The Czech government is proposing a fundamental shift in how it punishes illegal employment, moving the financial burden of penalties away from the worker and squarely onto the employer. Under a new legislative proposal, individuals caught working “off the books” would no longer face the heavy fines that currently loom over the country’s informal labor market.
The move is part of a broader effort to modernize labor laws, specifically through a proposed law on platform operate. The Ministry of Labour and Social Affairs argues that the current system unfairly penalizes vulnerable individuals who are often coerced or manipulated into illegal arrangements by employers seeking to dodge social security and health insurance contributions.
Currently, a person working without a contract can face a pokuta za práci načerno (fine for illegal work) of up to 100,000 CZK. However, the ministry contends that the “harmfulness” of the worker’s actions is minimal compared to the employer, who orchestrates the arrangement to save money on mandatory levies.
According to ministry officials, employers frequently exploit the desperate financial or family situations of their workers. This includes individuals struggling to find formal employment or those burdened by significant debt and loans. “These persons are easily manipulatable,” the ministry stated in its proposal.
The gap between law and enforcement
While the potential fine of 100,000 CZK is a significant deterrent on paper, data suggests This proves rarely applied in practice. The labor inspectorate’s own records reveal a stark discrepancy between detected violations and actual penalties.
Last year, the labor inspectorate identified illegal work involving approximately 2,500 people. Despite the volume of detections, formal administrative proceedings were initiated in only 166 cases. In those few instances where fines were issued, the average penalty was roughly 20,000 CZK.
the ministry points out that workers caught working illegally are already penalized through other mechanisms. They are typically removed from the Labor Office’s evidence and are required to repay any unemployment benefits they received during the period of illegal employment.
In place of worker fines, the government plans to expand the ways employers can be sanctioned. This includes stricter penalties for those who employ people in violation of specific work permits or those who fail to ensure their staff possess the required employee cards.
Redefining ‘Illegal’ vs. ‘Unreported’ Work
A critical component of the proposal is a legal reclassification of what constitutes illegal work. The government intends to distinguish between “unreported work” and “illegal work,” a nuance that will change who is eligible for fines.
Previously, “systematic dependent work”—where a person works under all the conditions of an employment relationship but without a documented contract—could be classified as illegal. Under the new rules, this will be categorized simply as unreported work, exempting the worker from fines.
The term “illegal work” will be reserved for specific, high-risk violations. These primarily include:
- Foreign nationals working without a valid employee card or blue card.
- Foreigners working without a required employment permit.
- In certain specific instances, violations involving the employment of minors.
The battle over ‘Dependent Work’
The proposal also seeks to loosen the definition of “dependent work,” which is the legal cornerstone used to fight the “švarcsystém”—the practice of forcing employees to operate as self-employed contractors (OSVČ) to avoid taxes and benefits.
Currently, the state uses four primary markers to determine if a contractor is actually a dependent employee. The new proposal would reduce this to only two markers. In other words that certain benefits provided to a contractor—which previously served as evidence of an employment relationship—might no longer be sufficient to prove the existence of a “švarcsystém.”
| Feature | Current System | Proposed System |
|---|---|---|
| Worker Fines | Up to 100,000 CZK | Removed for unreported work |
| Illegal Work Definition | Broad (includes unreported) | Narrow (permits/cards/minors) |
| Dependent Work Proof | 4 key markers | 2 key markers |
| Employer Sanctions | Standard fines | Expanded penalty variants |
A divide between unions and business leaders
The proposal has sparked a sharp divide between labor advocates and employer representatives. Josef Středula, chairman of the Czech-Moravian Confederation of Trade Unions (ČMKOS), has called the removal of worker fines “complete nonsense.”
Středula argues that both the employer and the employee participate in the illegal arrangement and that removing the fine would build the Czech Republic a global outlier. He specifically warned that the relaxed definition of dependent work could have “unforeseeable consequences,” potentially allowing more companies to shift legitimate employees into the “švarcsystém,” which would subsequently drain the state budget of tax revenue.
Conversely, Jiří Horecký, president of the Confederation of Employers and Entrepreneurial Associations, suggests that these changes are the result of extensive debate. According to Horecký, the primary indicators of a “švarcsystém” will shift toward the organization and the specific time constraints placed upon the worker, rather than secondary benefits.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific legal guidance regarding employment contracts and labor law, please consult a licensed legal professional.
The proposed changes could seize effect as early as this year, though they must first navigate the public comment period, receive government approval, and pass through Parliament. The next critical checkpoint will be the review of official comments by the Ministry of Labour and Social Affairs before the bill is formally submitted to the government.
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