Employment law and immigration law: two awkward siblings

Employment and immigration: an uncomfortable relationship?

It can be helpful to think of employment law and immigration law as two awkward siblings. They usually get along fine, sometimes they even work together well, but they are distinct beings. Occasionally, they get in each other’s way. When we consider their overarching structure and purpose, the potential for conflict between these bodies of law is clear:

• Employment law governs how the working relationship functions. It is concerned with rights for employees e.g. rights to pay and notice, protection from discrimination and unfair dismissal etc. Employment tribunals and civil courts hear disputes between employers and employees. If an employer breaches employment law, an employee may lodge a claim. If the employee wins, in many cases the employer will be ordered to pay compensation

• Immigration law exists in a parallel world in which the Home Office is king. Immigration law dictates how someone can join a UK workforce from abroad. The Home Office sets, monitors and enforces immigration rules. A fundamental principle is that all employees must have the ‘right to work’ for their employer in the UK. Most non-British/Irish workers need to obtain and hold a work visa before they can do their job in the UK. A failure to follow the rules – for example, working without appropriate immigration permission – may result in the Home Office taking action against the employer and/or the employee.

We consider three of the most common scenarios in which immigration and employment issues overlap.

Can an employer reject job applicants who do not have the right to work in the UK?

Immigration law versus discrimination law

Immigration law is discriminatory. It creates a two-tier hierarchy of job applicants and employees, divided along nationality lines. British and Irish nationals can start any job in the UK without anything other than an assessment of their professional credentials. But other nationals, for the most part, need something more. To hire a migrant who does not already hold some form of immigration status that enables them to work in the UK, an employer will usually have to “sponsor” that individual under a work visa (e.g. a Skilled Worker visa). The employer must first have obtained a “sponsor licence” from the Home Office. The grant of that licence requires the employer to understand and fulfil various compliance obligations. Then, the candidate needs to apply for a visa, which involves satisfying eligibility criteria and the payment of fees to the Home Office (commonly covered by the employer). Because of these financial and administrative hurdles, a question we are sometimes asked is: can an employer automatically reject candidates who do not already have the right to work in the UK?

The employment right at play here is protection from discrimination. All workers and job applicants in the UK enjoy the right not to be discriminated against in relation to certain protected characteristics (including race, ethnicity and nationality). The Home Office has issued guidance for employers in the form of a statutory code of practice: ‘Avoiding unlawful discrimination while preventing illegal working’. The code states:

Employers should:

• be consistent in how they conduct right to work checks on all prospective employees, including British citizens

• ensure job selections are made on the basis of suitability for the post

• ensure that no prospective job applicants are discouraged or excluded, either directly or indirectly, because of known or perceived protected characteristics

Employers should not:

• discriminate when conducting right to work checks

• only check the status of those who appear to the employer likely to be migrants

• make assumptions about a person’s right to work in the UK or their immigration status on the basis of their colour, nationality, ethnic or national origins, accent, surname or the length of time they have been resident in the UK

An employment tribunal may take the Code into consideration when determining whether discrimination has occurred.

Can a rejection policy be justified?

An automatic rejection policy based on right to work status is likely to be “indirectly” race discriminatory against a group of job applicants, namely non-British/Irish nationals (meaning the policy technically applies to all applicants, but in practice has a particularly detrimental effect on a particular group). Indirect discrimination can, however, be “objectively justified” if it is found to be a “proportionate means of achieving a legitimate aim”. This means that an indirectly discriminatory policy could potentially be lawful if the employer has a good reason for it, and there are not other, less discriminatory, ways of achieving the same aim. What is or is not a valid justification will turn on the particular facts presented to an employment tribunal.

