Criminal law for employers

section 266a Criminal Code are central within the field of criminal law for employers. This regulation penalises withholding and embezzling wages and salaries.

The employer is obliged to pay employee social security contributions to the respective authorities. It constitutes a criminal offence under section 266a par. 1 Criminal Code if the employer violates this obligation. Even the partial infringement of these obligations is actionable. Strict standards are applied in these cases. In general, even late payments are grounds for culpability.

This provision serves to protect the contributions of the social security carriers and is thus strictly enforced.

For instance, charges under section 266a Criminal Code are brought against an employer if there is the suspicion that this employer has employed labour without being registered on a large scale. The approach of the investigation authorities is in these cases often based on estimates. It is particularly problematic that the basis of these estimations often remains in the dark or are based on mere assumptions. Above all, these estimations must not result in failure to clarify the case even if this endeavour is cumbersome. It is unlawful to fall back on overinflated estimations.

Allegations under section 266a Criminal Code are also often made in the context of company insolvencies. The late or non-payment of social security contributions frequently occurs when companies are in crisis. If a company was no longer able to make due payments, liability is excluded according to section 266a Criminal Code.

So-called cash-in-hand jobs are employments that avoid the payment of social security contribution and tax. Employees are not registered with the respective authorities, no social security contributions and no tax on wages are paid.

These offences are punishable both under section 266a Criminal Code and under section 370 AO on grounds of tax evasion because no tax on wages actually paid has been submitted.

In practice, it is often difficult to identify the precise amount of wages paid for ‘cash-in-hand’ jobs. These payments are often made far apart in time and are for obvious reasons rarely documented. The investigation authorities usually try to determine paid wages based on incoming payments and estimations of the work required. Such an approach is naturally prone to error.

As the term indicates, cash-in-hand jobs are paid in cash. This results in further problems related to criminal tax law, particularly when fictitious invoices are used to disguise the cash payments.

The employer also has extensive obligations to protect and care for their employees. In case of a severe accident in the workplace, the question arises whether the employer or senior staff members are responsible, for instance for negligent physical injury or death.

Negligent physical injury or death can also be due to organizational fault. This can be presumed if health and safety as well as workplace regulations have not been complied with. In any case, however, actual and legal liabilities must be established. As a matter of course, senior staff members cannot personally supervise the compliance with all applicable regulations. Effectively delegating the respective tasks to subordinate employees is perfectly allowable. In this case, liability can only result from fault in selecting a third party.

In this context the so-called de facto manager is of particular importance, also from a practical point of view. A de facto manager is an individual who is not appointed as statutory manager or appears as such but who de facto determines the fate of the company. The de facto manager may also render themselves liable for withholding wages or social security contributions. The assessment of who is to be regarded as de facto manager is based on the overall analysis of the individual case according to specific legal criteria. This assessment is of particular importance because it constitutes the basis of culpability in each individual case.