Failed challenge shows that civil penalty appeals can be unappealing

“They weren’t working, they were just volunteering” is rarely a persuasive defence against a civil penalty. Indeed, it’s positively unpersuasive when those in question were caught voluntarily serving customers, selling alcohol, using the lottery machine to sell tickets and scratch cards, processing parcel deliveries, stacking shelves, and cleaning the store.

This is the case in Jen and Jamie Limited v Secretary of State for the Home Department [2025] EWCC 41, a reported County Court judgment upholding an £80,000 civil penalty against a Stockton on Tees convenience store for illegally employing two individuals without the right to work. It’s rare to see a reported first instance civil penalty appeal judgment. The judgment doesn’t change the law in any way, but it does lay bare the full evidence and appeal, reminds us of the key components of employment, and demonstrates the high cost of failure.

I found it helpful reading this case because many of the issues drawn out here mirror ones that come up time and time again in practice; it’s just rare to see them actually run all the way through to a conclusion.

For a quick refresher before jumping in, you can read more about civil penalties here.

Facts

The appellant operated a convenience store. The company director claimed to be hosting his friend’s two nieces who had been made redundant from the care sector. He said he had been told by his friend that they both had work permits. He claimed to have agreed to try them out on a voluntary basis to give them retail industry experience.

He did not conduct any right to work checks, because he said they were not coming to work, but he did check their identity documents to verify their ages. He claimed not to be offering them any financial compensation or any other benefits. The workers claimed to expect to receive £5.50 an hour after completing their initial training.

The Home Office visited the shop and found them both to be working there. After interviews, evidence-gathering, and conclusion of the investigation process, a civil penalty of £80,000 was issued, based on a calculation of £40,000 per illegal worker (discounted from £45,000 for co-operation).

Grounds of appeal 

The immigration status of the two individuals isn’t covered in the judgment, likely because it wasn’t in dispute, and so we must assume they did not have the right to work. Instead, the appellant argued that the Home Office had failed to prove that the individuals in question were employed, and in any event there was no liability because they were not employed. Lastly, the appellant argued that the penalty was too high and ought to be reduced.

Legal framework of an appeal

Section 15 of the Immigration, Asylum and Nationality Act 2006 is the statutory basis on which the Home Secretary can issue civil penalties. Section 16 sets out how to object and section 17 sets out how to appeal.

There are only three statutory grounds of appeal:

(a) [the employer] is not liable to the imposition of a penalty,

(b) [the employer] is excused payment by virtue of section 15(3), or

(c) the amount of the penalty is too high.

The standard of proof in a civil penalty appeal is the balance of probabilities, that is proving something is more likely than not (para 92).

The burden of proof rests on the appellant to demonstrate that they are not liable to a penalty (para 93-97, Akbar v Secretary of State for the Home Department [2017] EWCA Civ 16 cited). This disposed of the appellant’s first ground of appeal in which they had argued that the Home Office had failed to prove employment.

What constitutes employment?

Dealing with the second and most substantive ground of appeal, the judge examined what constitutes employment. Employment for the purposes of a civil penalty is defined in section 25(b) of the Immigration, Asylum and Nationality Act 2006:

a reference to employment is to employment under a contract of service or apprenticeship, whether express or implied and whether oral or written

This is usually where most immigration lawyers’ employment knowledge then falls off a cliff (myself included), but thankfully the judge goes on to explain that this definition mirrors the language in section 230 of the Employment Rights Act 1996, and cites helpful case law arising from that Act.

The relevant case is Autoclenz Limited v Belcher [2009] EWCA Civ 1046, which was subsequently upheld by the Supreme Court:

In essence there are four basic requirements that must be fulfilled before it can be said that there is a contract of employment and so a relationship of employer and employee. First, the employer must have undertaken to provide the employee with work for pay. Secondly, the employee must have undertaken to perform work for pay. Those obligations are mutual. The third requirement is that the employee must have undertaken to perform the work personally; he is not entitled to sub-contract the work to another. Fourthly, it is also generally accepted that there is a further requirement before a court will hold that there is a contract of employment between employer and employee, i.e. that the employee agrees that he will be subject to the control of the employer to a certain minimum degree. 

To this, the judge adds the Supreme Court’s opinion on the bargaining power of the parties involved

So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description.

Applying these considerations to the facts, the judge considered the following:

What activities were they doing in the store?

They were serving customers, selling alcohol, using the lottery machine to sell tickets and scratch cards, processing parcel deliveries, stacking shelves, and cleaning the store.

What was the frequency and duration of their activities, and their expectations in performing those activities?

