The requirement for some foreign nationals to register with the police has been suspended with effect from at least 4 August 2022. The Home Office has not made an official announcement and the Immigration Rules have not been amended, however affected individuals are being contacted by the Home Office or police services directly.

Text:

Under the UK Immigration Rules, certain foreign nationals are subject to an immigration condition requiring them to register with the police. They are also required to make notifications to the police where certain of their circumstances, had changed, e.g. they move residential address, change jobs or have an extension of their immigration permission. Although these requirements are currently still included in the Immigration Rules, they are no longer being observed in practice, as confirmed on GOV.UK from 4 August 2022.

This change will be welcomed because it removes a significant administrative burden both for the affected individuals and UK police forces. The registration system had been severely backlogged for some time, with the Metropolitan Police advising that no registration appointments were available until 2023.

Also, individuals who fail to comply with the condition are no longer at risk of criminal prosecution and/or refusal of immigration permission.

What do affected individuals need to know about this change?

A public notice issued by the Home Office, National Police Chief’s Council and Counter Terrorism Policing confirms that:

• Individuals who receive the public notice are no longer required to register with the police from the date of its receipt (this includes people who are waiting for an appointment);

• Individuals who have been issued with a visa with the police registration requirement endorsed but who have not yet travelled will either have their visa reissued if possible or will be notified of the change in their conditions in advance of travel;

• Immigration permission will now be granted without the police registration requirement imposed;

• Individuals who present at a police registration office will be advised they are not required to register;

• Individuals who have already travelled or who are in the UK will not have their visa/BRP updated to reflect the removal of the requirement;

• Individuals with existing immigration permission containing the condition will not have their visa or BRP amended, but they are no longer required to retain their police registration certificate or to report any changes to the information included on it to the police. They do however continue to be required to report certain changes to the Home Office;

• Proof of compliance with the requirement will not be required for applications for further UK immigration permission; and

• Individuals who have already paid the registration fee prior to the scheme being suspended will not be refunded.

If you have any queries about this development, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Supinder Singh Sian, Kathryn Denyer,

The requirement for some foreign nationals to register with the police has been suspended with effect from at least 4 August 2022. The Home Office has not made an official announcement and the Immigration Rules have not been amended, however affected individuals are being contacted by the Home Office or police services directly.

Text:

Under the UK Immigration Rules, certain foreign nationals are subject to an immigration condition requiring them to register with the police. They are also required to make notifications to the police where certain of their circumstances, had changed, e.g. they move residential address, change jobs or have an extension of their immigration permission. Although these requirements are currently still included in the Immigration Rules, they are no longer being observed in practice, as confirmed on GOV.UK from 4 August 2022.

This change will be welcomed because it removes a significant administrative burden both for the affected individuals and UK police forces. The registration system had been severely backlogged for some time, with the Metropolitan Police advising that no registration appointments were available until 2023.

Also, individuals who fail to comply with the condition are no longer at risk of criminal prosecution and/or refusal of immigration permission.

What do affected individuals need to know about this change?

A public notice issued by the Home Office, National Police Chief’s Council and Counter Terrorism Policing confirms that:

• Individuals who receive the public notice are no longer required to register with the police from the date of its receipt (this includes people who are waiting for an appointment);

• Individuals who have been issued with a visa with the police registration requirement endorsed but who have not yet travelled will either have their visa reissued if possible or will be notified of the change in their conditions in advance of travel;

• Immigration permission will now be granted without the police registration requirement imposed;

• Individuals who present at a police registration office will be advised they are not required to register;

• Individuals who have already travelled or who are in the UK will not have their visa/BRP updated to reflect the removal of the requirement;

• Individuals with existing immigration permission containing the condition will not have their visa or BRP amended, but they are no longer required to retain their police registration certificate or to report any changes to the information included on it to the police. They do however continue to be required to report certain changes to the Home Office;

• Proof of compliance with the requirement will not be required for applications for further UK immigration permission; and

• Individuals who have already paid the registration fee prior to the scheme being suspended will not be refunded.

