Furlough Fraud and Immigration Law

New research released on 18 June 2020 shows that over one-third of employers may be committing 'furlough fraud'. Furlough refers to the UK government's Job Retention Scheme which has been in place since March, just before the country' locked down' during the Covid-19 pandemic.

At one manufacturing firm, staff received a 20% pay cut as well as being told to keep working while furloughed. And some employees working for firms with a UK Sponsor Licence were threatened with deportation if they did not participate in the fraud.

The survey's creator told the media:

"We've had cases of employees working on a work permit in the professional services industry told they must continue working when furloughed or face being dismissed and asked to leave the country, furloughed employees in the appliance fitting business asked to carry out orders to justify the 'money' they were being paid, and investment companies trying to use the scheme as an alternative to performance management - if an employee isn't hitting the target, they were furloughed or threatened with furlough."

Whilst it must be pointed out that most organisations have been open and honest when using the furlough scheme, the fact that very few checks and balances were attached to providing employers with 80% of a furloughed employee wages meant the scheme was wide open to abuse.

A spokesman for HMRC, which supervises the scheme, said it has received 3,079 reports from the public as of 14 June and urged any employee who thinks their company is abusing the system to contact them.

"This is taxpayer's money and fraudulent claims limit our ability to support people and deprive public services of essential funding.

"Claims are checked and payments may be withheld or need to be repaid if the claim is based on dishonest or inaccurate information. We won't hesitate to take criminal action against the most serious cases."

Migrants who have been asked to commit furlough fraud, either by being told to come into work, work from home, or cover someone's shift must get in touch with an experienced immigration lawyer immediately. The concern is that when the time comes to applying for a visa extension or Indefinite Leave to Remain (ILR), the fact that a migrant has knowingly or even unknowingly committed fraud could result in their application being denied and them having to leave the UK.

Furlough fraud explained

At an estimated cost of £60 billion, the Government Job Retention Scheme is the Treasury's highest up-front Covid-19 cost. Because of the speed in which money had to be made available to employers to pay staff who otherwise would have lost their jobs, little administration surrounds the scheme. There is no requirement to prove that your business is struggling or that you cannot afford to pay your staff out of your own cash reserves. However, one strict rule is that if a worker is furloughed, they cannot participate in any work for their employer.

Employers breaking this rule are committing fraud. The Fraud Act 2006 provides for a general offence of fraud with three ways of undertaking it:

1. by false representation,
2. by failing to disclose information, and
3. by abuse of position.

To prove false representation, the prosecution must prove that the employer acted dishonestly and intended to make a gain for themselves or cause loss to another. Those convicted of criminal fraud face a possible 10-year custodial sentence.

The danger for migrant employees

Migrant employees are in an awkward position. Although they are theoretically protected by whistleblowing laws if they report their employer to the HMRC, many are still terrified of losing their job when a global recession is looming. And if they do report their sponsoring organisation and it is found guilty of criminal fraud, it is almost inevitable that the business's Tier 2 Sponsor Licence will be revoked. This means that unless they can find alternative employment with another authorised sponsor or switch to another visa, they will need to leave the country.

The other serious risk facing migrant employees if their employer commits furlough fraud is that they may find themselves being refused ILR under the notorious paragraph 322(5) of the Immigration Rules.

Paragraph 322(5) is a catch-all provision, stating an application for leave to remain should not be granted where:

'the undesirability of permitting the person concerned to remain in the United Kingdom in the light of his conduct (including convictions which do not fall within paragraph 322(1C), character or associations or the fact that he represents a threat to national security.'

At first reading, this provision seems to be a way to refuse those who are known to partake in criminal activities or associate with crime lords but have never been convicted, terrorists, and other dangerous individuals. However, the Home Office has regularly used paragraph 322(5) to refuse ILR to applicants who have committed even the most minor tax return mistakes.

Given the hostile environment already in place in the UK regarding migrants and the fact that when freedom of movement ends in January 2021, immigration from outside the EU/EEA is guaranteed to rise, it would not be too much of a stretch to conclude that the Home Office could well include furlough fraud in its repertoire of grounds to refuse ILR/visa extensions.

At present, such statements are conjecture only. The government has too much to worry about at present to look at the long-term consequences (or in the Home Office's case, opportunities) relating to furlough fraud. But rest assured, the day will come when a caseworker will come across an application where the migrant received money from the furlough scheme whilst in some way working for their employer.

To protect the best interests of yourself and your family, seek legal advice immediately if you know or have reason to believe that your employer has committed furlough fraud. As long as they confess within the 30-day amnesty due to be introduced by HMRC in the next few weeks, your employer will likely face no consequences aside from being asked to pay back the funds. For you, however, their actions could come back to haunt you many years from now.

Do not take that risk.