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Companies and illegal work

April 2010 - Employment. Legal Developments by Sarrau Thomas Couderc .

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On November 22, 2009 the government announced stricter measures against companies that employ workers whose papers are not in order. The transposition of the European "sanctions" directive of June 18, 2009 will give rise to a draft law in 2010.

Bruno Thouzellier, attorney-partner, Sarrau Thomas Couderc

This law, which is part of a national plan to combat illegal work in 2010-2011, announces two objectives: to penalize employers who cheat and to protect the rights that illegal employees have acquired through their work. In 2008, the inspection services identified 2,500 cases where foreigners with no residence permit were employed, which accounted for 13% of all illegal work offences. The government's announced objective is to significantly increase controls and sanctions.

Why is such priority given to the fight against illegal labor? Firstly, its cost to the State, estimated at 60 billion euros per year (4% of GDP), is equal to the national education budget. Secondly, to ensure better competition between companies, and finally, to redress violations of employees' rights. The government plan focuses on combating illegal work, an offence which entails the employment, whether directly or via an intermediary, for any duration whatsoever, of aliens without a work document entitling them to be gainfully employed in France (article L8251-1 of the Labor Code - CdT).

The plan provides, in particular, for the withdrawal of government aid in the event of illegal work. Similarly, offending companies may lose the benefit of social contribution exemptions. In addition, it is planned to give prefects the power to temporarily close establishments that employ illegal workers. This provision targets companies that engage in organized fraud as well as illegal labor networks. It is also planned to offer better protection of the rights of victims of illegal work by fixing at 6 months of salary the indemnity due in all cases where an employment contract relating to an illegal work situation is terminated. In the case of aliens without a residence permit, this indemnity currently corresponds to one month of salary. The sums owed to these employees would be super-preferential claims that would have to be paid to them at the cost of the employer. The government also wants to raise the awareness of prime contractors, who are already jointly and severally liable since contractors that enlist the services of another contractor that employs clandestine or illegal workers are criminally liable if they do not verify that their subcontractor made all the requisite social and tax declarations, filed all of the pre-employment declarations and provided employees with a pay slip corresponding to the actual work carried out. If they fail to do this, prime contractors will be deemed to have intentionally engaged in illegal employment, for which they can be prosecuted. The social security finance law for 2010 will extend the review of exemptions from social charges to prime contractors whose subcontractors did not declare their activity or used illegal labor. The government has also announced stiffer criminal penalties for prime contractors that do not certify their subcontractors as well as the exclusion from government contract tenders.

Nevertheless, these governmental announcements merely reiterate and reinforce an already existing arsenal of repressive measures.

Employers that employ illegal aliens may be jailed for 5 years, and fined 15,000 euros per illegal worker (L 8256-2 CdT). The Labor Code also provides for a 5-year ban on practicing in the sector, the closure of sites or the exclusion from public procurement offers. Legal entities risk a fine of 75,000 euros, being wound-up, permanently banned or banned for up to 5 years from the sector in which the offence was committed, the definitive or provisional closure of the establishment concerned, being excluded from government contracts permanently or for up to 5 years, confiscation of their plant, stocks and equipment and the posting or publication of the judgment.