If you have any queries about this development, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Supinder Singh Sian, Kathryn Denyer,

Employment law and immigration law are two distinct areas of law. On occasion, they meet each other and can create headaches for employers. We examine what happens when immigration law collides with discrimination law, unfair dismissal law and TUPE.

Text:

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.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Tom McEvoy,

Employment law and immigration law are two distinct areas of law. On occasion, they meet each other and can create headaches for employers. We examine what happens when immigration law collides with discrimination law, unfair dismissal law and TUPE.

Text:

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.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Tom McEvoy,

During the Covid-19 pandemic many employees asked if they could work from “home” from an overseas country. Similarly, employees from overseas countries asked if they could work remotely in Ireland. Two years on, these flexible working arrangements remain attractive to employees and employers may consider allowing employees to work remotely overseas. There are important legal and practical issues associated with these requests, which are explained in this note.

Text:

Please click download files to read the full note.

The content includes:

• Applicable laws and employee rights
• Income tax and social security implications
• Immigration implications
• Regulatory issues
• Information security, data protection and data privacy issues
• Confidential information implications
• Health and safety implications
• Permanent establishment risk

This note is reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com.

Related Item(s): UK & Ireland, Employment, Remote working overseas

Author(s)/Speaker(s): Laura Ensor, Síobhra Rush,

Attachment: Ireland: Remote working overseas PDF

During the Covid-19 pandemic many employees asked if they could work from “home” from an overseas country. Similarly, employees from overseas countries asked if they could work remotely in Ireland. Two years on, these flexible working arrangements remain attractive to employees and employers may consider allowing employees to work remotely overseas. There are important legal and practical issues associated with these requests, which are explained in this note.

Text:

Please click download files to read the full note.

The content includes:

• Applicable laws and employee rights
• Income tax and social security implications
• Immigration implications
• Regulatory issues
• Information security, data protection and data privacy issues
• Confidential information implications
• Health and safety implications
• Permanent establishment risk

This note is reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com.

Related Item(s): UK & Ireland, Employment, Remote working overseas

Author(s)/Speaker(s): Laura Ensor, Síobhra Rush,

Attachment: Ireland: Remote working overseas PDF

On 20 July 2022 the Home Office published further details of its strategy to deliver an end-to-end digital immigration system. The planned system transformation will involve a digital process for applying for permission to travel and identity verification for immigration applications, as well as using eVisas to cross the border and demonstrate entitlements within the UK.

Text:

The New Plan for Immigration: legal migration and border control strategy covers the Home Office’s vision across the following areas:

• Planning to come to the UK

• Making an application

• Travelling to the UK

• Crossing the border

• Living in the UK

• Cross-system improvements

Planning to come to the UK

The Home Office intends to:

• Provide clearer customer guidance on GOV.UK, with a simplified set of guidance for work visas due to be available later in 2022;

• Roll out additional interactive customer support tools, building on the success of tools such as Check if you need a UK visa and Check if you may be eligible for a Skilled Worker visa;

• Produce a series of ‘how to’ videos to assist customers to complete tasks such as making an application for an Electronic Travel Authorisation (ETA), proving their identity or making an application for a sponsor licence;

• By 2025, have in place a fully digital end-to-end process for individuals using the UK immigration system;

• Reduce customer queries through improved customer information and application processes; and

• Provide digital self-service support for customer queries using chatbot and voicebot services.

Applying to come to the UK

‘Digital by default’ system

The ‘digital by default’ agenda for the immigration system will be pursued further, with more people being able to enrol their biometrics digitally (or being able to reuse previously enrolled biometrics), making their application online and receiving an eVisa rather than physical proof of their status.

eVisas

eVisas are considered by the Government to be more secure, up-to-date and convenient to apply for and maintain. However, there are currently known issues with EU Settlement Scheme participants being able to access their UKVI account, which the Independent Monitoring Authority is currently investigating. Minimisation of such issues, combined with an effective resolution centre service will be critical to ensuring that individuals are not disadvantaged. The Home Office has stated that from 2023 their customer service agents will be in-house experts able to view all of the customer’s immigration interactions via one view.

Improvements are being made to the digital customer account this year and next year to enhance useability. The Home Office is also exploring opportunities to link up government information and services, including through the government’s One Login initiative.

