Update: October 2020
With the second coronavirus wave hitting Germany and the rest of Europe, measures are being taken to combat the spread of the virus. As cities around Germany are being declared “risk areas” and certain businesses are still facing certain restrictions, the easier access to Kurzarbeit / short-time work allowance has been extended. Originally, the limit to the easier access to the allowance was set to the end of 2020, but this has now been changed to the end of 2021. The hope is that this will allow companies greater security in their ability to plan. It is also in place as it has been a successful way of keeping employees in their jobs, as more than 10 million people have been placed in short-time work over the course of the crisis so far.
Germany has also seen cases of subsidy fraud in the form of abuse of short-time working allowance. There are strict rules in place around the issuing of Kurzarbeit / short-time work allowance, and investigations have been taking place of companies who have applied for it. Such investigations have involved office searches (including of the digital communication within the company), interviews with employees and management of companies as well as the finding of witnesses amongst the employees and customers of the business in question. In other words, a full criminal investigation. Where there is a case for abuse of short-time work allowance, those found guilty face the prospect of heavy fines and potentially damaging court cases.
If your company is facing the prospect of an investigation for abuse of short-time work allowance, make sure to contact our legal experts. Such office searches need to be carried out in a legally compliant manner, interviews should only be conducted with a lawyer present and should the case come to court, our lawyers will provide you with the required legal defence.
Access to short-time work allowance was made easier in the wake of the crisis surrounding the novel coronavirus (SARS-CoV-2). On 13 March 2020, the Bundestag passed the “Act on the temporary crisis-related improvement of the regulations for short-time working allowance” in an expedited procedure for this purpose and with retroactive effect from 1 March 2020.
As a result of the restrictions to contain the spread of the coronavirus (SARS-CoV-2), numerous companies and facilities will have to close down or will only be able to operate to a limited extent, a high demand for applications for short-time work allowance can be expected.
The first census conducted by the Federal Employment Agency last week (16.03.2020-22.03.2020) with 76,700 requesting companies already makes this clear. In comparison, the Federal Employment Agency received an average of only 600 short-time work allowance applications per week in 2019.
What are the Requirements for Claiming Short-time Work Allowance?
The basic prerequisites for applying for short-time work allowance are based on § 95 SGB III, according to which a considerable loss of work with loss of remuneration must be reported to the Federal Employment Agency at the company’s headquarters. In addition, the operational and personal requirements must be fulfilled.
Considerable loss of Working Hours with loss of Remuneration
A “substantial loss of working hours with loss of earnings” is to be assumed if an “unavoidable event” (e.g. the closure or restriction of operations to contain the spread of the coronavirus (SARS-CoV-2) ordered by the authorities) occurs or the loss of working hours is temporary and unavoidable due to economic causes.
According to the draft bill of 19 March, at least 10% of employees must have a loss of earnings of more than 10%.
The following prerequisites must be met for the assumption that the loss of working hours is unavoidable due to economic causes:
- No loss of working hours due to normal industry, business or seasonal reasons,
- Previous means is the reduction of overtime and working time accounts,
- Consideration must also be given to the temporary transfer of employees to another area,
- Overall, economically reasonable countermeasures must be taken beforehand,
- Operational and personal requirements
According to § 97 SGB III, the operational requirements are fulfilled if at least one employee is employed in the company, whereby “company” also includes a company department.
Depending on the employee, the personal prerequisites are fulfilled in accordance with § 98 SGB III if, after the beginning of the loss of working hours
- continues or takes up employment subject to compulsory insurance (for compelling reasons or following the termination of a vocational training relationship)
- the employment relationship has not been terminated or dissolved, and
- the employee is not excluded from the reduced working hour allowance.
What other recent changes to short-time work allowance should be Considered?
- Social security contributions incurred for the loss of work will be reimbursed in full,
- Short-time work benefits can be drawn for up to 12 months,
- Negative working time accounts will not be set up in companies where agreements on working time fluctuations are used,
- Temporary workers can also go on short-time work and are entitled to short-time allowance,
- Criminal law relevant case constellations
According to the German Federal Employment Agency, the number of short-time work allowance applications as a result of the economic and euro crisis was 1,144,407 in 2009, compared with 101,540 in 2008. During this period in particular, an increasing number of cases became known in which companies had made unlawful use of the subsidy.
