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Svarc system detection to be easier for the state

The Ministry of Labour and Social Affairs wants to fundamentally change the definition of illegal work. The length of work should no longer be relevant to conclude that a relationship is unlawful. The purpose of the change is to make work easier for inspection authorities when detecting the Svarc system. Although the ministry has received many comments to preserve the current status, they insist on keeping the new definition in the draft amendment to the Employment Act.

According to the current definition, illegal work is dependent work performed by a natural person outside employment, an agreement to perform work, or an agreement to complete a job. Under the Labour Code, dependent work is work that is performed:

within a relationship in which the employer is superior and the employee is subordinate

in the employer's name,

according to the employer's instructions,

and personally by the employee for the employer.

In addition to the above, the courts have also deduced consistency as a necessary characteristic.

When checking for the Svarc system, State Labour Inspection officers must prove that employees are working illegally. They must therefore check and confirm the existence of all dependent work characteristics, including that persons have been employed for a prolonged period of time. In practice, it is often difficult for inspection authorities to prove that a particular employee has been performing dependent work at the workplace on days other than the day of the inspection itself.

Under the proposed amendment, characteristics other than those stipulated in the Labour Code for dependent work should not be relevant for the assessment of illegal work. This means that the characteristic of consistency, deduced by case law, will no longer apply.

The ministry expects the change to facilitate the penalisation of illegal work, and thus to increase revenues for the state budget. Illegal employment work is subject to a fine of up to CZK 10 million.

Last year alone, the State Labour Inspection Office carried out over 6,500 inspections aimed directly at illegal employment, detecting the performance of illegal work by 2,500 people. Fines of almost CZK 176 million were imposed on the employers. These numbers are bound to increase in the future because of the legislative change.

Work performed using an individual’s sole-trader status (an entrepreneur’s Id. No. or “IČO”) is a common standard in many fields today, often sought after not by the hiring entities but by workers themselves. Therefore, we recommend that you prepare for these changes on time – review the existing relationships and assess whether it is appropriate to modify their conditions or even switch to proper employment contracts.