National Labour Inspectorate (INL): clarifications on the scope of application of the “maxi-penalty” for undeclared work

The National Labour Inspectorate (“INL“), with note no. 856 of 19 April 2022, issued a guide concerning the scope of application of the “maxi- penalty” for undeclared work, regulated by Article 3 of Decree Law no. 12/2002, converted, with amendments, by Law no. 73/2002. This offence is the employment of personnel by an employer without the latter sending the necessary compulsory reporting to the authorities, and any social security, welfare and accident-prevention insurance.

Penalty system

INL pointed out that the employer penalty system under the latest regulatory revisions, has been progressed in bands according to the duration of the unlawful conduct orundeclared employment. The determined penalty has been increased by 20 per cent under Art. 1, paragraph 445 letter d), of Law no. 145/2018. The penalty is:

1. Between € 1,800-10,800 for each illegal worker, for up to 30 days employment;
2. Between € 3,600-21,600 for each illegal worker, for 30-60 days employment;
3. Between € 7,200-43,200 for each illegal worker, for more than 60 days employment.

Under Art. 3, paragraph 3-quater, sanctions are increased by a further 20 per cent in the following cases:

• employment of foreign workers without a residence permit or whose permit has expired and whose renewal, revoked or cancelled has not been applied for within the legal deadlines;
• employment of minors of non-working age (i.e., those who did not complete ten years of compulsory schooling and are sixteen years old)
• employment of citizenship income recipients.

The 2019 Budget Law, in addition to the 20 per cent increase in the amounts due as sanctions, requires the doubling of these percentages where the employer, in the previous three years, has been the recipient of administrative or criminal penalties for the same offences (recidivism).

Make the relationship legal with a caveat

INL explained how Legislative Decree no. 151/2015 reintroduced the “caveat” of the maxi-penalty to “promote the legalisation of undeclared relationships.”

Three distinct cases are outlined in the note:

• Legalisation of the “undeclared” employment relationship for workers in force, which the employer may comply with within 120 days from the notification of the single report under certain conditions, i.e. (i) establishment of an employment relationship and (ii) keeping such workers in service for at least three months;
• legalisation of the employment relationship for workers employed after the illegal employment period, which can be complied with within 45 days with proof of
  • rectification of the date on which the employment relationship began;
  • payment of contributions and premiums;
  • payment of minimum penalties;
• legalisation of “illegal” workers not in force at the time of the inspection, similar to the previous procedure.

Exclusions

The note explained that the “maxi- penalty” does not apply whenever “the employer’s intention not to conceal the employment relationship is evidenced by the contribution obligations previously fulfilled, even if the employment was qualified differently.”

The inspection personnel will not apply the “maxi-penalty” in cases of:

• spontaneous and complete legalisation of the undeclared employment relationship, before any inspection by supervisory bodies in the field of labour law, social security or taxation or before the convocation to complete the individual judge conciliation;
• different classification of the employment relationship.

By “legalisation” the INL means when

1. the employer met the first contribution obligation by the deadline (i.e., up to the 16th day of the month following the month in which the employment relationship began) or sent the recruitment notice, which shows the date of employment relationship establishment. The subsequent and consequently social security obligations and sanctions including those related to late reporting are unaffected;
2. the employer, after the expiry of the first contribution obligation, has:
3. spontaneously reported its debt situation within 12 months of the deadline for the payment of contributions or premiums due to the social security institutions, and
4. made full payment of the contributions or premiums due for the illegal employment period within 30 days of the report, together with payment of the civil penalty for not paying contributions. This is subject to notification of the employment relationship showing the date on which the service began.