Employment Act and the fight against illegal labour, Czech Republic

About

Country: 
Czechia
Sectors: 
Public sector
Target Groups: 
employers/purchasersworkers/suppliers

 

In the Czech Republic, the first political steps against illegal employment were not taken until the start of this century. The 2004 Act on employment established a definition of illegal labour in Czech law and strengthened control mechanisms in this area. Prohibiting illegal employment and introducing penalties for offenders was certainly a step in the right direction in an effort to restrict this phenomenon. However, detecting illegal employment and enforcing the law in cases of undeclared work are still highly problematic in practice.

 

Background

Illegal work is a phenomenon rooted in Czech society from the country’s past regime, where the impossibility of establishing private enterprises made this practice relatively common. The widespread nature of undeclared work and a tolerance among Czech people of the illegal economy are still documented to this day (Fassmann, 2007).

Although legislative amendments restricting illegal work were introduced in the 1990s, the measures were not directly targeted at this phenomenon. In the Czech Republic, the first political steps against illegal employment were not taken until the start of this century. Whereas attention has been paid to the illegal employment of foreign workers since the end of the 1990s, illegal work by the local population has been overlooked, and it would still be wrong to say that it is a pressing political topic. In 2002, the government’s programme declaration included a drive to combat tax evasion and illegal employment. In 2004, the government issued a ‘Report on certain measures being applied and prepared to restrict the grey economy’ (Zpráva o uplatňovaných a připravovaných některých opatření k omezení šedé ekonomiky). Moreover, transforming illegal labour into regular employment became one of the goals of the National Employment Action Plan for 2004 – 2006 (Národní akční plán zaměstnanosti na léta 2004 – 2006 (350Kb PDF)).

The Act on Employment No. 435/2004 Coll. was a milestone in the fight against illegal employment in the Czech Republic, as it led to the first definition of illegal labour in Czech law and the adoption of a ‘deterrence approach’.

The legal measures are universally applicable. The actors actually most affected include employers, the control authorities and people working in the illegal economy or potential illegal workers, often foreign nationals.

Objectives

The aim of the Act on Employment was to define illegal labour, strengthen the powers of the control authorities, introduce stricter penalties for those engaging in illegal employment and thus restrict the incidence of this phenomenon in Czech society.

Specific measures

Under the Act on Employment, illegal labour is understood as follows:

  • where a natural person does not work for a legal or natural entity on the basis of a labour law relationship or another contract, except in the case of the natural person’s spouse or child;
  • where a foreign worker does not work for a legal or natural person on the basis of a labour law relationship or another contract, except in the case of the natural person’s spouse or child, or where the worker performs work in breach of an employment permit issued or without such a permit.

The Act on Employment extended the powers of the control institutions such as the labour offices and customs offices.

  • The labour offices are authorised to demand that a person in the workplace presents an identity document and a document attesting to the labour law relationship or other contract with the employer. In addition, customs offices can demand that foreign workers present the same documents as well as a work permit from the labour office.
  • A natural or legal person doing business under special regulations is deemed to be an employer even if the person does not officially have any employees. In this case, the labour offices may check for violations of the principles of illegal employment.
  • Staff of the control authorities are authorised to perform checks on presentation of their service identification. Formerly, they had to present the employer with a control authorisation, which made the inspection of illegal workers relatively inflexible.

Another provision was for jobseekers to be struck off the labour offices’ records if the jobseeker works illegally or hampers cooperation with the labour office without good reason. Under further amendments of the act, these jobseekers may be put back on the labour office’s books six months after they were struck off and will be penalised by receiving a cut in the duration of unemployment state support when returning to the labour office again.

Stricter rules on the employment of foreign workers were also introduced.

  • The employer is obliged to inform the appropriate labour office if a foreign national issued with an employment permit did not start work or terminated the work before the end of the period for which the permit was issued. Although the work permit does not expire on premature termination of employment, the authorities formerly could not detect illegal economic activity by a particular person because they were not aware that the person’s job had been prematurely terminated.
  • For the first time, the Act on Employment provides that foreign nationals who are members of a company or members of the statutory and other bodies of commercial companies or cooperatives must have a valid employment permit. Previously, foreign workers would establish commercial companies or cooperatives to circumvent the law and avoid having to obtain a work permit.

Illegal employment is classified as an offence for which a natural person or foreign national may be fined up to CZK 10,000 (about €362 as at 22 January 2009). A natural or legal person who enables the performance of illegal work and thus commits a misdemeanour in the case of a natural person or an administrative offence in the case of a legal person may receive a fine of up to CZK 2,000,000 (€72,375).

