The Fair Work Agency: enforcement framework, criminal exposure and employer response

The Fair Work Agency (FWA) was established under the Employment Rights Act 2025 (ERA 2025) on 7 April 2026 as an executive agency of the Department for Business and Trade, consolidating labour market enforcement functions previously carried out by other authorities. 

The FWA has extensive enforcement powers in relation to specified labour market legislation and represents a significant shift in how employment rights are monitored and enforced in the UK, moving towards more proactive state enforcement rather than reactive enforcement relying on complaints by individuals.  This materially changes organisational risk, particularly in situations where payroll complexity, workforce models or governance controls may be weak.  It requires coordination across legal, compliance, finance and audit functions. 

The enforcement powers of the FWA are supported by new criminal offences, which also establish personal criminal liability for company officers where offences are committed with their consent, connivance or are attributable to their neglect.

It is therefore important for businesses to understand the remit and powers of the FWA and to take steps now to ensure that they are in a position to respond effectively if they are contacted by the FWA.

Structure and purpose

The FWA is a single body enforcing certain employment rights and tackling labour market abuse across areas that were previously enforced by other bodies (or not enforced at all) and it is expected that its remit will be widened further over time.

The purpose of the FWA is to consolidate and simplify labour market enforcement.  It consolidates the enforcement functions of:

• HMRC National Minimum Wage (NMW) Enforcement;
• the Employment Agency Standards Inspectorate;
• the Gangmasters and Labour Abuse Authority; and
• the Director of Labour Market Enforcement (strategic functions).

The idea is that this integration will allow single, multi-issue investigations rather than siloed enforcement activity.

The FWA does not have its own distinct legal identity.  The relevant enforcement powers are conferred on the Secretary of State and exercised in practice by the FWA and its appointed enforcement officers.  It is supported by an advisory board consisting of an equal number of representatives from business, trade unions and independent experts.  The current advisory board was appointed on 24 March 2026 and is headed by Matthew Taylor as Chair and Lisa Pinney as CEO[1].

The FWA’s work is underpinned by a Statutory Enforcement Strategy to be published every three years, and it will also publish a Statutory Enforcement Annual Report every year, the first of which is expected after the end of the 2027/2028 financial year. 

On 7 April 2026, the FWA published:

• an enforcement policy statement outlining how it will decide whether to undertake an investigation, how its enforcement officers will exercise their powers when undertaking civil and criminal investigations and the range of enforcement actions open to it; and
• a Code of Practice in Fair Work Agency Labour Market Enforcement Undertakings and Orders, setting out its approach to the Labour Market Enforcement regime, listing the factors it will consider before it seeks a Labour Market Enforcement Undertaking, the process it will follow when attempting to secure an undertaking and how compliance with an undertaking will be monitored.

Separately, the Government has set out its expectations for the FWA during what it calls the “transitional year” from 2026 to 2027 in its policy paper, Strategic Steer to the Fair Work Agency. 

Remit

In summary, the scope of the FWA’s remit comprises:

• labour exploitation and certain modern slavery-related labour offences under the Modern Slavery Act 2015;
• gangmasters licensing;
• rules relating to agency workers;
• rules relating to employment agencies and umbrella companies (regulation of umbrella companies are expected to come into force in 2027);
• statutory sick pay (SSP) (commencement regulations are needed for enforcement of this to come within the FWA’s remit);
• holiday pay, including the employer’s duty to keep records (the FWA’s powers in respect of holiday and holiday pay are being phased in, with holiday pay enforcement expected to commence in 2027);
• enforcement of obligations to pay financial penalties imposed for failure to pay sums ordered by an Employment Tribunal or settlement sums agreed in a COT3 agreement;
• certain fraud offences under section 1 of the Fraud Act 2006; and
• enforcement of the NMW.  However, HMRC will continue to deliver this during 2026/2027 under a contracting arrangement with the FWA.  The FWA is expected to takeover this function in April 2027.

Importantly, the FWA does not create new substantive employment rights.  However, it radically changes how existing rights are enforced.

The FWA does not replace ACAS or the Employment Tribunals but sits alongside them. 

Equality legislation does not fall within the FWA’s remit, so enforcement of matters relating to employers’ duty to take reasonable steps to prevent sexual harassment of employees during the course of employment, or gender pay gap reporting obligations, for example, remain with the Equality and Human Rights Commission.

Powers

The FWA will identify potential non-compliance with the laws within its remit through a range of sources, including complaints from workers or their representatives, referrals from other public bodies, intelligence from partner agencies, information obtained through proactive compliance and analysis of data and risk indicators.  It will assess information received and determine whether further investigation and enforcement action is appropriate.

Where non-compliance is identified, the FWA may take a range of enforcement actions depending on the nature and seriousness of the breach. 

Key enforcement powers of the FWA include the following:

• Investigatory powers: 

• Gathering information:  The FWA can require individuals to attend a meeting, or request that information and documents are provided by a specific deadline. 
• Seize documents:  The FWA may copy and retain documents that it has reasonable grounds to believe are necessary for enforcement purposes for as long as it deems necessary.
• Enter premises:  The FWA may enter premises without a warrant (unless the premises are a dwelling or certain exceptions apply) to inspect or examine documents, including accessing computer systems and other equipment.  Enforcement officers will generally contact businesses in advance to arrange a site visit and agree this consensually, but the FWA does have powers to carry out unannounced investigations too (e.g. dawn raids).
• Police powers:  By virtue of regulations made under the Police and Criminal Evidence Act 1984[2] (PACE), certain FWA enforcement officers have access to particular police powers for the purposes of criminal investigations into labour market offences.  PACE powers will only be used in cases involving suspected serious labour market offences under the Gangmasters (Licencing) Act 2004 and relevant Modern Slavery Act 2015 offences within the FWA’s remit.

