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Criminal law and labour issues

Criminal law as it applies to labour issues covers a wide variety of cases that are linked by the employer’s obligations in respect of occupational safety and employee protection. Rules also exist for the protection of the bodies constituting the works council, as well as for the sanctioning of data protection violations relating to employees.

The principle crimes involved are however the withholding or misappropriation of social security contributions (section 266a Criminal Code), evasion of taxes payable on wages, undeclared work and all forms of illegal employment. The law enforcement agencies have for years now been focusing on violations of the Temporary Employment Law (illegal leasing of temporary employees, conclusion of bogus employment contracts), false declaration of status when commissioning solo self-employed workers (bogus self-employment), violations of the AEntG [Employee Secondment Law] (non-compliance with minimum working conditions or industry-specific minimum wages, secondment regulations), the Illegal Employment Control Law (illegal employment, undeclared work by foreigners without a work or residence permit, etc.) and the MiLoG [Minimum Wage Law]. Violations of craft or trade law requirements (section 8 Illegal Employment Control Law, sections 117, 118 HwO [Handiwork Regulations]) govern crafts and handiwork.

Tightening of legislation in 2019

With the further tightening of the Illegal Employment Control Law in mid-2019 and the considerable expansion of the auditing and investigative powers of the Finanzkontrolle Schwarzarbeit FKS, [the authority responsible for the financial control of illegal work], the law has taken a further step towards establishing the FKS as a form of “financial police” that has now even been granted the competences of a “mini public prosecutor”. With the introduction, in section 8 (3) Illegal Employment Control Law, of a new criminal offence imposing fines in the case of frivolous (i.e. grossly negligent) implementation of section 266a Criminal Code, there will be a shift in cases from the (main) public prosecutor’s office to the main customs offices.

It remains to be seen in practice whether the welcome change in the jurisprudence of the First Criminal Division of the Federal High Court in respect of intent under section 266a Criminal Code actually avoids criminalisation in the event of false declarations of status.

Far-reaching consequences are possible

Violations of employer obligations may not only result in severe penalties for individuals and fines against companies, but also in registration in the competition register, which has been set up at the Federal Cartel Office. Possible bars to the awarding of contracts for companies and personal liability of executive bodies for withheld social security contributions constitute far-reaching consequences outside of criminal law. A fine of 2,500 euros can be sufficient to exclude a
company from competing for public contracts under section 21 of the Undeclared Workers Act (SchwarzArbG).

The defence in such cases must apply a successful interdisciplinary approach, which also means keeping an eye on all tax, social security and labour law aspects. Appropriate contractor compliance measures can significantly reduce the liability of companies and their officers, including in matters of law that are abnormally influenced by individual decisions.