Visa vignettes and biometric immigration documents (biometric residence permits and cards) are due to be replaced by eVisas by December 2024. This deadline coincides with the expiry of a large number of existing biometric immigration documents. These are currently only valid to 31 December 2024, even if the holder’s immigration permission expires after this date.

Originally the reason for short-dating was due to the current encryption technology in the cards not meeting EU requirements from 1 January 2025. However, since the UK left the EU, the Home Office has continued to short-date with the expectation that the cards will be phased out by the end of 2024. Individuals will be given guidance on how to convert the proof of their status to an eVisa by this date.

Although not covered in the strategy document, employers will also need to be prepared to carry out an online repeat right to work check for employees with limited immigration permission who relied on a short-dated biometric residence permit as evidence of their right to work. The volume of these checks will be significant for larger employers.

Sponsorship

In terms of recent developments, the Home Office has put in place automatic checks with HMRC to be able to verify whether skilled workers are being paid in line with their certificate of sponsorship.

The timelines for sponsorship reform have been revised due to resourcing limitations. This most likely refers to the need for resources to be diverted to processing Ukraine Scheme applications.

The planned review of service standards to reduce the time needed to sponsor workers is now anticipated to be in place by Spring 2023. The new ‘Sponsor a Visa’ service is now anticipated to go live for limited roll-out in early 2023. The ‘Manage a Licence’ service is due for limited delivery by late 2023 and the ‘Become a Sponsor’ service by early 2024.

Travelling to the UK

A permission to travel scheme will be put in place in 2023, under which all travellers will either need a British or Irish passport, eVisa or Electronic Travel Authorisation (ETA). This could have significant cost and practical implications for individuals who are currently demonstrating their long-term residence in the UK using physical documents, for example an indefinite leave stamp or certificate of entitlement to the right of abode.

ETAs are expected to be implemented in three phases, firstly in Q1 2023 for a private beta release, secondly in Q2-Q3 2023 for nationals who are currently eligible for an electronic visa waiver, and thirdly in Q3-Q4 2023 for the rest of the world.

Carriers will also become able to access a single permission to travel confirmation message from the Home Office when they submit Advance Passenger Information (API) regarding travellers who are due to board services to the UK. Initial testing of an interactive API system (iAPI) has already taken place in April 2022, and integration of a messaging system for all carriers is expected to be completed by early 2024.

Crossing the border

The Home Office hopes to improve and standardise border infrastructure and facilities by 2025. It will also aim to deliver greater levels of automation for processing arriving passengers and improved availability and functionality of eGates. There is a proposal to reduce the qualifying age for using an eGate from 12 to 10.

The role of Border Force Officers will be focused on passengers of interest, e.g. those whose identity needs to be verified, who have a risk profile, where there is specific intelligence, agency directed intervention or a safeguarding concern. Border Force may also be reformed as an organisation, in line with the recommendations arising from the Independent review of Border Force, published on 20 July 2022.

Living in the UK

The main planned change in this area will be increased system-to-system communication of immigration status information between Government departments and public authorities.

Information sharing of this type is already in place with the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) and NHS England and Wales. In 2022 and 2023 these will be expanded to the DVLA, Social Security Scotland, the Student Loans Company and some local authorities.

This development may result in increased convenience for many individuals who currently need to go online to prove their rights to third parties. However, there are also risks of substantial detriments to individuals if the system data on immigration status is not correct and any errors cannot be swiftly and effectively addressed.

Communications and engagement

The Home Office intends to run communication campaigns for system users as its programme of changes progresses. These will cover topics such as the upcoming requirement to apply for an ETA, as well as how to use eVisas, UKVI accounts and online services.

The Home Office will also continue to take advice from advisory groups and key stakeholders including those in business, academics and the non-profit sector. Some engagement events will be delivered in person.

If you have any queries about the strategy document or the issues raised in this article, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Stephen OFlaherty, Parvin Iman, Tara Sayer,

On 20 July 2022 the Home Office published further details of its strategy to deliver an end-to-end digital immigration system. The planned system transformation will involve a digital process for applying for permission to travel and identity verification for immigration applications, as well as using eVisas to cross the border and demonstrate entitlements within the UK.

