The Illegal Employment of Foreigners in Germany

Undeclared work and the illegal employment of a foreigner are not uncommon in the labour market. The two terms have different meanings, yet they are closely linked. According to Section 1 (2) of the German Act to Combat Undeclared Work and Unlawful Employment (SchwarArbG), a person is engaged in undeclared work if they perform services or jobs or has them performed and, in doing so, violates tax obligations and the German social security law. Illegal employment, on the other hand, exists under the following circumstances:

• There is an employment relationship with a foreigner, whereby the latter lacks the required work permit and residence title.
• A relationship in which there is unequal treatment between the German and the foreign employee.
• An employment relationship in which the requirements of any laws – e.g., the Act Regulating a General Minimum Wage (MiLoG), the Act on Temporary Agency Work (AÜG) or the Act on Mandatory Working Conditions for Workers Posted Across Borders and for Workers Regularly Employed in Germany (AEntG) – are disregarded.

Both cases of undeclared work and illegal employment occur in the sectors mentioned in Section 2a SchwarArbG:

• construction sector,
• catering and hotel sector,
• passenger transport sector,
• haulage, transport, and associated logistics sector,
• fairground and amusement sector,
• forestry businesses,
• industrial cleaning  industry,
• businesses engaged in the setting up and dismantling of trade fairs and exhibitions,
• meat industry,
• prostitution sector,
• private security sector.

The first thing to note is that to work in Germany, a third-country national, i.e., a person from a country outside the EU and the EEA, must have a valid residence permit. This must also allow the foreigner to take up employment. However, an exception to this requirement is standardised in Section 4a (4) of the Residence Act:

Foreigners not holding a residence title may only carry out seasonal work if they hold a seasonal work permit and they may only pursue another economic activity if an inter-governmental agreement, a law or a statutory instrument entitles them to do so without a residence title or if the competent authority has given its permission.

Our German immigration lawyers will be happy to advise you on any questions or challenges you have. We also support you in obtaining a work visa and a residence permit and checking your success chances before an application. Furthermore, we ensure that neither you, as an employee, nor your employer can be accused of illegal employment. We support you and your company and verify that all requirements for compliance with applicable law are met.

Failure to comply with the relevant German laws when employing a foreigner is mainly prosecuted as an administrative offence and leads to substantial fines. However, criminal prosecution is also possible. We discuss the responsible authorities and the consequences of not complying with German law in this area.

Section 2 (1) SchwarsArbG stipulates that primarily the authority of the customs administration is responsible for examining illegal employment. According to Section 2 (4) of the SchwarzArbG, they are supported by:

• Tax authorities,
• the Federal Employment Agency,
• social insurance agencies,
• the police and many other authorities/agencies.

The powers of the customs administration authorities in Germany and the supporting agencies named in Section 2 (4) of the SchwarzArbG are set out in Sections 3 and 4 of the SchwarzArbG.

If the illegal employment of a foreigner has been established, this will be prosecuted as an administrative offence or a criminal offence. The punishment the person concerned can expect depends primarily on their position. In such cases, a distinction is made between employer and employee. In the following, you will be informed about the sanctions that can be imposed.

According to Section 4a, paragraph 5, sentence 1 of the Residence Act, a third-country national may only be employed or commissioned with other remunerated services or work in Germany if they have a residence title. There is no prohibition or restriction in this respect. Suppose an employer employs a foreigner illegally, except that ,Section 4a (4) AufenthG does not apply. In that case, they are acting in breach of the regulations under Section 404 (2) (3) of the Third Book of the German Social Code. This offence can be punished with a fine of €500,000 (cf. Section 404 (3) SGB III).

Such a violation by the employer can also be penalised with a prison sentence of up to three years or a fine in case of persistent repetition of the act or the unauthorised employment of more than five third-country nationals (cf. Section 11 SchwarzArbG). If, in addition, there is a conspicuous disproportion between the working conditions of the foreigner and those of the German employee, the custodial sentence may, under certain circumstances, amount to up to five years (cf. Section 10 SchwarzArbG).

