Illegal work of foreigners in 2021

When there is insufficient manpower and inspection imposes stricter sanctions

Unfortunately, the above-mentioned fact is reality not only of 2021 but also of the prior year. However, there are procedures implemented in practice, which can help the enterprisers go through even a very awkward inspection made by the Labour Inspectorate and focused on illegal employment (not only of foreigners), and help them minimize the risks. The article deals also with the possibilities of defence against any imposed penalty which is often imposed in the amount of millions of crowns.

You can find more information in the following section.

 

How to solve insufficient manpower?

The current situation in the labour market forces, willingly or unwillingly, the enterprisers to use external manpower to solve their insufficient capacity. The first completely legitimate possibility is assistance by an employment agency. The second option (also completely legitimate) is to use a subcontractor.

While the first above-mentioned possibility is trouble-free in practice (if you verify it is really a properly certified employment agency), the second one seems to be very controversial and is related to unpleasant consequences.

 

Outsourcing and (Bermuda) triangle

In case of urgent insufficiency of manpower the companies usually devote a part of their manufacture or a certain segment of activities and outsource it to an external supplier who becomes the company´s subcontractor in relation to an end customer.

A framework contract for work is usually concluded between a company (client) and subcontractor) whereas the subject-matter of such a contract is performance of certain works (e.g. packing of XY pieces of semi-finished products or quality inspection of XY products, etc.).

 

Till now everything is absolutely under control but ...

If the above-mentioned subcontractor performed the concluded contract for work by means of its own employees who are properly registered at the Prague Social Security Administration / District Social Security Administration, there would be no problem.

Unfortunately, it happens very often that a subcontractor does not employ any own employees (or employs only its own administrative staff) and performs a contract for work by means of another subcontractor. Thus, there is Subcontractor 1 and Subcontractor 2 who form the following triangle with a Contractor:

 

                        Client

Subcontractor 1     Subcontractor 2

 

Let´s focus on the core of this problem. Subcontractor 2 is usually an empty house without any employees whereas a citizen outside the EU acts as an executive and associate with investment of CZK 1, and this company is used only as an intergrade for money transfers (Client´s money for the work performed) - God knows where.

 

What is the inspection procedure by the Regional Labour Inspectorate?

In case the inspection reveals several tens of foreigners in service – usually from Ukraine, the reactions can be as follows:

Client: these persons are not our employees, they are employed by Subcontractor 1

Subcontractor 1: these persons are not our employees, they are employed by Subcontractor 2

 

Subcontractor 2: does not react or communicate or confirm anything

When inspecting the public databases, it is found out the affected foreigners do not hold any permit or have a permit but it is related to completely different companies and for completely different professions.

Subsequently, the inspection authorities assess who should be held liable whereas the authorities keep in mind Subcontractor 2 is an empty house where any sanction will undoubtedly have no effect.

As it was found out during the inspection that the affected persons (usually foreigners from Ukraine) were working at the Client´s workplace, with the Client´s machines and tools, and their work was organized/results were checked by the Client´s manager, the characteristics of a dependant activity / work (comp. § 2 of the Labour Code) are usually, unfortunately, met at the Client´s side.

Client often defends himself in vain by raising objections against an inspection report and in subsequent penalty proceedings because Subcontractor 2, and often even Subcontractor 1, do not help the Client anyhow. What´s more, they undermine the Client. They have collected their money and are moving smoothly on (workforce is insufficient and interest is huge).

 

What´s the solution?

It is not possible to ignore in this situation that the enterprisers take considerable risks. However, if we realize that each manufacture suspension costs usually hundreds of thousands of crowns daily, it is no wonder.

However, if the enterprisers want to ensure they are not left with Black Peter, it is appropriate to take adequate measures.

In particular, clients should ask a subcontractor for certain guarantees within each new collaboration. Such guarantees may include e.g. subcontractor´s written statement that the appointed foreigners being active at the Client´s workplace fulfil the tasks assigned by the subcontractor pursuant to the concluded contract for work + list of names of those foreigners (it is necessary to update the list regularly). Furthermore, it is suitable the subcontractor undertakes contractually to adhere to the Employment Act (ban on illegal work) and Act on the Residence of Foreign Nationals (ban on illegal residence in the Czech Republic) while executing the activity for the Client. If these Acts are not observed, the subcontractor will be obliged to compensation.

The above-mentioned procedures can help minimize any possible risks. However, if you want to be 100% sure, it is necessary to search for proven subcontractors who use their own workforce and do not take the advantage of cheap manpower from non-EU countries.

It is recommended to consult the contractual documents and adopted measures with an experienced legal representative because, as you should not forget, the upper penalty limit for illegal employment is CZK 10,000,000.

 

ARROWS advisory group

Jakub Oliva

associate
T: +420 732 441 267
E: oliva@arws.cz

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