Employers could have to pay a £10,000 penalty for every overseas migrant they employ who is not entitled to be in the UK, or to work here, thanks to new legislation. Recent changes to The Immigration, Asylum and Nationality Act 2006 have seen civil penalties introduced (in addition to a criminal offence) for employers who take on overseas migrants not entitled to be resident or work in this country.

So employers must be vigilant about their recruitment procedures by following three important steps before taking on a new employee or risk a fine of up to £10,000.

Step one: Obtain a document or documents from one of two lists. (See the Home Office website: www.bia.homeoffice.gov.uk/employer/ for details.) List A consists of documents which will be shown by prospective employees who have no restrictions on being in the UK, e.g. British nationals or those granted indefinite leave to remain.

List B documents will be presented by people with limited leave to be here - for example, a student who has been granted a student visa or the family member of a European National who has been given a residence card.

Step two: The validity of the document(s) must be checked to ensure the prospective employee is the person they claim to be.

Photographs and dates of birth must be checked, along with relevant stamps to ensure the prospective employee can do the work on offer.

Businesses must be satisfied that all documentation provided is genuine and that it has not been tampered with.

These checks must be made every year if the documents presented are from list B.

Step 3: Copies of the documentation must be maintained and kept on record, in a format that cannot later be altered.

A photocopy or scan is sufficient for this. Copies must be kept for the duration and for two years after the employee has left the company.

A business can still be prosecuted under criminal law and individuals can face up to two years in prison if it is discovered that they knowingly employed a person who should not be in the UK or allowed to work here.

Businesses must also remember the three steps above will not provide a defence against criminal prosecution.

Employers should nevertheless beware that they do not discriminate against job applicants simply to avoid the difficulty of having to comply with the legislation and it is vital all prospective employees are treated equally at every stage of the recruitment procedure.

Fines under race relations legislation are unlimited.

The Home Office website contains guidance on the new civil penalties and how you can ensure that you establish an "excuse".

Even if you fail to establish an excuse you may be able to have the penalty reduced, for example if you have completed a partial check of an employee's documents.

Turning to the employment law implications, following a recent employment appeal tribunal (EAT) decision, employers should still follow a fair dismissal procedure where an employee's right to continue working has ceased.

Otherwise they may face a charge of unfair dismissal in an employment tribunal.

The EAT case concerned a senior lecturer who had been working in the UK for five years and whose leave to remain had recently expired.

Originally, her university employer suspended her without pay and gave her a period of grace to sort out the matter.

However, before that period had expired, they decided to take a stricter stance by terminating her contract.

She was not given a hearing because the university said its disciplinary procedure, including any right of appeal, was not applicable due to the illegal nature of continuing to employ her. However, when she did appeal to the EAT, her unfair dismissal claim was a success.

The question of whether a dismissal is fair or unfair depends on whether the employer acted fairly in treating it as a sufficient reason for dismissing the employee.

Each case will be judged individually but the test applied is whether the decision was within the range of reasonable responses of an employer in the circumstances.

In this case, the EAT noted that something could readily be done to remedy the position because the lecturer had already set the wheels in motion, having made an urgent application for leave to remain and work.

The EAT felt that even if it is reasonable to proceed speedily to dismissal, there is no reason why provision should not be made for an appeal.

This may be of particular importance in a case where the illegal state of affairs is disputed, or arises from an oversight which can be remedied relatively quickly, as in the lecturer's case. Failure to follow a reasonable procedure may make the employer's action of dismissal unreasonable, unless proved otherwise.

By following a fair dismissal procedure, employers will also be in a better position if the former employee lodges a discrimination claim in a tribunal.

o Contact: Jenny Harvey, 01865 811700, jharvey@darbys.co.uk, Brigit Foster, 01865 811757, bfoster@darbys.co.uk