Evaluation and outcome

Achievement of objectives

The act defined illegal labour, prohibited this form of work and introduced penalties for undeclared employment in Czech law.

Obstacles and problems

While the legal definition of illegal labour and method of control and punishment are relatively clear, the enforceability of the act and its control in practice are more problematic.

In 2005, the control of illegal employment by domestic citizens, that is, work without a contract between an employer and employee, was given to the State Labour Inspection Office (Státní úřad inspekce práce, SÚIP). This phenomenon was rarely detected and proven, however. Illegal employment is a phenomenon that often occurs on the basis of consensus between an employer and employee and that is advantageous for both sides. Consequently, the inspection office hardly ever receives instigations to inspect illegal employment. If a person without a contract is detected in the workplace, it is difficult to dispute the employer’s typical excuses that the employee has just started work and their contract has not yet been drafted or that the person is working under a short-term labour law relationship that may also be concluded verbally.

The control of the illegal employment of foreign workers, who are required to have an employment permit and residence permit, is somewhat better. Control checks are performed by the labour offices. Even though the detected cases of illegal employment are just the ‘tip of the iceberg’ with regard to undeclared work, the number of irregularities identified has been rising since 2004.

Lessons learnt

Combating illegal employment is a long-term process that requires more than simply a legislative prohibition; it also requires systematic work by and cooperation between the control authorities that enforce the Act on Employment. In practice, it appears that other ways must be found to make the act more enforceable and control measures more effective.

Impact indicators

No statistics are available regarding illegal employment by domestic citizens.

The total number of control operations performed by the labour offices has for a long time remained at about 10,000 a year. Since 2001, however, increased control measures targeting employers employing foreign workers and an increasing number of checks among foreign nationals have been carried out. Similarly, the number of detected foreign nationals working illegally has increased slightly since 2004.








Details of control checks conducted by labour offices, 2001–2007
  2001 2002 2003 2004 2005 2006 2007
Total number of checks conducted

11,238

11,078

10,597

9,112

9,933

10,424

10,559

Number of checks at employers employing foreign workers

1,306

1,382

1,760

1,430

1,631

1,474

1,484

Number of foreign workers checked

*

5,145

5,128

9,889

9,534

12,094

21,897

Number of foreign workers illegally employed

1,318

1,488

1,466

1,646

2,017

1,701

1,662

Number of checks revealing non-compliance with employer’s information obligation to labour offices

*

*

*

*

*

2,087

2,163

Note: * No data collected.

Source: MPSV ČR, Assessment of the presence of foreign workers in the Czech Republic’s labour market in 2007, 2008

Transferability

The legislative measures could be transferred to other countries and these countries could derive inspiration from them when drawing up their own national legislation. Understandably, the social and cultural aspects of the given country and the context of the labour market in which illegal employment takes place have to be taken into account.

Commentary

To date, the Czech Republic’s actions to curb illegal employment have mainly consisted of repressive measures, but control work often fails. With the exception of foreign workers, no public campaign has yet taken place serving a preventive function and raising awareness of the negative impacts of this phenomenon. The fight against illegal employment requires the introduction of a broad range of mechanisms and measures – from repressive to preventive – to deter the main offenders, facilitate the transformation of illegal work into legal economic activity and develop a sound economic environment in the Czech Republic.

Contact

Main organisation responsible: Ministry of Labour and Social Affairs of the Czech Republic (Ministerstvo práce a sociálních věcí České republiky, MPSV ČR)

Bibliography

Bičáková, O., Zákon o zaměstnanosti. Přehled komentovaných novelizací od 1.10.2004 do 31.5.2007 [The act on employment. Overview of commented amendments from 1 October 2004 to 31 May 2007], Prague, LINDE nakladatelství s.r.o., 2007.

Bičáková, O., Náš právní řád umožňuje trestat ‘práci načerno’ [Our legal system enables the punishment of illegal work], Veřejná správa 51–52/2007, Prague, 2007.

Fassmann, M., Stínová ekonomika a práce načerno [The shadow economy and illegal labour], Prague, Briggs&Co., 2007.

Jouza, L. and Maršíková. L., Nový zákon o zaměstnanosti [The new employment act], Prague, 2007.

Ministry of Labour and Social Affairs, Hodnocení působení zahraničních pracovníku na trhu práce České republiky v roce 2007 [Assessment of the presence of foreign workers in the Czech Republic’s labour market in 2007], Prague, 2008.

Hana Dolezelova, Research Institute for Labour and Social Affairs (RILSA)

 

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