Text:

The New Plan for Immigration: legal migration and border control strategy covers the Home Office’s vision across the following areas:

• Planning to come to the UK

• Making an application

• Travelling to the UK

• Crossing the border

• Living in the UK

• Cross-system improvements

Planning to come to the UK

The Home Office intends to:

• Provide clearer customer guidance on GOV.UK, with a simplified set of guidance for work visas due to be available later in 2022;

• Roll out additional interactive customer support tools, building on the success of tools such as Check if you need a UK visa and Check if you may be eligible for a Skilled Worker visa;

• Produce a series of ‘how to’ videos to assist customers to complete tasks such as making an application for an Electronic Travel Authorisation (ETA), proving their identity or making an application for a sponsor licence;

• By 2025, have in place a fully digital end-to-end process for individuals using the UK immigration system;

• Reduce customer queries through improved customer information and application processes; and

• Provide digital self-service support for customer queries using chatbot and voicebot services.

Applying to come to the UK

‘Digital by default’ system

The ‘digital by default’ agenda for the immigration system will be pursued further, with more people being able to enrol their biometrics digitally (or being able to reuse previously enrolled biometrics), making their application online and receiving an eVisa rather than physical proof of their status.

eVisas

eVisas are considered by the Government to be more secure, up-to-date and convenient to apply for and maintain. However, there are currently known issues with EU Settlement Scheme participants being able to access their UKVI account, which the Independent Monitoring Authority is currently investigating. Minimisation of such issues, combined with an effective resolution centre service will be critical to ensuring that individuals are not disadvantaged. The Home Office has stated that from 2023 their customer service agents will be in-house experts able to view all of the customer’s immigration interactions via one view.

Improvements are being made to the digital customer account this year and next year to enhance useability. The Home Office is also exploring opportunities to link up government information and services, including through the government’s One Login initiative.

Visa vignettes and biometric immigration documents (biometric residence permits and cards) are due to be replaced by eVisas by December 2024. This deadline coincides with the expiry of a large number of existing biometric immigration documents. These are currently only valid to 31 December 2024, even if the holder’s immigration permission expires after this date.

Originally the reason for short-dating was due to the current encryption technology in the cards not meeting EU requirements from 1 January 2025. However, since the UK left the EU, the Home Office has continued to short-date with the expectation that the cards will be phased out by the end of 2024. Individuals will be given guidance on how to convert the proof of their status to an eVisa by this date.

Although not covered in the strategy document, employers will also need to be prepared to carry out an online repeat right to work check for employees with limited immigration permission who relied on a short-dated biometric residence permit as evidence of their right to work. The volume of these checks will be significant for larger employers.

Sponsorship

In terms of recent developments, the Home Office has put in place automatic checks with HMRC to be able to verify whether skilled workers are being paid in line with their certificate of sponsorship.

The timelines for sponsorship reform have been revised due to resourcing limitations. This most likely refers to the need for resources to be diverted to processing Ukraine Scheme applications.

The planned review of service standards to reduce the time needed to sponsor workers is now anticipated to be in place by Spring 2023. The new ‘Sponsor a Visa’ service is now anticipated to go live for limited roll-out in early 2023. The ‘Manage a Licence’ service is due for limited delivery by late 2023 and the ‘Become a Sponsor’ service by early 2024.

Travelling to the UK

A permission to travel scheme will be put in place in 2023, under which all travellers will either need a British or Irish passport, eVisa or Electronic Travel Authorisation (ETA). This could have significant cost and practical implications for individuals who are currently demonstrating their long-term residence in the UK using physical documents, for example an indefinite leave stamp or certificate of entitlement to the right of abode.

ETAs are expected to be implemented in three phases, firstly in Q1 2023 for a private beta release, secondly in Q2-Q3 2023 for nationals who are currently eligible for an electronic visa waiver, and thirdly in Q3-Q4 2023 for the rest of the world.

Carriers will also become able to access a single permission to travel confirmation message from the Home Office when they submit Advance Passenger Information (API) regarding travellers who are due to board services to the UK. Initial testing of an interactive API system (iAPI) has already taken place in April 2022, and integration of a messaging system for all carriers is expected to be completed by early 2024.