The first question is whether the employer has a “legitimate aim” – put simply, a good reason – for the policy. This, of course, depends on the specific context and facts. But, as a general point, the case law in this area is underdeveloped and not particularly favourable to employers. The leading case – Osborne Clarke v Purohit – is from 2009 and long pre-dates the current immigration system but remains binding on tribunals. It concerned a law firm’s policy of excluding candidates from trainee solicitor roles if they did not already have the right to work. The Employment Appeal Tribunal found that the policy did amount to unlawful indirect race discrimination as it could not be objectively justified on the basis of cost alone, especially in light of the firm’s ample resources. Instead, the firm should have conducted the recruitment process on merit ‘as normal’. It should only have thought about sponsorship questions towards the end of the process.

The Home Office code of practice (mentioned above) reinforces that central takeaway message, stating that employers should “ensure job selections are made on the basis of suitability for the post” (although both the judgment and the code do state that there is no obligation to sponsor someone). An employer considering implementing an automatic rejection policy should therefore be aware of the risk of relying only on costs to justify such policies, with the risk that a spurned job applicant would lodge an indirect discrimination claim with an employment tribunal.

Although this case remains binding, the immigration system of today is more complex and costly than it once was. An employer may, therefore, have more success if these kind of “objective justification” arguments were presented now (although, to our knowledge, the point is untested). For example, some employers have taken a view that a rejection policy for lower paid roles may be more likely to be justified, because roles paying less than £25,600 a year are, generally, ineligible for sponsorship under the Skilled Worker route. However, this is not a hard-and-fast rule. Some employees can be sponsored on an annual salary of less than £25,600. As a result, an employer would be well advised to think through this issue in detail, with careful consideration given to the reasons behind its policy. We recommend that legal advice is sought at an early stage.

Immigration fee clawbacks

As an alternative means of managing the cost of sponsoring an employee, increasingly employers are asking sponsored employees to sign up to ‘clawback’ repayment agreements. These see the sponsored employee being required to repay some or all of the fees associated with their visa application if the employment relationship ends. However, these arrangements are not without legal risk. An employee may argue that it is an unlawful penalty clause, an unlawful restraint of trade, or a discriminatory measure. Careful drafting is essential, with mechanisms such as ‘tapering’ the amount of the repayment over time and including a ‘sunset’ provision often advisable. It should also be noted that the Home Office prohibits a sponsor from passing on the cost of any Immigration Skills Charge it has paid.

Should an employer dismiss an employee who does not hold the right to work in the UK?

Immigration law versus unfair dismissal law

Immigration law requires that all employees have the right to work for their employer in the UK. If an employer suspects that an existing employee does not have the right to work for them in the UK, continuing the employment relationship may pose compliance risks for the employer. On the other hand, employment law says that employees with two years’ service have the right not to be “unfairly” dismissed from their job. Further, all employees (regardless of their length of service) have the right not to be treated in a discriminatory way. So, how should an employer handle a situation where it comes to light that an employee may not hold the right to work? Balancing the immigration and employment risks in this situation can be challenging.

Conducting right to work checks and investigating immigration status

The first thing to note is how the UK’s right to work regime operates. If an employee works without immigration permission, the Home Office considers them to be an “illegal” worker. The employer would be liable to receive a civil penalty (a financial penalty of up to £20,000) in respect of each illegal worker. It may even face criminal prosecution if it knew or should have known of the illegal working in question. However, if an employer properly undertook a right to work check, they will receive a “statutory excuse” against a civil penalty in respect of that illegal worker. If a worker does not hold the right to work, but the employer did a compliant right to work check before the start of their employment, the employer will not be liable for a civil penalty.

There is no obligation to do follow-up right to work checks during the employment relationship, except where an employee has time-limited immigration permission. However, it may come to light that an employee who once had the right to work in the UK may no longer continue to hold that right. For example, they may have forgotten to apply for an extension of their immigration permission before it expired. If an employer becomes aware of the possibility that an employee has lost their right to work in the UK, swift and considered action is advisable, because the continued employment of an employee without immigration permission may pose serious immigration risks for the employer.

But the employment law dimension must not be forgotten. To minimise employment risks, the employer should promptly try to investigate the employee’s right to work status. However, there is an obvious conflict here: while there is a need to undertake a form of procedure to mitigate the employment risks, there is also a need for urgent action to mitigate the immigration risks.

