General Contractor Liability in Germany: Defending Against FKS Claims and Liability Notices

General contractor liability is grounded in Section 14 of the Posted Workers Act (Arbeitnehmer-Entsendegesetz, AEntG), Sections 28e(3a) to (3e) of Social Security Code Book IV (Sozialgesetzbuch IV, SGB IV), and Section 150(3) of Social Security Code Book VII (Sozialgesetzbuch VII, SGB VII). It applies to any contractor that brings in other companies to handle parts of a construction project. The principle is straightforward: the general contractor is liable as a direct guarantor for its subcontractors’ social security contributions — regardless of any personal fault on its part.

In practice, this means that if a subcontractor fails to pay its employees’ social security contributions, or violates minimum wage rules, the general contractor can be held liable for those amounts directly. It cannot insist that the collection authority pursue the subcontractor first — liability is immediate once the demand period against the subcontractor has expired.

This liability is triggered when the estimated total contract value for a construction project reaches €275,000. That figure covers the combined value of all contracts awarded for the project, not the value of any individual subcontractor agreement.

FKS inspections are not random. The FKS is Germany’s central authority for investigating undeclared work and illegal employment. It can enter construction sites without notice, question workers and employers, examine documents, and — since the SchwarzArbMoDiG came into force — access digital systems.

Common triggers for an inspection in the construction sector include discrepancies between registered workers and those actually on site, signs of cash-in-hand payments, foreign subcontractors with no apparent social security registration, and anomalies flagged by automated analysis of contribution and registration data.

When the FKS finds violations at the subcontractor level — missing registrations, unpaid contributions, minimum wage shortfalls — it follows the chain upward. The general contractor that engaged the non-compliant subcontractor moves into focus automatically.

During an FKS inspection, employers and employees are legally required to cooperate: they must allow inspections to proceed, answer questions, and produce documents, under Section 5 of the Undeclared Work Act (Schwarzarbeitsbekämpfungsgesetz, SchwarzArbG). Since the SchwarzArbMoDiG came into force, that obligation expressly covers electronic data — the FKS can inspect IT systems, payroll and HR software, and cloud-based solutions.

These powers sit in tension with the right against self-incrimination (nemo tenetur) under criminal procedural law. Once an inspection starts to look like a criminal investigation, the rules change. Providing information or handing over documents at the wrong moment can seriously damage any subsequent defense. Legal representation during the inspection itself — not just afterward — is therefore essential.

Once the FKS finds irregularities at the subcontractor level, it passes its findings to the relevant authorities — and from there, escalation follows a familiar pattern. The social security collection authority pursues surety liability under Section 28e SGB IV; the BG Bau — the employers’ liability insurance association for the construction sector — asserts claims for unpaid accident insurance contributions under Section 150(3) SGB VII. Administrative fine proceedings run in parallel: violations of minimum wage or registration obligations can attract fines of up to €500,000 under Section 21 of the Minimum Wage Act (Mindestlohngesetz, MiLoG) and Section 8 SchwarzArbG. If deliberate aiding and abetting is suspected, the FKS passes the files to the public prosecutor’s office — and an inspection becomes a criminal investigation against the managing director personally.

When a subcontractor fails to pay social security contributions — because it has become insolvent, or because a foreign company is simply no longer reachable — several institutions can turn directly to the general contractor. Outstanding total social security contributions are pursued by the relevant collection authority, usually the subcontractor’s health insurance fund (Krankenkasse). Outstanding accident insurance contributions are pursued by the relevant employers’ liability insurance association — in construction, typically the BG Bau.

The statutory basis is Sections 28e(3a) to (3f) SGB IV, which establish liability for the total social security contributions of engaged subcontractors, alongside Section 150(3) SGB VII, which extends that liability to BG contributions. The general contractor stands as a direct guarantor for the subcontractor’s health, long-term care, pension, unemployment, and accident insurance contributions — without the collection authority or BG first being required to exhaust its options against the subcontractor.

General contractors are not without recourse — but the burden of proof rests with them. Section 28e(3b) et seq. SGB IV recognizes three established routes for excluding personal fault:

• Prequalification of the subcontractor: Fault is excluded if the general contractor can demonstrate the subcontractor’s professional competence, reliability, and capability through a prequalification satisfying the eligibility requirements under Section 6a of the Construction Contract Procedures Part A (Vergabe- und Vertragsordnung für Bauleistungen Teil A, VOB/A). Prequalification establishes that the engaged company meets the relevant criteria — including tax compliance, social security registrations, financial soundness, and professional competence.
• Falling below the threshold: Liability does not apply if the total value of all construction works commissioned for a project falls below €275,000. This figure relates to the project as a whole, not to individual subcontractor agreements — though how exactly it is calculated can itself become a point of dispute.
• An unbroken series of clearance certificates: Alternatively, qualified clearance certificates (Unbedenklichkeitsbescheinigungen) may be submitted under Section 28e(3f) SGB IV. These must document proper payment of social security contributions and confirm the number of registered employees. Continuity matters: gaps or expired certificates can cause a liability defense to fail.