They had an obligation to attend the store at specific times for identified shifts, to perform their tasks. Assertions by the director and by the store manager that they were free to come and go were not accepted. Attendance for seven consecutive days at the store demonstrated a level of commitment alongside an obligation to commit to that pattern of work.

Was there an obligation to remunerate?

There was an expectation on behalf of the individuals of an eventual payment of £5.50 per hour. The frequency of work and the set shift pattern performed by the individuals indicated an obligation on the employer to remunerate. The inadequacy of the remuneration (at a level well below the national minimum wage) was irrelevant to the question of obligation.

“Training isn’t working!” (it is)

Both the individuals and their employers claimed that they were training, not working. The appellant argued that training is unremunerated, and whilst agreeing it is work, argued that it was entirely voluntary and did not meet the definition of employment.

Weirdly, the Home Office argued that training represented a benefit in the form of work experience and practising English. The judge didn’t accept either submission, finding that work experience and language practice cannot possibly meet the threshold of consideration in the context of an employment contract.

Relying instead on the plain English definition of training in the trusty Cambridge Dictionary, the judge held that training in a job context is preparatory in nature and designed to ensure a trainee is equipped for the role they will perform. There is a clear nexus between the training and the job. There was no distinction between “trainee time” and “trained work” in this case.

Referencing the February 2024 Code of Practice on Preventing Illegal Working the judge highlighted that an employee could also include someone who would be employed (in the future).

Was there a contract of employment? 

Yes. Weaving together all of the above, there was a contract of employment, because there was mutuality of obligation, including an obligation on the individuals to attend work at set times, and an obligation on the employer to remunerate.

As a result of this finding, the appellant also lost on their second ground of appeal.

Can a penalty be reduced? 

Having lost the substantive arguments, the last point of contention was whether the court should reduce the penalty. The appellant argued it should. Whilst the court does have the power to reduce a penalty, the circumstances under which it would do so are limited.

Working through the legislation including the Code of Practice, the judge agreed with the simple mathematics behind the Home Office’s penalty calculations. The judge found that the court is bound to follow the statutory formula and does not have an unfettered discretion to reduce the penalty:

It is not the role of the court to ride roughshod over the process which has been laid out in the Code. (Para 140)

Citing some caselaw which may be useful to practitioners in evaluating cases, the judge looked at a case in which a penalty was reduced (Ashfaq v The Secretary of State for the Home Office [2012] 10 WLUK 14) but departed from it on the basis that it erroneously mixed up civil and criminal jurisdictions. Instead, the judge followed the approach in Mohamed v The Advocate General for Scotland (on behalf of the Secretary of State for the Home Department) [2017] SC LIV 23 which took the position that the appellant’s ability or inability to pay the penalty is irrelevant to whether any reduction should be given.

As to whether the 30% discounted penalty rate was still available to the appellant after losing the appeal, the answer was an unequivocal ‘no’. Following Secretary of State for the Home Department v Ouedrani [2021] EWCA Civ 1181 the judge held that the Immigration, Asylum and Nationality Act 2006 does not provide for the option of paying a discounted amount after a failed appeal.

Takeaways 

 Employers will often be advised that in such cases, it’s rarely worth pursuing an appeal against a civil penalty notice due to the cost of litigation and the poor prospects of success. See for example this case of a chippie owner reported in the Guardian yesterday. But with penalties now at bankruptcy-inducing levels of up to £45,000 per incident for first-time offenders, it’s unsurprising that employers will try to explore every available legal avenue to challenge one, and many perhaps feel they have nothing left to lose by giving it a go.

What Jen and Jamie Limited v Secretary of State for the Home Department shows us however is that attempting to argue that someone was merely training or volunteering will rarely fly, and the risk of pursuing this unsuccessful line of argument is that the appellant then loses out on the opportunity to benefit from the 30% penalty discount offered to those opting to make a fast payment instead of appealing. At current levels, some small businesses might just about manage to survive a 30% discounted penalty, but few would withstand the cost of an appeal followed by the full penalty.

I questioned the effectiveness of illegal working fines back in this 2020 opinion piece, when they were just £15,000 for first offenders. Colin shared a similar view in 2023 when the previous government tripled fines up to current levels. We are now firmly in an era of immigration enforcement, with no changes to the penalty regime on the horizon.

At the end of this year it will be interesting to see how much money is actually successfully recovered through penalties compared against how many businesses simply declare themselves bankrupt. Until then, employers need to be more vigilant than ever to ensure they conduct proper right to work checks and retain the correct evidence to arm themselves with a statutory excuse against any civil penalty.