Undeclared Work: Possible Sanctions on Closer Examination

Abstract

According to the definition of the European Commission, undeclared work is ‘any paid activity that is lawful as regards its nature but not declared to public authorities, taking into account differences in the regulatory system of Member States.’1 The key question has always been how we can effectively tackle undeclared work. There are now numerous configurations of sanctions and incentives in existence,2 as can be seen in the legal systems of the Member States of the European Union.3 Yet regardless of how meritorious these are, what is striking here is that the concept of sanctioning is, for the most part, relatively narrow. Evidently, thoughts mainly run along the lines of penalties and fines, which the state imposes on the undeclared worker and/or his employer. This falls short of what is needed in two ways. First, this approach falls short because – in terms of penal law and law governing administrative offences – we should not be constrained to consider possible penalties or fines, but should also ask whether other tools might not be found in these areas which could possibly be utilised in the context of tackling undeclared work. Second, it falls short particularly because the role that other areas of law, particularly civil law, could play in this context is largely ignored. This is astonishing when we consider the significance of sanctions under civil law in the context of violations of competition law, for example. In this field, Council Regulation (EC) No. 1/2003 of 16 December 20024 led to a real paradigm change from administrative enforcement of EU competition law to ‘private enforcement’, which is sometimes described as a ‘change from an administratively led ex-ante control to an ex-post control driven by private initiative’.5 However, above all it is astonishing because consequences of undeclared work under civil law are suited to quite considerably influencing the associated risks for those involved. This paper will give both a brief overview of further legal consequences of criminal and administrative offences outside of penalties and fines (II) and a look at civil law (I). The latter is actually the focus, and consequently it must be addressed straight away in this paper. Solely for reasons of scope, I will not seek to provide a comprehensive investigation comparing different legal systems. Rather, all of the points made will primarily be based solely on German law, which should, however, be sufficient to illustrate the relevant problems.