Brexit, Byron and Business Compliance

A lot can change in a few months. The Home Office raid of private equity-owned Byron Burgers on 28 July 2016 came hot on the heels of the Brexit referendum (23 June) and roll out of new powers under the Immigration Act 2016.

What does Bryon mean for GPs?

Following a raid which, it is understood, was approved by Byron's management, the Home Office removed 35 staff found to be working illegally in the UK. This raid shortly followed the launch of a new Home Office task force specifically charged with investigating right to work compliance in London's hospitality industry. Hospitality, together with hotels, retail and construction, has long been vulnerable to illegal working and is the subject of Home Office focus scrutiny when enforcing right to work powers. This increased risk level is due to the make-up of these companies workforces, low skill level and low pay for many industry roles, as well as a relatively high level of staff turnover which makes managing right to work compliance a complex challenge for managers and HR teams alike.

Byron had retained compliant right to work evidence for its staff so was spared a civil penalty of up to £700,000 as well as potential criminal charges. However the commercial impact of the #BoycottByron social media campaign and negative publicity 2 months later cannot be underestimated. The fast spreading campaign was a response by customers, in particular younger ones, who perceived that the company had arranged a training session to “catch out” workers who, it must be remembered, were working in the UK unlawfully.

Regardless of your view, it is clear that alienating customers will damage a company's brand, reputation and profit long after the memory of a raid fades. In this era of stricter penalties and Home Office audits, businesses need to balance the consequences of working with the Home Office alongside brand protection. Such decisions can also impact more widely on counterparty and regulator relationship. Ensuring you brief your press team to assist with messaging should you find yourself in a similar situation is an important consideration.

What does the Immigration Act 2016 mean for GPs?

The Bryon raid and increase in civil penalties reflects the focus on right to work compliance under the Immigration Act 2016.

The Immigration Act introduced a lower threshold for illegal working under which a criminal penalty arises where an employer had “reasonable cause to believe” rather than the previous threshold of “knowing” that someone did not have the right to work lawfully in the UK. While the Home Office has not historically brought many criminal cases under right to work legislation this may change in the future. Furthermore companies remain liable to civil penalties of up to £20,000 in relation to each illegal worker employed. From July to December 2015 over 1,200 penalties were issued with a value of £21.5 million.

Evidencing a defence against both civil and criminal charges through compliant right to work documentation taken from before staff start work, updating checks where relevant, and producing evidence if required, remains important. We recommend you regularly audit these files for ongoing compliance.

Businesses should also be mindful of the new Home Office power, from October 2016, to close premises for 48 hours if a history of illegal working is found or suspected. This would particularly hit the profit of businesses in the hospitality industry which can be substantial over the course of a weekend.

What does Brexit mean for GPs?

Managing compliance matters will increase pressure on portfolio companies already considering their resourcing and staffing needs in this post-Brexit landscape. Do remember that, whilst the UK has voted for Brexit, it remains business as usual for the foreseeable future. The UK remains a member of the EU – citizens retain the automatic right to work in any EU country without visas and vice versa – until the UK has formally left the EU.

Advance Brexit planning is of particular concern for employers in high risk industries which traditionally comprise of a large proportion of EU nationals. Whilst there is no firm guidance on future immigration rules for UK based European nationals, research shows that 94% of these nationals in the hotel and restaurant industries are unlikely to meet any future skills test set by the Home Office under Brexit related immigration rules.

Taking small steps now to support staff applying for permanent residence (if they have resided in the UK for 5 years) to take them outside immigration rules, as well as training existing staff to anticipate post Brexit skills gaps will be important steps for business planning until the post Brexit landscape becomes clearer.

And the future?

The Byron raid shows that the Home Office, which is under pressure to reduce migration to “tens of thousands”, means business when tackling illegal working.

Private equity investments in these industries are relatively common. The costs of compliance, along with the benefit of brand preservation, needs to be factored into costs modelling.

In uncertain times it is increasingly important for businesses to plan resourcing and to review, audit and where necessary update staff training practices for illegal working. “Tip-offs” leading to investigations and penalties are increasing. As can be seen from the effects of the Byron raid, businesses also face risks of consumer campaigns against non-compliant practice which can be just as reputationally damaging.