Lawyers specializing in employment criminal law

Criminal defense in cases of bogus self-employment, undeclared work, illegal temporary employment, and employment without a work permit.

Employment criminal law is one of the most practically relevant areas of white-collar crime. Investigations into bogus self-employment, undeclared work, illegal temporary employment, or the employment of workers without the required residence permit are frequently initiated by the Financial Control Unit for Undeclared Work (FKS) – and can have existential consequences for managing directors and entrepreneurs.

The central charge is regularly the allegation of withholding and misappropriating wages under Section 266a of the German Criminal Code – colloquially sometimes referred to as "social security fraud." This involves the alleged failure to properly pay social security contributions. In addition, investigations frequently focus on violations of the Act to Combat Undeclared Work, the Temporary Employment Act, and the Minimum Wage Act.

The potential consequences go beyond fines or imprisonment: There are threats of substantial back payments, confiscation measures under Sections 73 et seq. of the German Criminal Code (StGB), Sections 111b et seq. of the German Code of Criminal Procedure (StPO), fines against the company under Section 30 of the German Administrative Offenses Act (OWiG), as well as consequences under trade and professional law.

The lawyers at Galen Rechtsanwälte defend clients nationwide in employment-related criminal law cases. We develop a defense strategy tailored to your specific case from the outset – with the aim of limiting criminal risks and minimizing consequential financial damages.

Please feel free to contact us to arrange an appointment.

What is meant by labor criminal law? – An overview of its meaning and offenses.

Employment criminal law pursues a clear protective purpose. It aims to ensure fair competition and protect social security systems by sanctioning misconduct related to employment relationships. The focus is often on allegations related to bogus self-employment, undeclared work, illegal temporary employment, or the employment of workers without the required residence permit.

The central provision is Section 266a of the German Criminal Code (StGB). It protects the interest of social security institutions in the complete and timely receipt of contributions. Of particular practical relevance is the failure to remit employee social security contributions when due, as stipulated in Section 266a Paragraph 1 of the German Criminal Code. If bogus self-employment is established, social security and tax obligations may arise. Therefore, in addition to charges under Section 266a of the German Criminal Code, criminal charges may also include tax evasion under Section 370 of the German Fiscal Code.

Provisions relevant to employment criminal law – both criminal offenses and administrative offenses – can be found in numerous laws, including: the Fiscal Code (AO), the Posted Workers Act (AEntG), the Temporary Employment Act (AÜG), the Working Time Act (ArbZG), the Occupational Health and Safety Act (ArbSchG), the Residence Act (AufenthG), the Works Constitution Act (BetrVG), the Youth Employment Protection Act (JArbSchG), the Minimum Wage Act (MiLoG), the Maternity Protection Act (MuSchG), the Act to Combat Undeclared Work (SchwarzArbG), and the third and fourth books of the Social Code (SGB III and SGB IV).

What are the typical criminal offenses in labor law?

Withholding and misappropriating wages (§ 266a StGB)

Section 266a of the German Criminal Code (StGB) forms the core of allegations relating to employment-related criminal offenses.

Of particular practical relevance is Section 266a Paragraph 1 of the German Criminal Code (StGB). According to this section, any employer who fails to remit employee social security contributions to the collecting agency when due is committing a criminal offense. The decisive factor in determining whether a dependent employment relationship exists is the actual structure of the employment relationship, not its contractual designation. Section 266a Paragraph 1 of the German Criminal Code can therefore also apply in cases of so-called "bogus self-employment.".

Bogus self-employment exists when a contractual relationship is formally structured as self-employment, but in reality constitutes dependent employment subject to social security contributions as defined in Section 7 of the German Social Code, Book IV (SGB IV). This can result in social security and tax reporting obligations and other duties that are not fulfilled due to the flawed formal structure of the employment. The decisive factor for classification is not the contractual designation, but rather the actual implementation after a comprehensive assessment of all circumstances. Key factors include, in particular, the employee's obligation to follow instructions, their integration into the client's work organization, and the distribution of entrepreneurial risk.

In practice, Section 266a of the German Criminal Code (StGB) often raises the question of the amount of damages incurred. Incorrect calculations by the investigating authorities can significantly influence the charges and are therefore often the focus of the defense.

Undeclared work (Undeclared Work Act)

Undeclared work, as defined in Section 1 Paragraph 2 of the Act on Combating Undeclared Work (SchwarzArbG), can take various forms. For example, undeclared work exists when services or work are provided or performed while violating social security reporting, contribution, or record-keeping obligations.

The Act to Combat Undeclared Work contains both provisions for fines (§ 8 of the Act to Combat Undeclared Work) and criminal provisions (§§ 9 et seq. of the Act to Combat Undeclared Work). Of particular relevance under criminal law are the issuing of fictitious and cover invoices by so-called service companies and the employment of foreign nationals without the required permits. Especially for internationally operating companies or companies with foreign employees, a careful examination of residency requirements is essential.