Our specialist lawyers for employment law advise employers, managing directors and other executives. We will explain your rights and obligations, assert your interests, and show you what to bear in mind when dealing with your employees to avoid employment law mistakes and their consequences.

The unlawful conduct of an employee set out in Section 404 (2) no. 4 SGB III is punishable by a fine of up to €5,000 (cf. Section 404 (3) SGB III). The penalty to be expected may be more severe if there is a persistent repetition of the prohibited conduct (cf. Section 11 (1) no. 1 letter b SchwarzArbG).

A foreigner is also punishable if they stay in Germany based on a Schengen visa and pursue employment without a corresponding permit (cf. Section 95 (1a) AufenthG). This provision is relevant for both employees and self-employed persons.

Our German legal experts will be happy to inform you about the Schengen visa and its benefits. If this is not the correct document for your project, we will advise you, explain the advantages and disadvantages of the individual residence titles and check which one is most suitable for you.

In addition to the provisions already mentioned, the following standards may also become relevant in an investigation of illegal employment:

• Section 23 AEntG –fines regulations,
• Section 8 SchwarzArbG – fines regulations,
• Section 16 AÜG – administrative offences,
• Section 98 para. 2a no. 1 AufenthG – fine of up to €500,000 for engaging in illegal employment,
• Section 93 (3) no. 1 Residence Act – fine of up to €5,000 of the unauthorised exercise of a self-employed activity,
• Section 232 et seq. StGB – offences such as human trafficking, forced prostitution, forced labour and the exploitation of labour,
• Section 266a StGB – prison sentence or fine for the withholding and embezzlement of remuneration for work,
• Section 291 StGB – prison sentence or fine for usury of wages,
• Section 70 StGB – prohibition of employment.

If preliminary proceedings are opened against your person, our criminal law experts will support and advise you in this regard comprehensively. Our practice group for criminal law then develops a defense strategy to enforce your rights and protect your interests. As confiscation of your assets may already occur at the pre-trial stage, quick action is required. Therefore, our team will treat your contact with the utmost urgency and respond accordingly.

If you wish to employ a foreign worker, you should ensure that you do not commit any offence related to illegal employment before accepting them for work. This requires an examination of the necessary documents. Schlun & Elseven will be happy to assist you with these steps. Contact us via the online form below to benefit from our legal services in this area.

Before hiring a foreigner, it is necessary to inquire about their nationality. If the applicant is a citizen of an EU member state or a member state of the European Economic Area (EEA), no residence permit is required. However, if the applicant is a third-country national, you should ask about the necessary residence permit. If the residence permit does not also entitle the foreigner to take up employment, an additional work permit is required, which should also be presented to the future employer.

As soon as you decide to employ the third-country national and you have the necessary documents regarding the applicant’s citizenship, the permission to stay and take up employment in Germany, the registration with the social insurance, and the tax office must take place. This obligation to register arises under Section 28a SGB IV and must not be missed. It should be noted that there is a special regulation for specific sectors to curb illegal employment. These sectors are listed in paragraph 4 of the latter standard.

To work legally in Germany as a third-country citizen, it is necessary to obtain a residence title. The Residence Act (AufenthG) provides, for example, the following titles:

• Residence permit,
• EU Blue Card (Section 18g AufenthG),
• permit for permanent residence – EU (unlimited issuance, Section 9a AufenthG),
• Intra-Corporate card (ICT card, Section 19 et. seq. AufenthG),
• permanent residence permit (unlimited issuance, Section 9 AufenthG),
• Visa.

Not every residence title automatically leads to permission to pursue a professional activity in Germany. While it is generally permitted to be gainfully employed in the case of permanent residence titles, a note must explicitly indicate that taking up employment is allowed in the case of temporary titles. However, this permission may also be limited to certain areas of activity.

Please look at our articles on the individual residence titles or contact our immigration lawyers directly for more information. We will to explain how to obtain such a title, which one is the most suitable for the intended purpose in Germany and which documents you need to apply for it.