Strengthening non-financial sanctions, France

This measure aims to prevent employers from using undeclared workers by increasing the use of non-financial penalties. The aim is to reduce the prevalence of undeclared work and to encourage employers to comply with the law. Penalties can include being barred from tendering for public works for a period, being excluded from receiving financial support from the state or being forced to close down the establishment for three months.

Background

A national plan to fight undeclared work was adopted in 2009 for a two year period (2010–2011). The detection rate (procès-verbal) for illegal work, which numbered 8,764 in 2008, is targeted to increase by 5% annually, and the number of reassessments, to uncover employers failing to pay social security contributions, which, in monetary terms, totalled €108 million in 2008, will need to increase by 10%. The Minister of Labour also sought to increase joint investigations, between a number of inspection bodies, from 23% to 25% in 2010 and 2011.

The plan specifically focuses on five sectors: construction; hotels and restaurants; the private security and cleaning industry; live performance and recorded entertainment; and seasonal work in agriculture. It also targets four main sources of infringements: undeclared labour, hiring of undocumented migrant workers, the illegal use of a specific status of employment (internship, short-term contracts in the live performance or audiovisual sector, so-called ‘intermittents du spectacle’) and illegal trafficking of works across borders. This national plan aims to fight against a phenomenon that costs, according to data from the Ministry of Labour in 2009, €60 billion per year, equivalent to 4% of the national GDP or the entire budget of the country’s public education system. According to a report from the Council of Obligatory Taxes and Social Contributions (Conseil des prélèvements obligatoires, CPO), infringements of the rules concerning tax and social security contributions in 2006 represented a loss of revenue of between €28.9 billion and €40.2 billion per year (between 1.7 and 2.3% of national GDP). These figures included between €6.2 and €12.4 billion for undeclared work alone.

In this area, since 2010, the government and Parliament have adopted several bills aimed at strengthening measures to identify infringements of the legal requirements to pay taxes and social security contributions. The main focus of these measures is to counter fraudulent employers who breach their statutory duty to declare accidents at work and occupational diseases, to improve the exchange of information between the various inspection bodies and to introduce a new measure whereby authorisation is given to employees of the French public employment service (Pôle Emploi) to identify infringements of the rules relating to unemployment insurance and undeclared labour.

The law n° 2011-672 of the 16 June 2011 on immigration, integration and nationality, which came into force on 2 December 2011, has increased the penalties for those employers who have committed fraud by failing to declare labour. This law transposed Directive 2009/52 of 18 June 2009 and provided minimum standards on the sanctions and measures that can be used against employers which employ illegally resident third-country nationals. This Directive prohibits the employment of illegally resident third-country nationals in order to fight illegal immigration. To this end, it lays down minimum common standards on sanctions and measures to be applied in Member States against employers who contravene this principle. The law was finally introduced by a decree of 30 November 2011 and an order of 30 November 2011.

Objectives

The aim of this new measure is to reduce the prevalence of undeclared work and to encourage employers to adhere to the law. This measure also speeds up the enforcement process and provides harsher punishment to those employers that infringe the rules by issuing administrative sanctions as opposed to penal sanctions, which take longer to administer due to the fact that court hearing is required. It will also allow for fairer competition between companies and help to create a balance within the state’s finances.

Specific measures

If an employer infringes the rules governing undeclared work when carrying out work on behalf of public authorities, it may be punished by administrative sanctions, such as to be:

• prohibited to tender for public works contracts for a maximum period of six months;
• prohibited from receiving financial support from the state or the European Union, for employment related projects (for example, financial support to employ young workers in apprenticeships), professional training or subsidies for cultural activities for the workforce (such as tickets for the theatre or festivals) for a maximum of five years. This measure was introduced prior to the law of 2011, which added that the employer also has to repay any public financial support received in the previous year, prior to the infringement being recorded (LC. art. L. 8272-1);
• compelled to close down the relevant establishment for three months (LC. art. L. 8272-2). The employer found to have infringed the law in this area, for example by employing undocumented migrant workers, carrying out clandestine work, bargaining or hire outs of illegal labour, will be forced to temporarily close the establishment they used to commit the offence and/or be excluded from any forms of public procurement (LC. art. L. 8272-2 and L. 8272-4). The closure may affect a plant but also a company on a construction site. In case of such a closure, employees must still be paid, so they are unaffected financially by the closure.

To increase the efficiency of this policy, the financial law for 2012 (art. 62) stresses that the prefect has to receive the documents of each infringement that relates to undeclared work in order to make a ruling for administrative sanctions or the reimbursement of public financial support. The same rules apply to enforcement officers who must pass the relevant documents to the French Office for Immigration and Integration (OFII) on discovering undocumented migrant workers. This allows OFII’s director to demand that employers who have committed an infringement pay taxes and be financially responsible for relocation costs of the third-country nationals. These measures were reinforced through the law of financing social security for 2012.

Actors involved

The administrative body responsible for overseeing the particular state support has the power to refuse this support or to demand the employer pays back any support already received (mainly through the Pôle emploi – the French Public Employment Service or Local Authorities). The latter body then informs the Prefect of the Department of its decision (or the Commissioner of the Police, in Paris) (LC. Art. D. 8272-2). A decision to order the closure of the business, and/or to the company being denied the right to bid for public tenders, is taken by the Prefect of the Department.

Outcome of evaluations: lessons and conclusions

Achievement of objectives

As the new measures were introduced late in 2011, an official assessment is not available. By mid-November 2012, the Ministry of Labour will have organised a conference and published the annual report of the National Commission for Combating Illegal Work, which contains new data on the fight against illegal work, and will probably contain some data on the new measures.

According to interviews carried out with officials from the labour ministry, it appears that prefects have actually utilised their right to close companies, as this only requires their approval. However, other measures appear to be more difficult to implement as they involve several actors, all of which must exchange information. For example, if a prefect decides to ask an employer to reimburse the state for previously provided support, the reimbursement has to be formally requested by the financial authority that granted the financial support in the first place. In addition, if a local authority launches a call for tender then it will need to be advised of the names of companies that the prefect has excluded from this process.

Obstacles and problems

As a consequence of the last point, if there is a lack of coordination and/or communication between the various actors involved, a local authority may not be aware that a company is in fact banned from being awarded work through a call for tender.

Transferability

This measure applies at the national level to all companies. It could be used by other Member States that have not used administrative sanctions.

Contacts

• ACOSS: www.acoss.urssaf.fr
• Ministry of Labour, General Directorate of Labour.

Commentary

Through these measures, the government intends to offer more tools to counter the use of illegal employment and to increase the vigilance of the authorities and to improve the enforcement rate by introducing administrative sanctions that can easily and quickly be determined and then applied by the prefect.

Bibliography

Décret no 2011-1693 du 30 novembre 2011

Arrêté du 30 novembre 2011, NOR : IOCL1131488A

Liaisons sociales, “Loi relative à l’immigration – Mesures concernant l’emploi”, Légis. soc. - n°155/2011 du 3 août 2011

Frédéric Turlan, IR Share