Illegal temporary employment (§ 15, § 15a, § 16 AÜG)

The Temporary Employment Act regulates the conditions under which employees may be assigned to third parties.

The use of temporary workers without the required permit may constitute an administrative offense under Section 16 Paragraph 1 Number 1 of the German Temporary Employment Act (AÜG). In certain situations involving foreign workers – for example, the use of foreign nationals without the necessary permits – the conduct of both the temporary work agency and the client company may be considered a criminal offense under Section 15 or Section 15a of the AÜG.

Of practical importance is the distinction between temporary employment and other forms of third-party personnel deployment, such as genuine contracts for work and services or independent service contracts. If such a contract exists, criminal liability under the German Temporary Employment Act (AÜG) is generally excluded. The distinction depends on the actual structure of the contract, not its label.

Minimum wage violations (MiLoG)

The Minimum Wage Act (MiLoG) contains a number of provisions for fines in Section 21, including those for underpayment of the statutory minimum wage (Sections 1 and 20 MiLoG). This administrative offense can be punished with fines of up to €500,000. Criminal relevance arises particularly when the insufficient wage payments also result in the evasion of social security contributions. In such cases, the elements of Section 266a of the German Criminal Code (StGB) may be met. This is because amounts must be calculated based on the actual wage owed (not the wages actually paid).

How are crimes related to employment law detected?

Criminal investigations in employment law often begin with company audits by the German Pension Insurance (DRV) pursuant to Section 28p of the German Social Code, Book IV (SGB IV), inspections by the Financial Control Unit for Undeclared Work (FKS) of the Customs Administration, or tips from former employees. Tax audits can also trigger criminal investigations if irregularities are discovered.

Typical investigative measures include:

• Searches pursuant to Sections 102 and 103 of the Code of Criminal Procedure
• Securing and evaluating payroll documents, contracts and digital data
• Obtaining information from the social security institutions
• Interviews with employees or other witnesses
• In complex procedures: Consultation of experts for damage calculation.

The public prosecutor's office is working closely with the financial authorities and customs.

Damages are often calculated by extrapolating from net to gross earnings in accordance with Section 14 Paragraph 2 of the German Social Code, Book IV (SGB IV). This calculation is prone to errors and can significantly influence the extent of confiscation and the sentencing – it must therefore be carefully reviewed by the defense.

What penalties are possible under labor law?

The possible sanctions in labor criminal law vary depending on the offense and the severity of the accusation:

Section 266a of the German Criminal Code: The penalty ranges up to five years imprisonment or a fine; in particularly serious cases, imprisonment of six months to ten years is possible.

Sections 9 et seq. of the Act on Combating Undeclared Work: The penal provisions of the Act Against Undeclared Work (SchwarzArbG) stipulate various penalty ranges. The maximum penalty is imprisonment for up to five years.

Section 21 MiLoG: Violations of the minimum wage law can result in fines of up to €500,000. Furthermore, underpayment of the minimum wage often leads to criminal liability under Section 266a of the German Criminal Code (StGB), as social security contributions are calculated based on the wages owed (and not the wages actually paid).

Companies also face fines under Section 30 of the German Administrative Offenses Act (OWiG) for criminal offenses or regulatory violations committed by their management. Fines may also be imposed on company officers who have violated their supervisory duties (Section 130 OWiG).

In addition to criminal and administrative penalties, further consequences such as the following are possible:

• Confiscation decisions pursuant to Sections 73 et seq. of the German Criminal Code
• Exclusion from the position of managing director
• Professional consequences (e.g. for tax advisors, auditors or lawyers)
• Professional ban according to § 70 StGB
• Commercial law measures such as business prohibitions or entries in the central business register
• Exclusion from public procurement procedures

Defense against criminal charges under labor law – Galen Lawyers

The lawyers at Galen Rechtsanwälte advise and defend clients nationwide in proceedings concerning commercial and employment criminal law.

As a rule, we first request access to the case file. Based on this, we assess the allegations made by the public prosecutor's office. This often includes analyzing the classification of the employment relationships under social security law and reviewing the calculation of the allegedly withheld contributions.

We think beyond the criminal proceedings: We keep an eye on the ancillary consequences under labor, corporate, social, and administrative law from the outset, involving colleagues from other specialist areas if necessary. Our goal is to protect your personal rights and minimize the impact of the proceedings on your professional and economic livelihood.

In addition to criminal defense, we also advise you preventively, for example on the implementation and optimization of compliance structures, in order to avoid supervisory duty violations within the meaning of Section 130 OWiG and other administrative offenses and criminal charges from the outset.

Please feel free to contact us to arrange an appointment.