A fair procedure would probably involve the employer meeting with the employee. The employee should be encouraged to provide information that would be helpful in determining their immigration status.

The employer may also wish to conduct a check using the Home Office’s Employer Checking Service, because a ‘Positive Verification Notice’ would give the employer a statutory excuse against liability for a civil penalty for six months. Caution should be exercised even if a ‘Negative Verification Notice’ is received. This can sometimes happen where an individual does actually have the right to work e.g. where an application or appeal has not yet been logged on the Home Office’s systems or it has not been registered that the person is a Windrush generation individual. We recommend that immigration law advice is sought in this scenario.

If the employer, having conducted its investigation, concludes that the employee probably does not have the right to work, dismissal may well be appropriate – and, potentially, necessary. However, a failure to follow a fair procedure and arrive to an informed decision may prompt the employee to lodge an unfair dismissal and/or discrimination claim.

Dismissing for right to work reasons

If, following a fairly conducted investigation, the employer reaches a conclusion that dismissal is unavoidable, the termination letter should include:

• a description of the investigation;

• a reference to the right to work provisions in the employment contract;

• the reason for the dismissal (taking the form of “because we believe that you do not have the right to work”, rather than “because you do not have the right to work”);

• the right of appeal; and

• potentially an offer of re-engagement if the employee can prove they have the right to work.

We recommend that full legal advice on how to handle these scenarios is sought on a case-by-case basis both because of the risk of tribunal claims and also because an employee who seemingly does not have the right to work may, in fact, actually have that right.

Does a TUPE transfer of sponsored employees require the new employer to do anything?

Most employment lawyers are familiar with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (aka “TUPE”). After a TUPE transfer, employees’ terms and benefits are preserved when their employment transfers to the new employer. However, the ways in which TUPE interacts with immigration law are less well understood. Consequently, it is not uncommon to overlook a couple of important immigration-related issues in corporate transactions.

Post-transfer right to work checks

Under TUPE, right to work checks that were done by the seller of the transferring business are deemed to have been done by the buyer. In other words, the buyer will get the benefit of a statutory excuse that the seller obtained in relation to a transferring illegal worker. The flip side of this is that if the seller did not do proper right to work checks, and so did not obtain a statutory excuse for a transferring illegal worker, the buyer will potentially be liable for a civil penalty in respect of that person.

For this reason, the buyer would be well advised to undertake due diligence on whether the seller has done compliant right to work checks. The transaction paperwork (e.g. the asset purchase agreement) should address the issue in the form of appropriate warranties and/or indemnities. Then, after the transfer, the buyer should ensure that it conducts fresh right to work checks on those transferring employees. There is a grace period of 60 days from the transfer date to do so.

Sponsor licence notification or application

If the TUPE transfer involves the transfer of sponsored employees, both the buyer and the seller must notify the Home Office of the change of sponsor. They must do so within a relatively short period of 20 working days from the date of the transfer. If the buyer does not itself already hold a sponsor licence of its own, it must apply for one from the Home Office and prepare to assume responsibility for the sponsorship of those employees. The window for applying is, again, 20 working days from the date of the transfer. A failure to make an application will likely mean that the Home Office cancels the sponsored employees’ immigration permission. Both parties to the TUPE transfer must therefore be alive to their post-completion obligations and the transaction agreements should be drafted accordingly.

If a sponsored employee’s duties and responsibilities will change, such that the transfer is outside the scope of TUPE, this would usually require a fresh immigration application to be made to authorise them to start working in the new position for their new employer.

Any questions?

Although this article considers aspects of some of the more commonly encountered questions that we deal with, it cannot give a full account of the various dimensions and complexities of each scenario. We therefore strongly recommend that full legal advice is sought on a case-by-case basis when handling these difficult questions in practice. If you need assistance, please do get in touch with a member of our Employment Team or Immigration Team.