Inspection of undeclared work, Lithuania
Inspections with regard to undeclared work are in place in Lithuania since 1997. The controls primarily aim to identify undeclared workers. The main actor involved in the inspections is the State Labour Inspectorate, which conducts about 2,000 controls of undeclared work a year and identifies around 900 undeclared workers every year. Some 200–300 cases dealing with undeclared work are brought before court each year.
Inspections of undeclared work (nelegalaus darbo inspektavimas) are one of the first initiatives taken to tackle the problem. They were initiated in Lithuania as far back as 1997 when the concept of undeclared work was defined in the Code of Administrative Violations of Law. The inspections are conducted by the State Labour Inspectorate (Valstybinė darbo inspekcija, VDI) independently or in cooperation with other authorities enforcing control over undeclared work, such as the State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI), the State Social Insurance Fund Board (Valstybinio socialinio draudimo fondo valdyba, VSDFV), the Police Department (Policijos departamentas, PD) and the Financial Crime Investigation Service (Finansinių nusikaltimų tyrimo tarnyba, FNTT).
VDI conducts about 80% of all inspections of undeclared work; the remaining 20% are carried out by the labour inspectorate in cooperation with the above authorities.
The main objective of the inspections of undeclared work is to identify irregular workers. In parallel, the controls aim to prevent undeclared work and raise awareness in society.
VDI – independently or together with other authorities – initiates inspections of undeclared work in the following cases:
- having received anonymous information, whether in writing or orally;
- having received an individual complaint undersigned by its author;
- in the course of scheduled risk preventive inspections;
- having received information from other institutions;
- having received information from media sources.
Inspections of undeclared work may be carried out in companies, agencies and organisations. Besides such legal entities or persons, natural persons may also be inspected for undeclared work.
To conduct these inspections, VDI officers exercise all rights stipulated in the Law on the State Labour Inspectorate. In other words, they have the right to film, take photographs, make sound recordings, seize documents and their copies, and obtain explanations from persons representing or authorised by the employer as well as from employees at the place of inspection. When there are grounds to suspect that difficulties may arise in determining the identities of workers and/or likely resistance to inspecting officers, the inspections of undeclared work may be carried out together with police officers.
Undeclared workers identified during inspections, as well as persons representing or authorised by the employer, must submit their explanations. The inspections are documented in a statement of investigation of undeclared work. The date of issue, number of the documents and place of issue must appear in the statement. The statement shall also contain the name of the entity that is inspected for undeclared work, and the time of commencement and ending of the inspection of undeclared work. In addition, the statement shall indicate whether the inspectors made any video recordings or took photographs, obtained explanations, seized the register of employment contracts and copies of documents, or gathered other evidence during the control.
All facts identified during the inspection and likely to be used as evidence in undeclared work proceedings shall be listed in the statement. The number of total workers identified during the inspection and the number of identified undeclared workers must also be indicated in the statement. Furthermore, personal information of all workers identified during the control but not documented in the statutory procedure or having no other documentary proof of legality of their activities must be indicated in the statement. The statement shall be signed by the issuing inspector.
A report of administrative violations of law is then made and the case is referred to a court.
Evaluation and outcome
Achievement of objectives
Since 2006, VDI has been conducting about 2,000 inspections of undeclared work each year. These controls have resulted in the identification of some 900 undeclared workers every year, around 3%–9% of whom are young persons aged under 18 years, and 1%–2% are foreign individuals. About 250–350 reports of administrative violations of law are issued against employers every year with regard to 430–450 undeclared workers, under Article 41-3 of the Code of Administrative Violations of Law (Administracinių teisės pažeidimų kodeksas, ATPK) ‘Illegal Work’.
According to the findings of the VDI inspections, some economic sectors are particularly prone to irregular labour. The highest number of cases of undeclared work is identified in the construction sector, which accounts for about 30%–40% of incidents in this regard. Meanwhile, the sectors of wholesale and retail trade, manufacture of wood and wood products, hotels and restaurants, and call centre activities each account for some 5% of total incidents.
Legal persons constitute most of the undeclared workers identified, comprising about 60%–70% of total incidents; natural persons represent 30% and farmers 5% of all identified cases of undeclared work.
Every year, some 150–300 cases dealing with undeclared work are heard in court. About 70%–80% of the respondents are given administrative penalties and some 20%–30% of the administrative proceedings dealing with undeclared work are cancelled.
Although the number of cases is not high in general terms, it should be noted that other measures are being implemented in parallel with the identification of undeclared work. These activities raise awareness in society, which in turn acts as a preventive measure aiming to combat undeclared work.
Obstacles and problems
It appears from the experience of VDI officers that the main problems faced in the area of undeclared work inspections related to the following obstacles.
- Identification of objective elements of undeclared work: Sometimes, inspecting officers fail to uncover and specify administrative violations of law and/or its objective elements. For example, VDI inspectors fail to produce evidence in court of elements of the employment contract present in the relations between the employer and employee.
- Identification of subjective elements of undeclared work: For example, a natural person shall be liable to administrative proceedings under Article 41-3 of the ATPK only if a specific element is present – that is, the person is an employer or a person authorised by the employer.
- Qualification of undeclared work: Problems in this regard are mainly related to trial periods and individual activities.
- Issuing reports of administrative violation of law: Sometimes, the requirements for making reports of administrative infringements of the law are not adhered to in practice. For example, reports of administrative breaches of law are issued without identification of the elements of the violation, or cases of such violations are brought to court without having collected the proper evidence.
- Term of imposing penalties: Sometimes, a term for imposing administrative penalties under Article 35 of the ATPK is violated.
In order to avoid the above irregularities and problems related to the inspections and identification of undeclared work, VDI analyses, on an ongoing basis, information on the controls conducted and publishes its findings and recommendations for improvement of these activities. Information on likely obstacles and problems is prepared and circulated to inspecting officers, along with instructions to avoid these difficulties in future.
So far, no policy evaluations have been conducted in Lithuania that would give grounds for an objective assessment of the impact of the inspections against undeclared work. Nevertheless, it can be said that this measure – as the main one in raising awareness aimed at combating undeclared work – undoubtedly has a positive impact on reducing the incidence of undeclared work in the country.
Inspecting undeclared work is one of the stricter measures in the prevention of irregular work. These provisions, however, are inevitable in order to restrict the use of such work, especially for certain economic activities or certain groups of workers who are particularly vulnerable – for example, young people or migrants – and who lose certain social guarantees in cases of undeclared work. Therefore, this measure could be – and is – used in other countries where softer measures do not bring positive results.
Gediminas Noreika, Deputy Head of the Law Department of the State Labour Inspectorate
Chief State Labour Inspector of the Republic of Lithuania, ‘On the amendment of Order No. I-33 of 7 February 2006 of the Chief State Labour Inspector of the Republic of Lithuania “On the approval of the regulations for investigation and accounting of undeclared work incidence, and investigation statements and explanatory forms of undeclared work”’, No. V-201, Vilnius, 8 July 2008.
VDI, Information on the coordination of undeclared work control performed by the State Labour Inspectorate and measures aimed at preventing undeclared work in 2006, Vilnius, 2007.
VDI, Information on the coordination of undeclared work control performed by the State Labour Inspectorate and measures aimed at preventing undeclared work in 2007, Vilnius, 2008.
VDI, Mistakes of VDI inspectors in documentation of material on undeclared work for courts, Internal VDI document.
Inga Blažienė, Institute of Labour and Social Research