What You Need to Know About Illegal Employment in the Czech Republic: New Rules

Checks for illegal work in the Czech Republic are now being conducted under new regulations. What are the changes, and what should employers be cautious about in practice?

The amendment to the Employment Act No. 408/2023 has changed the definition of illegal work starting in 2024. Sanctions for employers have also been tightened. This represents a small but significant change in proving illegal employment.

Previously, illegal work (work performed outside of an employment relationship) completely mirrored the definition of dependent labour according to the Labour Code. Dependent work is defined as work performed in a relationship between a manager and a subordinate on behalf of the employer, carried out personally by the employee for the employer. This type of work must be compensated with wages, salaries, or remuneration and is conducted under the employer’s responsibility, during working hours at the employer’s premises or another agreed location.

Definition of Illegal Work in the Czech Republic from 2024

The Employment Act defines key terms for the purposes of this legislation in Article 5. Among these definitions is that of illegal work (paragraph e). According to the current version of the law, illegal work is defined as work that exhibits the characteristics of dependent labour in accordance with § 2, paragraph 1 of the Labour Code, and is performed under the following conditions:

1. By an Individual Outside of an Employment Relationship.This does not apply if the performance of work outside of an employment relationship is permitted by other legal regulations (e.g., Act No. 234/2014 on public service, Act No. 361/2003 on employment, or employees of the security forces).

2. By a Foreigner in Violation of Work Permit Regulations. This includes working without a required permit or in violation of an employee card or blue card issued under the Act on the Residence of Foreigners in the Czech Republic. However, this does not apply to certain cases outlined in § 41, paragraph 1 of the Labour Code (e.g., if a pregnant employee, breastfeeding employee, or mother who is an employee performs work until the end of the ninth month after giving birth that is prohibited due to health concerns).
   
3. By a Foreigner for a Legal Entity or Individual Without a Valid Residence Permit.This applies if a residence permit is required under the Act on Residence of Foreigners.

With this last addition, legislators aim to limit illegal employment and assist the labour inspectorate in implementing control measures to more effectively identify and demonstrate instances of illegal work. In the past, continuity of work was one of the most significant indicators of illegal employment. This meant that work outside an employment relationship had to be performed for an extended period before it could be detected during an inspection by the labour inspectorate at the employer’s workplace, which made proving illegal work logically problematic.

Therefore, the amendment to the Employment Act in 2024 includes provisions regarding illegal work (§ 5, item d). Notably, it states that the duration of such work is not essential for determining whether it is considered illegal.

Clarifying Illegal Employment: Key Changes and Requirements

A minor yet significant change is the revision of the phrase “work is performed” in the introduction to the definition of illegal work. This wording clarifies that, to prove illegal employment, it is not necessary for the work to be carried out on a regular or repeated basis; even a one-time job performed outside of an employment relationship, with or without a work permit, can be considered illegal.

To formalise an employment relationship in accordance with the Labour Code, an employment contract or agreement must be drafted and signed by both parties. It is generally recommended to complete this process in advance, but no later than the agreed start date of the work.

Illegal Work and Labour Inspection Checks

The recent changes aim to assist labour inspectorates in more easily identifying signs of illegal work and proving instances of illegal employment. Sanctions have also been tightened. In addition to fines for permitting illegal work, employers may now face a ban on operations for up to two years. Richard Kolibach explained how this change will impact practice:

“The State Labour Inspectorate (SUIP) has not altered its inspection procedures due to the revised definition of illegal work. Inspectors continue to assess all indicators of dependent work as defined by the Labour Code while also determining the duration of such work.”

The indicators of dependent work are outlined in Article 2 of the Labour Code. According to Article 3, dependent work can only be performed within the framework of a primary employment relationship unless specified by special regulations. 

Administrative courts and the Supreme Administrative Court have included continuity as a characteristic of dependent labour in their rulings, even though this concept is not explicitly defined in the Labour Code. Consequently, demonstrating continuity has complicated the enforcement activities of labour inspection bodies, as courts have sometimes deemed short-term or sporadic illegal work as inconsistent performance. This judicial perspective makes it challenging to control and prove instances of illegal work, as Richard Kolibach concluded. 

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source: https://www.podnikatel.cz/clanky/nelegalni-prace-podle-upravenych-podminek-od-roku-2024/?utm_source=push&utm_campaign=2024-09-12