We would like to draw your attention to the Act No. 351/2015 Coll. on cross-border cooperation regarding posting of employees to perform work while providing services (hereinafter the “Act on posting of employees”), which is effective as of 18 June 2016, implements the EU Directive No. 96/71/ES into the Slovak law. This Act also amends other laws, such as the Labour Code, Act on Illegal Work and Illegal Employment and Labour Inspection Act. In this context, we would like to draw your attention in particular to alterations with respect to the amended Act on Illegal Work and Illegal Employment, which introduces absolute objective responsibility, and a novelty is that all persons who order services will be responsible for illegal employment, regardless of whether or not the suppliers were aware of illegal employment.
Terms “Illegal Employment“ and “Illegal Work“
Illegal Work means illegal employment or, in other words, undeclared work. For a certain performance of activity of a natural person for another to be qualified as illegal work, conceptual elements of illegal work must be fulfilled according to Act No. 82/2005 Coll. on Illegal Work and Illegal Employment and on amendments of certain acts.
We can talk about illegal employment:
- If a person performs work for an entrepreneur according to the latter‘s instructions,
- Using entrepreneur’s work equipment,
- For the purpose of obtaining the latter‘s financial profit.
Most Frequent Cases of Illegal Employment
A) Illegal Employment for Work without Employment Contract
It is a situation where the employer does not conclude a written employment contract with its employee. Thus in this case awritten employment contract with all compulsory elements does not exist, however, despite that, an employment relationship is established and both the employee and the employer have all rights and obligations defined in the Labour Code (the notice period, entitlement to a holiday, etc.).
B) Illegal Employment when Employee is not Registered in the Social Insurance Agency
According to the legislation, all employers are obliged to register their employees in the Social Insurance Agency, not later than on the day when the employee starts to perform the work. In the event of employer‘s failure to do so, or when they fail to register an employee on time even though a written employment contract was concluded with the employee, again the employer commits illegal employment.
C) Illegal Employment of Foreigners
A foreigner means any person who is not the citizen of any of European Union Member States. For employers to be allowed to employ foreigners legally, the following conditions must be met:
- The foreigner has been granted a permit to take up employment or a temporary residence permit for employment, or
- The foreigner is the EU Blue Card holder, or
- He/she is an asylum seeker whose entry into the labour market is permitted by a special regulation.
Without the fulfilment of these conditions, the employer commits illegal employment.
D) Illegal Employment for Operation of Trade
Instead of an employment contract the employer concludes a business contract (usually a contract for work, contract of mandate or cooperation agreement), based on which the “employee“ invoices his/her activities. If such mutual cooperation accomplishes the elements of dependent employment, the employer commits illegal employment.
E) Illegal Employment for Unpaid Students Internships
If any students’ internship accomplishes the elements of dependent employment, it will be another case of illegal employment.
Consequences of Illegal Employment
For the violation of the prohibition to accept work or service, the control authority will impose a penalty ranging from 2 000 EUR to 200 000 EUR on any legal entity or natural person being an entrepreneur, and in the case of two and more natural persons simultaneously, at least 5 000 EUR.
The penalty may be imposed within 2 years of the date of discussions about the inspection results protocol and not later than three years of the date of violation.
We would also like to call attention that in addition to the penalty, other sanctions may be imposed on entrepreneurs such as the cancellation of trade licence, prohibition to make use of State or EU subsidies, impossibility of participation in public procurement, impossibility to obtain certain permits, such as for the performance of Temporary Employment Agency’s activity, and others.
Amendment Effective from 18.6.2016
Within a new Act on Cross-Border Co-operation, also the Act on Illegal Work and Illegal Employment was amended with effect from 18.6.2016. A novelty is that a legal entity or a natural person being an entrepreneur is not allowed to accept any work or service which is delivered or provided, based on contract, by a legal entity or natural person through a natural person employed by them illegally, in particular in the case of:
- Cross-border provision of services for any period in excess of 5 days in a period of 12 months after the first provision of the service, or
- Domestic supply of work or cross-border supply of work (in this case it means the supply of Temporary Employment Agency’s employees).
It means in practice that a company which orders cross-border provision of services or domestic or cross-border supply of work(i.e. uses the services of a Temporary Employment Agency) must verify whether the employees of its supplier/assigned workers perform undeclared work or not, in particular:
- Through employment contracts,
- Subsequent verification of data in the employment contract (e.g., through an identity document),
- Verification of the social security system under which the employee is registered and whether the employee was really registered by the employer in the system,
- Verification of the fulfilment of conditions for employment of foreigners