The appeal of judicial discretion in civil penalty appeals: Court of Appeal grants permission

The Court of Appeal recently granted permission to appeal the County Court decision in Jen and Jamie Ltd v Secretary of State for the Home Department [2025] EWCC 41, [2025] 7 WLUK 288, in which an appeal against a civil penalty notice for illegally employing two individuals was dismissed. The Court of Appeal will consider the question of judicial discretion in civil penalty appeals, that is, whether judges are entitled to exercise discretion and look at mitigating factors other than those contained in the Code of Practice when assessing the appropriate level of penalty.

In this post, I summarise the proceedings to date and explain why we are seeing increasing numbers of civil penalty appeals.

County Court proceedings

Last summer, the small world of civil penalty appeals was unexpectedly rocked by the publication of the County Court decision in Jen and Jamie Ltd. I was instructed to act for Jen and Jamie Ltd in the store’s civil penalty appeal in the County Court.

Practising in this field remains complicated by the dearth of binding authorities. There is also a lack of reported County Court decisions to confirm standard practice. Different County Court centres have been approaching crucial aspects of the civil penalty regime differently. This results in inconsistent and uncertain outcomes, dependant on a postcode lottery.

As set out here and here, while practice varies, County Court centres have been known to accept that:

the initial burden of proving that a person was employed and that they had no legal right to work in the UK rests on the Secretary of State;
employment law principles apply when establishing the existence of an employment relationship for the purpose of a civil penalty appeal;
ad hoc and casual work arrangements do not constitute employment and the Secretary of State must prove that there has been a contract of employment, including mutuality of obligation.

The store’s appeal in the present case concerned the imposition of fines in relation to the work of two unpaid workers, in breach of section 15 of the Immigration, Asylum and Nationality Act 2006. As summarised in the decision, neither woman claimed to be currently employed by the store or in receipt of any form of payment for their work (or training) at the time of the immigration raid. One of the women referred to an hourly rate which she hoped to be paid if employed by the store in the future. The appellant’s witnesses denied making this offer.

The immigration officers who conducted the immigration raid on the store reported observing both women engaging in “work”. Notably, Jen and Jamie Ltd never denied that the women engaged in unpaid work, but denied their “employment”. The legal distinction between these terms was a crucial aspect of the County Court appeal.

The Home Office subsequently issued the store with two civil penalty fines of £40,000 each. The store had no prior breaches of the 2006 Act. Accordingly, the starting point was a £45,000 penalty, with a £5,000 discount applied for cooperation with the Home Office.

No documentary evidence of current payments or an agreement to provide future remuneration was ever presented. The store objected to the penalties, which were subsequently upheld in the objection outcome notice.

The County Court appeal raised three grounds:

The Home Office failed to meet the burden of proving the existence of an employment relationship;
The appellant was not liable due to a lack of an employment relationship in the present case; and
The Court could exercise its discretion to reduce the penalty amount, taking into account matters outside of the Code of Practice (further to section 17(2)(b) and section 17(3)(b) of the 2006 Act).

The Home Office maintained that, while it was not in dispute that the two women were not paid in the traditional sense, their remuneration came in the form of the benefit of learning a trade and practicing their English language skills.

Based on the answers provided in their interviews, neither woman claimed that they believed themselves to be currently employed by the store. This aligned with the appellant’s position that they were unpaid workers/volunteers, receiving training in retail work.

His Honour Judge Robinson BEM did not accept the above arguments from either party. The judge was not persuaded by the Home Office’s submission that practising one’s language skills could form valid consideration for the purpose of establishing the existence of an employment relationship.

Notably, the judge accepted that employment law principles apply when considering the existence of an employment relationship for the purpose of section 15 and section 25 of the 2006 Act, and applied the test in Autoclenz.

However, despite finding the appellant’s witnesses credible and accepting the applicability of the relevant employment law principles, the judge dismissed the appeal on all grounds.

The judge did not agree that the application of the four-stage Autoclenz test meant that no employment relationship existed in law. The judge found that the two women “had an expectation they would receive pay” which “transitioned to an obligation upon the appellant by virtue of the sheer frequency of work and set shifts” they were required to work.

Contrary to recent practice of other County Courts, the judge also found that the burden of proof rested on the appellant regarding all aspects of the appeal. The judge also found that he did not have the discretion to consider matters outside the Code of Practice when assessing the level of penalty under section 17(2)(b) of the 2006 Act. However, recent unreported County Court decisions demonstrate a divergence in the approach to the question of judicial discretion to reduce the penalty amount pursuant to section 17 of the 2006 Act.

Permission to appeal

Subsequently, Jen and Jamie Limited applied for permission to appeal to the Court of Appeal. Permission was sought in relation to two grounds. Ground one was the finding of employment; that is, whether the judge materially erred in law and in fact by finding that the alleged employees were employed at the material time. Ground two was judicial discretion; whether the judge erred in law by determining that he is not entitled to have regard to matters outside of the Code of Practice, while considering the level of penalty under section 17(2)(b) in conjunction with section 17(3) of the 2006 Act.

On 17 December 2025, Lord Justice Singh granted permission to appeal on ground two, i.e. the question of whether judges are entitled to exercise discretion and to look at mitigating factors other than those contained in the Code of Practice when assessing the appropriate level penalty. Lord Justice Singh considered that the ground has a real prospect of success and raises an important issue of principle.

Civil penalties and the hostile environment

Following the threefold increase of civil penalty amounts in February 2024, combined with an increase in immigration raids, many small businesses have found themselves in an unenviable position. Either accept the penalty and go out of business. Or pursue costly and unpredictable litigation.

As recently reported in the Guardian, the Federation of Small Businesses expressed concern that, following these increases, even a first breach penalty could prove fatal to small businesses. The Federation also “called on ministers to ‘accept that the size of employer now gets reflected in Home Office fines and systems’.”

The operation of the hostile environment and the trigger happy and unchecked manner in which these penalties are issued by the Home Office also increase the risk that racialised small business owners will be disproportionately affected.

However “unappealing” pursuing a civil penalty appeal may seem, at present there is a high cost to be paid either way, particularly considering how these penalties have been publicised.

Conclusion

Unfortunately, there are few binding or persuasive authorities in relation to the civil penalty regime. As a result, we have seen contradictory approaches to these appeals. Employers face a postcode lottery when it comes to matters including the question of judicial discretion regarding lowering the penalty amount.

Since the threefold increase in civil penalties, many employers face the risk of liquidation even upon receiving their first penalty notice. The Court of Appeal will now certainly bring some much-needed clarity and guidance in this area.