Labour Inspection Office focuses on illegal employment and unlawful labour hire practices

Despite complications associated with the COVID-19 pandemic, last year the Labour Inspection Office carried out more than five and a half thousand inspections focusing on illegal employment, revealing more than three thousand illegal workers, mainly from countries outside the EU, even though the pandemic itself had generally decreased the number of foreign nationals in the Czech Republic. The average penalty amounted to CZK 240 thousand.

Illegal work may take on two forms: employment of foreigners without appropriate work and residence permits and the so-called ‘Svarc’ system, i.e. performance of dependent work outside an employment relationship. Illegal employment of foreign nationals does not only involve not having any permits at all but also cover situations when foreigners have permits that do not apply to the type of work they are performing. Employers most often forget to apply for a change of permit upon a change of position or place of work. Regarding the ‘Svarc’ system, it is now less common for employers to pursue the conclusion of contracts other than employment contracts; instead, job candidates themselves are often interested in more flexible arrangements. But when it comes to setting out mutual contractual rights and duties, they do not know their way around and instead enter into arrangements that resemble employment relationships.

Apart from “traditional” illegal employment, inspectors increasingly often come across a more recent unlawful structure: concealed agency employment. This involves situations when an entity offers its employees’ work for consideration without having an employment agency licence necessary for such a business. In the last year, the number of penalties imposed for concealed agency employment was lower but the average penalty amount was significantly higher, exceeding CZK 450 thousand. This type of offence is relatively new and many companies are not even aware of having been engaged in it. The line between legally providing services through employees and lending employees to fulfil customers’ instructions is indeed relatively thin, with a decisive role being played by the conditions of the collaboration and the contractual provisions. 

The Labour Inspection Office’s statistical figures for the previous year are in line with our experience from practice. The complexity of immigration procedures and the inflexibility of labour-law regulations often drive employers to consider more risky but more flexible solutions. For concealed agency employment / employment mediation, the problem lies with the relatively complex concept, where the difference between legal and illegal arrangements often seems mere legal wordplay to pragmatists. A sensitive legal review of contracts on cooperation with self-employed persons or contracts based on which employees work for customers may bring significant benefits and improve this year’s statistics.