• Notices of Underpayment:  Where underpayment of a statutory payment is found, the FWA may issue a Notice of Underpayment.  That would require the employer to pay a penalty of 200% of the amount owed per individual, capped at £20,000 per individual (with a minimum amount of £100 per individual).  That payment must be made within 28 days, but the amount is reduced to half if the penalty is paid within 14 days.  Importantly, a Notice of Underpayment can “look back” and relate to sums due in the last six years.  Although Notices of Underpayment relating to NMW are not new, they will in due course be issuable across other statutory payments within the FWA’s remit (i.e. SSP and holiday pay) which is a significant change.
   
• Labour Market Enforcement Undertakings and Orders:  The FWA may request “Labour Market Enforcement Undertakings” from employers, under which employers agree to correct their practices through measures identified in the undertaking.  Undertakings can last for up to two years.  If the employer refuses to accept entering into an undertaking, or to agree the terms of an undertaking within the relevant negotiation period, or breaches an undertaking, the FWA may apply to court for a “Labour Market Enforcement Order”, which can also last up to two years.  Such orders may prohibit or restrict the individual from doing anything set out in the order or require them to do anything set out in the order.  Breach of a Labour Market Enforcement Order without reasonable excuse is a criminal offence.
   
• “Naming and shaming”:  Public “name and shame” lists are currently used in respect of NMW underpayments.  This may be extended to other statutory pay provisions too.  This can cause significant reputational damage to businesses.

Powers not yet in force

• Ability to bring claims before the Employment Tribunal.  The FWA will have the power to bring proceedings on behalf of workers who have the right to bring a claim but choose not to.  This will be a significant change to the existing regime which, until now, has required individuals to seek their own redress.
   
• Recovering costs of enforcement and investigations from non-compliant organisations.  Regulations will set out how the FWA can impose charges to recover enforcement costs from employers against whom employment action has been taken for non-compliance.  This is another significant change to the current regime.
   
• Provision of legal assistance to workers.  The FWA will be able to offer legal advice and assistance to individuals who are party to legal proceedings involving employment or trade union law.

It is not yet clear when these powers will come into force, but it is not expected to be before 2027.

Criminal sanctions

ERA 2025 introduces three new criminal offences in connection with the FWA's enforcement functions:

• False information:  Knowingly or recklessly providing materially false information or documents (punishable by up to 51 weeks' imprisonment, a fine or both on summary conviction);
• Obstruction:  Intentionally obstructing an enforcement function, or failing to comply with a requirement imposed by one without reasonable excuse (punishable by up to 51 weeks' imprisonment, a fine or both on summary conviction); and
• Failure to comply:  failing to comply with a Labour Market Enforcement order without reasonable excuse (punishable by up to two years' imprisonment, a fine or both on indictment).

ERA 2025 also establishes personal criminal liability for company officers where offences are committed by an organisation with their consent, connivance, or are attributable to their neglect.  An officer in relation to a corporate body means a director, manager, secretary or other similar officer or someone purporting to act in any such capacity.  There are also similar provisions applicable to partners and partnerships, unincorporated associations and to the Crown or Crown premises.  This new personal accountability effectively elevates compliance with employment law matters within the FWA’s remit into a board-level issue.

The concept of "reasonable excuse" under the ERA 2025 is not defined in the statute itself and there is limited case law specifically interpreting this defence in the labour market enforcement context. However, general principles from criminal law apply and the defence requires an objectively reasonable excuse, not merely a subjective belief or misunderstanding.

Recommended action points

The FWA’s broad investigative and enforcement powers mean that compliance is now more important than ever.  The ability to demonstrate compliance with the law through proper documentation is also critically important.  Actions organisations can take now to ensure they are prepared if the FWA come calling include:   

• Audit compliance and put in place remediation plans if needed:  Audit compliance across the FWA’s remit, including NMW, SSP, holiday and holiday pay, employment agency arrangements, supply chain issues that may fall withing the modern slavery legislation and existing record keeping mechanisms and practices across all those fields.  If issues or underpayments are identified, put in place a plan to rectify those as soon as possible.
   
• Strengthen record-keeping systems:  Review and strengthen internal systems to ensure that there are clear and comprehensive audit trails demonstrating compliance with the relevant legal requirements.
   
• Put protocols in place:  Design and put in place protocols that should be followed in the event that the organisation is contacted by the FWA.  Staff at all levels, from the reception desk to senior management should be clear on how they should respond to contact and/or requests for information.
   
• Understand the limitations:  There are limits on the information organisations are obliged to provide to the FWA.  The offence of obstructing enforcement, for example, excludes information that may incriminate a person.  Also, the obligation to provide information and documentation does not apply to material that is protected by legal privilege.  If in doubt, organisations should seek legal advice to understand what information/documentation may be excluded.
   
• Train staff and raise awareness:  Train relevant staff on the changes and, given the prospect of personal liability, members of senior management in particular so that they are aware of the requirements and their potential exposure to criminal proceedings.
   
• Review and update policies and procedures:  Ensure relevant policies are up to date.  For example, any non-disclosure agreements / clauses should be reviewed to ensure that appropriate disclosures to the FWA are not prohibited.
   
• Monitor developments:  As some of the FWA’s powers will be phased in over time, it will be important to monitor developments and, in particular, the FWA’s actions in terms of its use of its powers (for example, whether trends can be identified in the organisations and sectors it may appear to focus on).

Please do not hesitate to contact us if you would like to discuss any of the matters referred to above.

The information on this page is intended as a generic summary of the law and practice in force at the time of writing. It has not been tailored to individual circumstances and is not intended to be treated as legal advice. If you have any specific concerns please do not hesitate to contact us.