterised as self-employment. Businesses securing services from individuals by way of sub-contracting, agency work, or in the gig economy need to be prepared.

By a Government amendment to the Border Security, Asylum and Immigration Bill (introduced at Report Stage when the Bill was in the House of Commons, presently clause 45), the Immigration, Asylum and Nationality Act 2006 is to be amended. As a result, not just employers but also those securing services from an individual, or sub-contracting to them, or using an on-line matching service to provide details of a person supplying services are to be brought within the scheme.

Presently, the maximum fine for employing a single adult subject to immigration control who lacks work authorisation is £60,000. Where several unauthorised employees are detected, any penalties imposed have the potential to severely undermine a business’s cash flow and profitability. Some businesses are at risk of having to cease trading as they are unable to pay. For a small or medium-sized business, this is of particular concern.  

For those who wish to challenge such penalties, there is a statutory administrative objection process and, further, the possibility of an appeal to the County Court. However, the time limits are strict and experience of County Court appeals shows that it is easy to fall foul of inflexible rules.

Employer civil penalties under the Immigration, Asylum and Nationality Act 2006

At present, the Immigration, Asylum and Nationality Act 2006 (ss. 15-26) makes provision for the imposition of a civil penalty on an employer who employs an adult subject to immigration control who in turn lacks the necessary authorisation to work under immigration laws. An employer may establish an excuse not to pay such a penalty by demonstrating compliance with prescribed requirements to check the employee’s immigration documents. Under the 2006 Act, a relationship of employment exists where there is employment under a contract of service or apprenticeship, whether express or implied and whether oral or written.

The rationale for extending the scope of civil penalties

As set out in the Home Office Impact Assessment accompanying the amendment, the Government seeks to extend the civil penalty scheme to restrict the ability of (in their words) “rogue employers” to take advantage of illegal workers and protect work opportunities for those entitled to work in the UK. The amendment aims to “provide parity across industries” and to set “a level playing field for businesses…”.

The Impact Assessment identifies a need to ensure liability for a civil penalty where businesses contract, by digital or non-digital means, for the provision of work or services in their name, or where individuals work in roles akin to being employed but are in fact self-employed. Among other things, it aims at companies that contract or ‘match’ individuals to provide services. The examples given are agency workers or food delivery riders, as well as those that use individuals as temporary workers under zero-hours contracts.

To be included: a worker’s contract

The civil penalty regime is to be extended to a scenario where a person (‘person A’) is engaging an individual (‘individual A’) under a ‘worker’s contract’. Such a contract is one where there is a contract, other than a contract of service or apprenticeship, whereby individual A undertakes to do or perform personally work or services for person A or another person (whether or not that other person is specified in the contract), and person A is neither a client nor customer of any profession or business undertaking carried on by individual A.  A contract includes a contract that express or implied and (if it is express) whether oral or in writing.

This has the effect of bringing within the civil penalty scheme a person who enters into a contract with a business to perform personally work or services for it or on its behalf for another person. The only exception, albeit an important one, is where person A is either a client or a customer of a profession or business undertaking carried on by individual A (see also below as to how ‘liability’ for a civil penalty is to be defined).

To be included: sub-contracting

The civil penalty regime is to be extended to a scenario where a person (‘person B’) engages an individual sub-contractor (‘individual B’). Such a scenario occurs where individual B has entered into a contract with person B to provide work or services in circumstances where person B has entered into a contract with a third party to provide, or arrange for the provision of, the work or services but individual B has not.

To be included: on-line matching

The civil penalty regime is to be extended to a scenario where an online matching service (‘person C’) is providing the details of an individual who is a service provider (‘individual C’) to potential clients or customers. In this scenario, a ‘service provider’ means a person providing, or seeking to provide, work or services for remuneration.

In this scenario, the relationship between person C and individual C is even more remote from that of a traditional employer/employee relationship that than where a person is working under a worker’s contract or sub-contracting. An ‘online matching service’ is defined to mean a person who, in the course of a business:

• keeps a register of service providers for the purpose of matching them with potential clients or customers
• provides an online service by which potential clients or customers can submit enquiries for the purpose of being matched with suitable service providers, and
• charges a fee or commission in return for making such matches.  

The extension of liability

In the new provisions, liability for a civil penalty is carefully defined. It includes where a person:

• employs an individual to provide work or services, or
• is contracted to provide, or arrange for the provision of, work or services and enters into a contract under which another person is to provide, or arrange for the provision of, the work or services (or part of the work or services).

It also includes where a person is an online matching service who provides the details of another person who is a service provider to potential clients or customers, and as a result of being matched by that person, the service provider enters into a contract with a client or customer for the provision of work or services.

Notably, each of these scenarios also includes where a person is to be treated as employing any individual who personally provides the work or services (or any part of the work or services), including where:

• the person is not in a contractual relationship with the individual, or
• the person does not know that the individual is providing the work or services (or part of the work or services).

Liability is extended where there is a chain of contracts. Thus, there is liability where a person is contracted to provide, or arrange for the provision of, the work or services regardless of whether that contract is the first or any other contract in a chain of contracts to provide, or arrange for the provision of, the work or services (or part of the work or services). This may be complicated to administer in practice.

In a final twist and for the avoidance of doubt, it is expressly stated that this extension of liability does not affect the liability of any other person under the existing provisions for employers.

Implementation

When the Border Security, Immigration and Asylum Bill receives the Royal Assent and becomes law as an Act of Parliament, the civil penalty changes will not be applied immediately. The Home Office Impact Assessment indicates that a formal consultation with businesses is planned. The aim of that consultation will be to secure ‘input’ to the proposed accompanying guidance and statutory codes of practice.

Remedies

As matters stand, at the moment as regards civil penalties for employers, there is scope to challenge an intention to impose a civil penalty, as well as a statutory objection process to challenge both liability to a penalty and the amount of a penalty, and a right of appeal to the Country Court on both these issues. These routes of challenge may be pursued with profit where merited.

Where there is an employer/employee relationship, it is not unknown for the Home Office to err in its decision as to liability for a civil penalty or as regards the amount of the penalty. In particular, whether or not the person said to be working was acting under a contract of employment may be challenged, as well as whether or not they were authorised to work under immigration laws.  In addition, a demonstration of compliance with the immigration-document regime may discharge liability to a civil penalty. 

When the new provisions come into force, these same remedies will offer scope to challenge the decision to impose a civil penalty and/or the amount of the penalty where there is said to be a worker’s contract, sub-contracting, and/or on-line matching. The question of whether one or more of these scenarios are established or can be disproven will be at the heart of such challenges.