Liability of Other Legal Persons Alongside the Employer for Illegal Work Performed by Foreign Nationals

The legal definition of illegal work by a foreign national is set out in Section 5(e)(3), which treats as such the activity of a natural person, a foreign national, who works for a legal or natural person without a valid residence permit for the territory of the Czech Republic where such a permit is required under a special statute. (Note: the question of when a foreign national must hold a permit to reside in the territory of the Czech Republic is governed by Act No. 326/1999 Coll., on the Residence of Foreign Nationals in the Territory of the Czech Republic, as amended.)

That amendment transposed Directive 2009/52/EC, which aimed to impose sanctions on employers who breach the prohibition on employing third-country nationals staying illegally in the territory of the EU or in the Member States of the European Union.

Where a legal person enables a natural person, a foreign national holding no valid residence permit for the territory of the Czech Republic, to work, it commits an administrative offence within the meaning of Section 140(1)(e) of the Employment Act. The fine for breaching the prohibition on the illegal employment of foreign nationals runs from a lower limit of CZK 250,000 to an upper limit of CZK 10,000,000.

Further, under Section 141a(1) of the Employment Act, payment of the fine imposed on a legal person that enabled a foreign national to perform illegal work is guaranteed by the legal or natural person to which the legal or natural person that enabled the foreign national to perform illegal work under Section 5(e)(3) supplied performance within a commercial relationship as a subcontractor, directly or through another person, or for which it acted as an intermediary. This is therefore a guarantee given by an entity that has, for example, concluded a works contract with a company employing foreign nationals illegally in this way.

Payment of that fine does not exhaust the liability of the person who enabled the foreign national to work illegally. In addition, under Section 141b of the Employment Act, a legal person on which a fine has been imposed with final effect for an administrative offence under Section 140(1)(e) of the Employment Act must pay

the foreign national who performed the illegal work the remuneration owed,
an amount corresponding to the general health insurance contributions and the social security contributions (including penalties) that the fined legal person would otherwise have been obliged to pay,
the costs of delivering the remuneration owed to the foreign national, including delivery to the state of which the foreign national is a national, the state of his last residence or the state in which he holds a residence permit.

In relation to the sanctions set out in the preceding paragraph as well, Section 411b(3) of the Employment Act imposes a guarantee on legal or natural persons that used subcontracting directly or through legal persons using the illegal work of foreign nationals.

The Employment Act evidently seeks to soften the impact of the guarantee on legal persons that used the services of a subcontractor employing foreign nationals illegally, or on those who arranged such work, by providing that the guarantee arises only where the person knew, or exercising due care could and should have known, of the illegal work by foreign nationals. Even so, we consider that this provision does not set sufficiently clear boundaries for determining when a person subject to the statutory guarantee could not have known of the use of illegal work by foreign nationals even with due care.