A liability notice is not the end of the road. In practice, the relevant authority often fails to set out its damage calculations and their attribution to the general contractor with sufficient precision. A common approach is the so-called two-thirds method (Zwei-Drittel-Methode), in which liable wage amounts are estimated and the contribution claim built from that estimate. General contractors can always demand a precise calculation — and in practice, this frequently produces a lower figure than the authority’s initial estimate. The conditions that must be met before estimation can be used at all must also be verified case by case.

Beyond this, the exact value of construction works relative to the €275,000 threshold, and the scope and quality of any clearance certificates produced, regularly provide additional grounds for challenge. Early legal review of any liability notice is advisable in every case.

A liability notice is serious. A criminal investigation is potentially existential. Customs authority inspections do not always stop at the civil liability question — they can escalate into criminal proceedings against company management personally. When that happens, the central allegation is typically aiding and abetting the withholding of social security contributions under Section 266a(1) and Section 27 of the German Criminal Code (Strafgesetzbuch, StGB).

Only the employer can be the direct perpetrator of Section 266a(1) StGB — in practice, the subcontractor that fails to remit its employees’ contributions. Since the general contractor is not typically the employer of those workers, its criminal exposure arises through participation rather than as principal, most commonly through aiding and abetting. Liability as an accessory requires intentional assistance in the commission of an intentional unlawful principal offence — the assistance need only promote the offence, not be an equivalent cause of the outcome.

For the general contractor, the practical implication is this: awarding contracts to a subcontractor in the knowledge — or with wilful disregard of the likelihood — that it is not paying its workers’ social security contributions constitutes promotion of the principal offence, and opens the door to criminal liability for aiding and abetting. That exposure is not limited to active steps such as establishing concealed payment structures or participating in sham arrangements. In some circumstances, simply continuing a contractual relationship where the circumstances point to systematic non-compliance, and the general contractor is fully aware of this, may be enough.

Price is one of the most sensitive indicators in the criminal context. Engaging a subcontractor at a rate that is visibly below market — or that makes payment of the statutory minimum wage arithmetically impossible — creates a real risk that investigators and courts will treat this as evidence of conditional intent (bedingter Vorsatz). The logic: a contractor who knows that work cannot be delivered at a given price while meeting all legal obligations, yet proceeds regardless, is accepting the likelihood that the subcontractor will breach those obligations.

An unusually low offer from a subcontractor is therefore not a fortunate find — it is a warning sign, legally and criminally. General contractors who accept such offers without examining whether the underlying calculation is even plausible expose themselves to significant personal liability and criminal risk.

When a criminal investigation is opened, searches and seizures of business documents typically follow, along with the reputational consequences of an ongoing public proceeding. At that stage, early legal representation is not a matter of preference — it is a necessity.

The SchwarzArbMoDiG came into force on 1 January 2026. For general contractors in the construction sector, the most significant changes are the new and tightened obligations introduced for employers and employees, which the customs authority now monitors with extended powers.

On the employer side, the changes are concrete. Employers must inform each worker in writing — with documented acknowledgment — that the worker is required to carry identity documents when working and to present them to customs officers on request. That notice must be retained for the duration of the employment relationship and produced during inspections. An immediate notification obligation also now applies: the start of any employment relationship must be reported to the data centre of the German pension insurance system (Datenstelle der Rentenversicherung) no later than the moment work begins — in addition to, not instead of, the standard notification to the relevant collection authority.

The existing obligation to document working hours and payroll records under Section 17 MiLoG continues alongside these new requirements: the start, end, and duration of each working day must be recorded within seven days and retained for at least two years. Payroll records must also be kept within Germany, in German, for up to two years.

For general contractors, the implications go beyond their own workforce. These obligations set the standard against which the customs authority assesses the compliance of an entire construction project. Engaging subcontractors that do not meet these requirements is a fast route to FKS scrutiny — with all of the liability consequences that follow.

General contractor liability in Germany is not a theoretical concern — it is a real financial and criminal risk for every general contractor operating in the construction sector. Operating without a solid documentation structure, or without systematically reviewing subcontractors, is a form of negligence. These cases sit at the intersection of construction law, employment law, and criminal law, and they require legal advice that can work across all three at once.

At Schlun & Elseven, our lawyers bring those capabilities together, supporting general contractors and managing directors across every relevant area — from structuring contracts and implementing sound subcontractor review processes, to challenging BG Bau liability notices, to defending managing directors facing criminal charges under German law.

If you have received a liability notice, are facing an FKS inspection, or want to take preventive steps before a problem arises, the right time to seek advice is now. The earlier we are instructed, the greater the room for manoeuvre — and the more effectively a defense can be coordinated across employment, construction, and criminal law. Contact us to discuss your situation and explore your options.