A Fight against “Švarc System”: New Possibilities of Sanctions, Employment Agreements Must be Available
Monday, 29 July 2013 08:29

The so-called “Švarc System” has been considered illegal for quite a long time, but pursuant to the legislation effective until 31 December 2012 it was hardly sanctioned at all in practice. This situation has dramatically changed with the effect of the amendment to Act No. 435/2004 Coll., on Employment, effective as of 1 January 2012, that has introduced the possibility to sanction a natural person performing illegal work (e.g. in the form of the “Švarc system”) and impose a fine up to CZK 100,000. The term “Švarc system” means performance of a dependant work outside an employment relationship, most often when an employer concludes an agreement with a self-employed person within the framework of a business relationship, although the person in fact performs dependant work for the employer. Legal entities and natural persons – entrepreneurs face the sanction in the form of a fine up to CZK 10 million for allowing illegal work. The employer is obliged to keep copies of documents evidencing the existence of employment relations at the workplace, i.e. in particular employment agreements and agreements on works performed outside the standard employment relationship. A failure to submit these documents in the course of an inspection performed by the Labour Inspectorate is classified as illegal work and in such a case the inspection authorities impose a fine to the employer of at least CZK 250,000, with additional submission of the documents having no impact on the work classification as illegal or on the imposed fine. The assessment and sanction imposition is fully within the competence of labour inspection authorities that review not only the content of the contractual documentation, but also inspect the factual conditions of mutual co-operation under which a natural person performs their work or provides their services for another person or entity.

 
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Advokátní kancelář

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