Crossing the border

The Home Office hopes to improve and standardise border infrastructure and facilities by 2025. It will also aim to deliver greater levels of automation for processing arriving passengers and improved availability and functionality of eGates. There is a proposal to reduce the qualifying age for using an eGate from 12 to 10.

The role of Border Force Officers will be focused on passengers of interest, e.g. those whose identity needs to be verified, who have a risk profile, where there is specific intelligence, agency directed intervention or a safeguarding concern. Border Force may also be reformed as an organisation, in line with the recommendations arising from the Independent review of Border Force, published on 20 July 2022.

Living in the UK

The main planned change in this area will be increased system-to-system communication of immigration status information between Government departments and public authorities.

Information sharing of this type is already in place with the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) and NHS England and Wales. In 2022 and 2023 these will be expanded to the DVLA, Social Security Scotland, the Student Loans Company and some local authorities.

This development may result in increased convenience for many individuals who currently need to go online to prove their rights to third parties. However, there are also risks of substantial detriments to individuals if the system data on immigration status is not correct and any errors cannot be swiftly and effectively addressed.

Communications and engagement

The Home Office intends to run communication campaigns for system users as its programme of changes progresses. These will cover topics such as the upcoming requirement to apply for an ETA, as well as how to use eVisas, UKVI accounts and online services.

The Home Office will also continue to take advice from advisory groups and key stakeholders including those in business, academics and the non-profit sector. Some engagement events will be delivered in person.

If you have any queries about the strategy document or the issues raised in this article, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Stephen OFlaherty, Parvin Iman, Tara Sayer,

Spain has long been the favoured holiday destination for many sun-seeking Brits. The proposed introduction of a new digital nomad visa, opening the door to both “working holidays” and longer term relocations, will therefore be welcome news to employees.

Text:

But will these potentially complex arrangements now be more straightforward for employers to navigate? We consider the potential employment, immigration and tax implications.

The pandemic saw a surge in requests from employees to work remotely in another country, often for an extended period. Initially, requests were usually short-term relocations related to the crisis. Increasingly, however, requests have involved permanent or semi-permanent moves abroad, with the trend continuing even though the public health crisis has now abated.

The challenges of the “digital nomad”

Such requests create headaches for employers. No one wants to upset their staff or put themselves on the backfoot in the war for talent. At the same time, employers are faced with a litany of legal issues which we have considered in detail before. Would the employee’s activities in the third country create a “permanent establishment” for corporation taxes? Would the employer need to register to withhold income tax, and pay employer social security charges? Does the employee have the right to work, or could the employer find itself facing immigration penalties? Would the employee find themselves in possession of a host of local employment rights, able to take the employer to a local labour court they know little about in the event of a dispute? Will the local labour inspector come knocking at the employee’s door? What about data protection? Regulatory issues? Health and safety?

It’s therefore understandable that employers tend to tread carefully on this issue. This can mean requests being refused, authorisations time limited, or permission being granted only in specific circumstances (such as where there is an existing local entity that can employ staff). Employers of record present one possible solution, but this arrangement is not without its own challenges.

Digital nomad visas – the legal implications

Is there a better way? Some countries think so: the Bahamas was fastest off the mark with a “digital nomad visa”. The basic premise behind this is that, in return for attracting well paid staff to come and spend their earnings in the local economy, the visa conditions mean that employers won’t need to worry about any of these complex issues. Countries as diverse as Estonia and the UAE have since followed suit.

Now comes a possible game changer for British employers: the so called “Start-up Law” recently introduced as a bill in the Spanish Parliament, with approval anticipated by the end of 2022. This seeks to establish a brand-new visa and residence permit for “digital nomads” which will permit people working remotely for foreign companies to live in Spain without needing a full work visa or a local sponsoring entity.

This latest development will be of particular interest to many UK employers, given Spain’s huge popularity as both a tourist and second home destination for Brits; at end of 2020 it was estimated that there were over 380,000 British citizens residing in Spain. However, employers will need to pay close attention to the detail: although the new visa will make life easier as far as immigration law is concerned, there remains a potential sting in the tail with respect to tax and employment law.

