Although it may not seem so at first glance, the recent amendment to the Employment Act, which focused in particular on the activities of employment agencies, may have quite significant consequences for all companies. What is at stake and why should employers be more vigilant?
The term "illegal work" is certainly familiar to all employers. It refers to a situation where a person is working "underground" without a concluded employment contract or agreement on the performance of work/work activity, or where a foreigner does not have the necessary permits to work in the Czech Republic.
In addition to these cases, the term "illegal work" also includes the so-called "shvarcsystem", i.e. the concealment of the employment relationship by cooperation between the employer and the self-employed person. This is typically done on the basis of a cooperation contract or a work contract.
It is probably needless to say that employers face significant financial penalties of up to CZK 10,000,000 for allowing illegal work to be performed. However, with the year 2024 came a major innovation that may put companies out of business altogether. As of 1 January 2024, Section 140(5) of the Employment Act provides that, in addition to fines, a ban on activity may also be imposed for allowing illegal work for up to two years.
A ban, even if only for 6 months, would certainly mean a complete halt in revenue for the company, loss of key clients and business partners, deterioration of reputation and credibility in the market or demotivation and departure of employees seeking a more stable working environment. If, by chance, such a company were interested in resuming its activities, it would be faced with the difficulties and costs of re-entering the market after the end of the ban. Simply put, the consequences for companies if a ban were imposed would be absolutely devastating and, de facto, such a sanction would be tantamount to shutting down the company for good.
In this respect, it is therefore necessary to call on all companies to explore long-term external collaborations, as prevention is always better than ex post problem solving. External cooperation with self-employed persons can be assessed by the labour inspectorate as a scam system and, in extreme cases, the consequences for the company can be far more serious than a heavy fine.
Typical features of a shvarcsystem include the economic dependence of the self-employed on a single customer, the absence of their own business tools (office, website, equipment, employees, etc.) or integration into the brand or organisational structure of the customer (car with customer stickers, business cards, listing on the customer's website, etc.).
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