For 2020, the Federal Employment Agency is expecting around 2,350,000 reduced working hour compensation applications due to the COVID-19 coronavirus, so that an increase in abuses of short-time work can be expected this year as well. A risk of criminal liability arises not only for the employer, but possibly also for the employee.
Criminal Actions relating to Short-Time Work Allowance
This is how a criminal case can occur. Firstly, the employer submits an application for short-time work allowance due to loss of working hours in accordance with the aforementioned requirements. They do this even though there is no loss of working hours to the extent specified in the application. The employer instructs their employee to enter the reduced working hours claim in the relevant entry system, but then to continue working full-time.
In addition, such instructions by the employer may not only result in a criminal liability on the part of the Federal Employment Agency, but also on the part of the employees.
If the employees have reliable knowledge of this intention of the employer to illegally receive the services of the Federal Employment Agency, they too are exposed to a high risk of being punishable for participation. This can also apply if they “only” comply with the employer’s instructions in order to keep their jobs.
What also happens repeatedly, or has been practiced in the past, is that the employer compensates the loss of wages by entering “under the counter” internal agreements with their employees. The employer then applies for short-time work allowance, but only taxes the reduced wage and pays the employees the rest untaxed.
What are the Criminal law Consequences?
With the procedures described above, the employer risks criminal liability for fraud (§ 263 StG) or subsidy fraud (§ 264 StGB) at the expense of the Federal Employment Agency on the one hand and for coercion (§ 240 StGB) or blackmail (§ 253 StGB) at the expense of his employees on the other.
However, employees could also be criminally investigated for aiding and abetting (§ 27 StGB) the employer’s fraud or subsidy fraud. In the fourth variant, employers and employees also commit wage tax evasion and the employer may be liable to prosecution for withholding and embezzlement of wages (§ 266a StGB).
Employer Criminal Liability for Subsidy Fraud § 264 StGB or Fraud § 263 StGB
Fraud pursuant to § 263 StGB is to be classified as probably the most relevant criminal offence with regard to the abuse of short-time work allowance. The subsidy fraud pursuant to § 264 StGB may also be relevant, as it is not far off the case that the services of the Federal Employment Agency are to be classified as “subsidies”.
The fraud according to § 263 StGB initially presupposes a deception of facts. In the procedures described, such a deception lies in the fact that the employer, by providing incorrect information in the applications of the Federal Employment Agency, pretends to be in need of short-time work allowance because the working hours of the company have been shortened. In fact, however, the employees continue to work full-time. As the application processors of the Federal Employment Agency incorrectly assume that the information provided by the employer corresponds to reality, the error occurs after the fraud arises.
The provision of the short-time work allowance and the social security contributions by the Federal Employment Agency is the reason for the mistaken disposition of assets which ultimately leads to a financial loss for the Federal Employment Agency because its benefits are not used for the purpose of maintaining jobs in the wake of the crisis. The employer is also likely to be found guilty of intent and unlawful enrichment. Certainly, all these prerequisites must be proven beyond doubt, but the risk of becoming a criminal offender as an employer through the misuse of reduced working hours and reduced working hour allowance should not be underestimated.
Employee Participation Punishable for Aiding and Abetting Fraud or Subsidy Fraud according to § 27 StGB
Employees can also quickly become liable to prosecution for aiding and abetting fraud (§§ 263, 27 StGB) or subsidy fraud (§§ 264, 27 StGB) on the part of the employer. Aiding and abetting is in fact fulfilled when someone assists another offence, which tends to be interpreted broadly in case law. Thus, if the employee is aware of the circumstances, agrees to short-time work but continues to work full-time, it could already be assumed that the employee is providing assistance in accordance with § 27 StGB.
A different assessment could possibly be made if the employer’s instructions fall under the criminal offence of coercion under §240 StGB or extortion under §253 StGB.
Both small and large companies are currently facing a critical economic situation in the wake of the crisis surrounding the novel COVID-19 coronavirus (SARS-CoV-2). However, this should – as explained – not be a reason to abuse the regulations on short-time work allowance. After all, this would not only mean heavy fines, but also prison sentences of up to five years, in serious cases even up to ten years.
At Schlun & Elseven our criminal law team provides advice and assistance in a diverse range of criminal law matters. Our offices are located in Cologne, Düsseldorf and Aachen but we can also be reached remotely during this difficult time. Our lawyers can advise you in English as well as German. We remain in contact with our clients through phone, email and video conferencing. Contact us today for legal assistance and answers to related queries.