Immigration law

If approved, the bill will be a turning point in terms of Spanish immigration law. Permit-holders will be allowed to work remotely in Spain provided that their employer is located abroad and does not operate a Spanish entity. In addition, self-employed “freelancers” will be able to work for Spanish clients, provided that the time spent does not exceed 20% of the individual’s professional activity.

Under the proposed legislation there are two main immigration routes available for individuals:

• Visa for international remote work: this is intended for qualified professionals, graduates, postgraduates of renowned universities, vocational education, and renowned business schools or applicants with at least three years of professional experience.

Foreign nationals (not ordinarily residing in Spain) who intend to stay and work remotely for a non-Spain-based company would be able to apply for a visa which will be valid for up to one year, or the duration of their employment contract if shorter.

Visa holders would also have the right to apply for a “residence permit for international remote work”, starting 60 calendar days prior to the expiry of their visa, provided the conditions that led to their original visa being granted are still satisfied.

• Residence permit for international remote work: foreign nationals who either hold the “visa for international remote work”, or who otherwise have legal status to reside in Spain, would be able to apply for this type of permit.

This permit would be valid for up to three years, or the duration of the contract if shorter. Thereafter, holders would have the right to renew their permits for periods of two years, provided that the conditions of its original approval continue to be met.

Employment law

The employment law implications of the proposed visa, however, are more complex. If employees work remotely in Spain for UK employers under the new visa, the arrangement will not qualify as a “secondment” under the Spanish legislation that implements the EU Posted Workers Directive. This means that (under this legislation at least) none of the local legal protections associated with secondments – including the obligation to grant to seconded employees certain minimum employment rights and conditions – would apply.

Even where visa holders’ contracts are governed by UK law, the position on whether local employment rights will apply is not straight forward. Although an individual employment contract may be governed by the law agreed between the parties, this choice of law is not unfettered; under EU rules, certain mandatory rules (meaning those which can’t be derogated from by agreement) cannot be contracted out of.

This begs the question which mandatory rules trump this choice of law? These are the mandatory rules of the country:

• in which the employee “habitually” carries out their work;

• in which the place of business through the employee was engaged is situated; or

• which is “more closely connected” with the contract based on all existing circumstances.

When a comparison is made between the law chosen by the parties and the applicable mandatory rule, whichever gives greater protection to the employee will apply.

In this context, this means that Spanish legislation in its entirety (including applicable industry-wide Collective Bargaining Agreements (CBA)) would apply to UK employees working remotely in Spain if the following conditions are met:

• the Spanish legislation grants them enhanced rights when compared with UK legislation; and

• the employee will habitually carry out their work in Spain (placing importance on determining how much time the employee will stay in Spain working remotely as compared to their time spent providing services from the UK), or the employee is able to prove stronger ties with Spain than with the UK (for example: if social security contributions are paid in Spain; the employee becomes a Spanish tax resident; or has worked in Spain for longer than they have worked in the UK).

With this in mind, it may sometimes be prudent for overseas employers with employees working remotely from Spain under the proposed visa to acknowledge and grant the minimum working conditions established by Spanish legislation and the applicable Spanish CBA. In particular, this would be advisable with respect to rules regarding workplace accidents, which would involve the Spanish Labour Authorities. However, what is appropriate will depend on the circumstances, and we would recommend seeking local advice on a case-by-case basis.

Corporation tax

The draft “Start-up” Act does not include any special provisions in respect of corporation tax. This means that the question of whether a company will be considered to have a permanent establishment in Spain because it sends an employee there under the new visa scheme will be determined by the existing legislation. In addition, double taxation treaties signed by Spain will continue to apply. Although this is a fact specific question – mere presence of a digital nomad does not necessarily mean that there is a permanent establishment in Spain – it may be a practical limitation on employers allowing staff to avail themselves of the new visa.

Income tax and social security

As long as an employer does not carry out an “economic activity” in Spain (defined as “the organisation on one’s own account of means of production and / or of human resources, with the aim of intervening in the production or distribution of goods or services”), which will be the case for most digital nomads, there will be no obligation for the company to withhold tax on employment income in Spain.

