At the end of February 2008 new rules were introduced aimed at tightening the existing measures to combat illegal working, by making it more difficult for people to exceed any permission granted to stay in Great Britain or continue working in breach of the conditions imposed on them by the immigration authorities and to make it easier for employers to ascertain whether it is legal for them to engage any prospective employee.

Prevention of illegal working

The new rules, introduced by s 15 – 25 of the Immigration, Asylum and Nationality Act 2006 (the Act), came into force on 29 February 2008 and apply to all employment commencing after that date. They replace the rules under s 8 Asylum and Immigration Act 1996 which continue to apply in respect of employees engaged between 1 May 2004 and 28 February 2008.

The offence

An employer will commit an offence if it employs a person over 16 years old who is subject to immigration controls and not entitled to work in the job he is engaged in. The penalty for an employer in breach of this provision is a fine up to a maximum of £10,000.

The statutory excuse

An employer will have a statutory excuse against liability under the Act if it can be shown that BEFORE the person was employed the employer checked and retained copies of certain listed documents. It is not possible to establish a statutory excuse after the employment has started.

There is only one exception to the provision that the statutory excuse cannot be established retrospectively.

The new rules have introduced a single circumstance where there is a grace period to conduct the necessary checks on an employee: where a company acquires employees pursuant to a Transfer of Undertakings (Protection of Employment) Regulations 2006 transfer of a business. In those circumstances, the new employer must conduct the same document inspection as for any prospective employees but has 28 days from the date of the transfer to complete the necessary checks on all transferring employees.

The documents which a prospective employee may produce to establish a right to take up the proposed employment are contained in two lists: List A and List B. List A comprises those documents which prove that a person is not subject to immigration controls and has no restrictions on his stay and employment in the UK. These documents provide a statutory excuse for the whole of the period of that person's employment. List B documents show that a person has limited leave to be in the UK or may only be employed in certain types of work. List B documents establish the statutory excuse for only 12 months and an employer must repeat the checks every year until the employee produces a List A document, leaves the employment or leaves the country.

Three steps

The employer must see original documents from either List A or List B and be satisfied they are genuine and not tampered with. The employer must be satisfied that the age and appearance of the prospective employee is consistent with the photograph and date of birth in the documents. Any differences in names on the documents must be explained by further documentation. The documents must be checked for expiry dates and any UK Government endorsements permitting the work in question. Copies must be kept and retained, for 2 years after the end of the employment. These steps must be followed for any annual follow-up checks and the date of the follow-ups recorded. A failure to conduct the follow-up checks is also an offence. To avoid any exposure to race discrimination claims the same checks should be made of all potential employees. An employer should not rely on a prospective employee's claim to British nationality without verifying it in accordance with the Act.

This is a change from the rules that continue to apply to employees taken on before 29 February 2008; a statutory defence established before the commencement of the employment in this earlier period will be valid for the whole of the employment. An employer in breach of rules in respect of illegal workers engaged prior to 29 February 2008 will still be liable under these rules, where the penalty is a fine of £5,000 per illegal worker.

The statutory excuse will not be available to any employer who knows the person is working illegally. Under the Act an employer in this situation commits a criminal offence punishable by an unlimited fine and/or 2 years imprisonment.

When should an Insolvency Practitioner be concerned?

Liability under the Immigration, Asylum and Nationality Act 2006 falls on the employer and, unless it can be demonstrated that the statutory excuse was established prior to the commencement of the employment, liability may be imposed at any time an employer is found to be employing illegal workers.

When is an insolvency practitioner an employer? There are limited circumstances in which an insolvency practitioner will be the employer. In administration, the administrator is the agent of the company and all continuing employment contracts remain with the company. Any person engaged in the course of the administration will also be an employee of the company, not the administrator. However it would be prudent of the administrator to ensure that it is lawful for the company to employ a prospective employee in accordance with the Act and an administrator should ensure that, where a 12 month statutory excuse has been established, all reviews of an employee's entitlement to remain and work in the country are conducted when due.

This situation can be contrasted with the position of an administrative receiver who, whilst also the agent of the company, is personally liable on any contracts of employment adopted by him in connection with carrying out this function. In these circumstances, it would be prudent for an administrative receiver to conduct an investigation of all continuing employees prior to the commencement of his appointment.

The commencement of liquidation terminates all contracts of employment. Where certain employees are to be retained during the winding up, this is on a new contract of employment and so, again, it would be prudent for the liquidator to investigate the legality of the employment of every person it is proposed to engage before the commencement of the employment.

When advising a purchaser of a business under the Transfer of Undertakings (Protection of Employment) Regulations 2006, an insolvency practitioner should ensure that all the information about transferring employees required to be supplied by the seller is presented as quickly as possible. However a purchaser cannot rely on the seller's warranties as to the immigration status of the transferring employees and so should conduct a full investigation prior to completion and again within 28 days of the date of transfer in case there was not full disclosure before completion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.