As “digital nomads” will conduct their activity in Spain, they will be covered by the Spanish social security system and must, therefore, contribute to it. That said, those who have a valid Social Security Coverage Certificate validly issued by a Member State of the European Union, or by a state with which Spain has signed a Social Security Agreement (which includes the UK by virtue of the post-Brexit trade deal), will be exempt from this obligation.

What next?

Time will tell whether the proposed new visa will result in a renewed upsurge in requests to work from Spain, and businesses should keep a close watch on the extent to which other countries follow Spain’s lead by introducing similar measures. Whilst this won’t be in place for this summer season, if the Spanish government follows through on its plans, employers may wish to consider relaxing their rules on employees working from “home” in Spain in summers to come.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Colin Leckey, David Lyons, Gisella Alvarado Caycho, Mounia Jrabi, Luis de Alcaraz,

Spain has long been the favoured holiday destination for many sun-seeking Brits. The proposed introduction of a new digital nomad visa, opening the door to both “working holidays” and longer term relocations, will therefore be welcome news to employees.

Text:

But will these potentially complex arrangements now be more straightforward for employers to navigate? We consider the potential employment, immigration and tax implications.

The pandemic saw a surge in requests from employees to work remotely in another country, often for an extended period. Initially, requests were usually short-term relocations related to the crisis. Increasingly, however, requests have involved permanent or semi-permanent moves abroad, with the trend continuing even though the public health crisis has now abated.

The challenges of the “digital nomad”

Such requests create headaches for employers. No one wants to upset their staff or put themselves on the backfoot in the war for talent. At the same time, employers are faced with a litany of legal issues which we have considered in detail before. Would the employee’s activities in the third country create a “permanent establishment” for corporation taxes? Would the employer need to register to withhold income tax, and pay employer social security charges? Does the employee have the right to work, or could the employer find itself facing immigration penalties? Would the employee find themselves in possession of a host of local employment rights, able to take the employer to a local labour court they know little about in the event of a dispute? Will the local labour inspector come knocking at the employee’s door? What about data protection? Regulatory issues? Health and safety?

It’s therefore understandable that employers tend to tread carefully on this issue. This can mean requests being refused, authorisations time limited, or permission being granted only in specific circumstances (such as where there is an existing local entity that can employ staff). Employers of record present one possible solution, but this arrangement is not without its own challenges.

Digital nomad visas – the legal implications

Is there a better way? Some countries think so: the Bahamas was fastest off the mark with a “digital nomad visa”. The basic premise behind this is that, in return for attracting well paid staff to come and spend their earnings in the local economy, the visa conditions mean that employers won’t need to worry about any of these complex issues. Countries as diverse as Estonia and the UAE have since followed suit.

Now comes a possible game changer for British employers: the so called “Start-up Law” recently introduced as a bill in the Spanish Parliament, with approval anticipated by the end of 2022. This seeks to establish a brand-new visa and residence permit for “digital nomads” which will permit people working remotely for foreign companies to live in Spain without needing a full work visa or a local sponsoring entity.

This latest development will be of particular interest to many UK employers, given Spain’s huge popularity as both a tourist and second home destination for Brits; at end of 2020 it was estimated that there were over 380,000 British citizens residing in Spain. However, employers will need to pay close attention to the detail: although the new visa will make life easier as far as immigration law is concerned, there remains a potential sting in the tail with respect to tax and employment law.

Immigration law

If approved, the bill will be a turning point in terms of Spanish immigration law. Permit-holders will be allowed to work remotely in Spain provided that their employer is located abroad and does not operate a Spanish entity. In addition, self-employed “freelancers” will be able to work for Spanish clients, provided that the time spent does not exceed 20% of the individual’s professional activity.

Under the proposed legislation there are two main immigration routes available for individuals:

• Visa for international remote work: this is intended for qualified professionals, graduates, postgraduates of renowned universities, vocational education, and renowned business schools or applicants with at least three years of professional experience.

Foreign nationals (not ordinarily residing in Spain) who intend to stay and work remotely for a non-Spain-based company would be able to apply for a visa which will be valid for up to one year, or the duration of their employment contract if shorter.

Visa holders would also have the right to apply for a “residence permit for international remote work”, starting 60 calendar days prior to the expiry of their visa, provided the conditions that led to their original visa being granted are still satisfied.

• Residence permit for international remote work: foreign nationals who either hold the “visa for international remote work”, or who otherwise have legal status to reside in Spain, would be able to apply for this type of permit.

This permit would be valid for up to three years, or the duration of the contract if shorter. Thereafter, holders would have the right to renew their permits for periods of two years, provided that the conditions of its original approval continue to be met.

Employment law

The employment law implications of the proposed visa, however, are more complex. If employees work remotely in Spain for UK employers under the new visa, the arrangement will not qualify as a “secondment” under the Spanish legislation that implements the EU Posted Workers Directive. This means that (under this legislation at least) none of the local legal protections associated with secondments – including the obligation to grant to seconded employees certain minimum employment rights and conditions – would apply.

Even where visa holders’ contracts are governed by UK law, the position on whether local employment rights will apply is not straight forward. Although an individual employment contract may be governed by the law agreed between the parties, this choice of law is not unfettered; under EU rules, certain mandatory rules (meaning those which can’t be derogated from by agreement) cannot be contracted out of.

This begs the question which mandatory rules trump this choice of law? These are the mandatory rules of the country:

• in which the employee “habitually” carries out their work;

• in which the place of business through the employee was engaged is situated; or

• which is “more closely connected” with the contract based on all existing circumstances.

When a comparison is made between the law chosen by the parties and the applicable mandatory rule, whichever gives greater protection to the employee will apply.

In this context, this means that Spanish legislation in its entirety (including applicable industry-wide Collective Bargaining Agreements (CBA)) would apply to UK employees working remotely in Spain if the following conditions are met:

• the Spanish legislation grants them enhanced rights when compared with UK legislation; and

• the employee will habitually carry out their work in Spain (placing importance on determining how much time the employee will stay in Spain working remotely as compared to their time spent providing services from the UK), or the employee is able to prove stronger ties with Spain than with the UK (for example: if social security contributions are paid in Spain; the employee becomes a Spanish tax resident; or has worked in Spain for longer than they have worked in the UK).

With this in mind, it may sometimes be prudent for overseas employers with employees working remotely from Spain under the proposed visa to acknowledge and grant the minimum working conditions established by Spanish legislation and the applicable Spanish CBA. In particular, this would be advisable with respect to rules regarding workplace accidents, which would involve the Spanish Labour Authorities. However, what is appropriate will depend on the circumstances, and we would recommend seeking local advice on a case-by-case basis.

Corporation tax

The draft “Start-up” Act does not include any special provisions in respect of corporation tax. This means that the question of whether a company will be considered to have a permanent establishment in Spain because it sends an employee there under the new visa scheme will be determined by the existing legislation. In addition, double taxation treaties signed by Spain will continue to apply. Although this is a fact specific question – mere presence of a digital nomad does not necessarily mean that there is a permanent establishment in Spain – it may be a practical limitation on employers allowing staff to avail themselves of the new visa.

Income tax and social security

As long as an employer does not carry out an “economic activity” in Spain (defined as “the organisation on one’s own account of means of production and / or of human resources, with the aim of intervening in the production or distribution of goods or services”), which will be the case for most digital nomads, there will be no obligation for the company to withhold tax on employment income in Spain.

As “digital nomads” will conduct their activity in Spain, they will be covered by the Spanish social security system and must, therefore, contribute to it. That said, those who have a valid Social Security Coverage Certificate validly issued by a Member State of the European Union, or by a state with which Spain has signed a Social Security Agreement (which includes the UK by virtue of the post-Brexit trade deal), will be exempt from this obligation.

What next?

Time will tell whether the proposed new visa will result in a renewed upsurge in requests to work from Spain, and businesses should keep a close watch on the extent to which other countries follow Spain’s lead by introducing similar measures. Whilst this won’t be in place for this summer season, if the Spanish government follows through on its plans, employers may wish to consider relaxing their rules on employees working from “home” in Spain in summers to come.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Colin Leckey, David Lyons, Gisella Alvarado Caycho, Mounia Jrabi, Luis de Alcaraz,