UNDECLARED EMPLOYMENT AND ITS CONTROL IN LITHUANIA

Gediminas NoreikaDeputy head of Law division

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Structure of presentation

• Major facts• Situation in the area of undeclared employment and control• Selection of risky enterprises, planning of the visits • Cooperation with other institutions• Evidence collection• The amount of fines, other punishment mechanisms, appeal

process on the imposed fines, outcome results of appeal • Court proceedings, outcome results • Key issues and challenges in control and supervision of

undeclared work

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Major facts about Lithuania

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Official name: Republic of Lithuania Area: 65,200 square kilometers Population: 3,700,000 Major cities: Vilnius - the capital city, Kaunas, Klaipėda, Šiauliai,Panevėžys

Major facts about Lithuania (2)

• Total number of enterprises (companies) - 200,729• Number of enterprises (companies) in each size

category:‣ 1 – 9 employees - 181 967‣ 10 – 49 employees - 14 271‣ 50 – 249 employees - 4 016‣ > 250 employees - 475

• Total number of employees - 1 110 714• Total number of self-employed - 167 786

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Major facts about State Labour Inspectorate

• Mission of the State Labour Inspectorate of the Republic of Lithuania – preservation of life, health and employability of employees as well as prevention of infringements of safeguarding employees guarantees in labour relations.

• Number of employees – 296• Number of inspectors – 193• Inspectors by specialization:

‣ Engineers - 103‣ Labor law - 79‣ Work hygiene - 11

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Economical crisis influence on the labour market

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constantly delayed payment of wages;

undeclared payment; minimal or even lower wages;

illegal work;

overtime work or massively organized work during leisure days without pay;

pursuit of economical and commercial profit by disregarding health and security of employees.

Undeclared work is:• Work without employment contract or other contract

within the framework of the law;

• Work in unregistered companies or companies working without special licences;

• Work without business certificate or within the framework of the law declared individual practise;

• Work in the companies going into outlaw business.

Illegal work is:• Labour Code provides that illegal work shall mean:

• the work performed without the conclusion of an employment contract although the characteristics of an employment contract are present;

• the employer without reporting of one working day before the start of the work didn‘t notice to the State Social Insurance Fund of the person's body of work began;

• performed by foreign citizens and stateless persons failing to comply with the procedure of their employment established by regulatory acts.

Standing groups on illegal work control

• In 2011, 13 standing groups on illegal work control were set up in the five largest cities to undertake control and prevention of UDW not only within their own counties, but also in the neighboring ones.

• Detection of UDW incidents more than doubled in 2011 compared to the previous year.

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Public information and awareness-raising campaign

• The SLI fundamentally embarked on changing the principles of its activities, placing a greater focus on business consulting, public information and awareness raising.

• As a result of increased public awareness and a no-tolerance attitude towards UDW, a growing number of alerts from residents on its alleged presence were received by phone and public e-access.

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Situation in the area of undeclared employment and control

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All UW inspections in companies in farms to persons 0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

3644

2407

245

992

3729

2000

235

1494

4497

2468

219

1810

2011 m.2012 m.2013 m.

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Situation in the area of undeclared employment and control (2)

in 2011 in 2012 in 2013

10801200

1120

18231710

1428

Cases, where was founded illegally working persons

Number of persons who have work illegally

Selection of risky enterprises, planning of the visits • In the State Labour Inspectorate is installed a system of risk assessment in

2014. The system helps to identify the riskiest companies.

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Selection of risky enterprises, planning of the visits (2)

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Construction

Agriculture, hunting, forestry

Transport, warehousing and Communication

Hotels and restaurants

Wholesale and retail trade

Repair of motor vehicles

Other utility, social and individual service business

Other sectors

0% 10% 20% 30% 40% 50% 60%

32%

15%

3%

7%

10%

6%

6%

21%

36%

12%

2%

6%

11%

4%

12%

17%

50%

11%

2%

5%

6%

6%

9%

12%in year of 2013

in year of 2012

in year of 2011

Cooperation with other institutions

• Coordination of UDW control was initiated in Lithuania in 2001: on the 26 November 2001, the Government of the Republic of Lithuania issued a decree ‘On the Coordination of Undeclared Work Control’, delegating the task of coordination to the State Labour Inspectorate

• Control and prevention of undeclared work by law is delegated to 5 institutions:• State Labour Inspectorate under the Ministry of Social Security and Labour

• Financial Crime Investigation Service under the Ministry of the Interior

• State Tax Inspectorate under the Ministry of Finance

• Police Department under the Ministry of Interior

• State Social Insurance Board of Lithuania

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Cooperation with other institutions (2)

Police Departm

ent

State Labour In

specto

rate

State Tax Insp

ectorate

Financial C

rime In

vestigation Service

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1823

928

524

17101467

16215

14281612

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in year of 2011

in year of 2012

in year of 2013

Cooperation with other institutions (3)

Only SLI; 3925; 89%

State Tax Inspectorate;131; 3%

Police Department; 314; 7%

Other;40; 1%

Evidence collection

• According to Law on the State Labour Inspectorate of the Republic of Lithuania Inspectors of the State Labour Inspectorate shall have the following rights:• upon presentation of the certificate of employment and authorisation, to enter any

work station freely and without prior notification at any time of the day and to inspect the compliance with the requirements laid down in labour laws, standard acts on occupational safety and health or other regulatory acts;

• to obtain data and documents (copies, extracts thereof) and other evidence from the employer, which are expedient for execution of the functions of the State Labour Inspectorate;

• exercising the prevention and control of violations of laws regulating occupational safety and health as well as labour relations and other regulatory acts, and in the manner not contravening the immunity of private life of persons as guaranteed by relevant laws, to take photos, to make audio and video records;

• other rights.

The amount of fines, other punishment mechanisms, appeal process on the imposed fines, outcome results of appeal

• Employers or their authorised persons, who have permitted illegal work to be performed, shall be liable in accordance with the procedure prescribed by laws. ‣ Pursuant to the valid legislation, a fine imposed for every illegally

working person may be from LTL 3,000 to 10,000 (EUR 870-2,900). ‣ For a repeated violation, employers or their authorised

representatives may be imposed fines from LTL 10,000 to 20,000 (EUR 2,900-5,800).

• Cases of undeclared work according to the protocols of administrative law violations written by labour inspectors are examined and fines are issued only by courts.

• Work without business certificate or within the framework of the law declared individual practise shall be punished by a fine of LTL 500 to 1,000 (EUR 145-290).

• For a repeated violation may be imposed fines from LTL 1,000 to 2,000 (EUR 290-580)

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The amount of fines, other punishment mechanisms, appeal process on the imposed fines, outcome results of appeal (2)

The amount of fines, other punishment mechanisms, appeal process on the imposed fines, outcome results of appeal (3)

• Company who have permitted illegal work of foreigners to be performed shall be punished by a fine LTL 3,000 to 10,000 (EUR 870-2,900) for every illegally working foreigner. For a repeated violation, legal entities may be imposed fines from LTL 10,000 to 20,000 (EUR 2,900-5,800).

• Company must pay salary to foreigner who worked undeclared, at least the Government of the Republic of Lithuania the minimum monthly wage and for at least three months, and from this sum to pay the statutory fees.

• The State Labour Inspectorate investigates such cases and imposes fines. • Penalties may be imposed no later than within 3 years. • Companies who allowed working undeclared foreigners may be treated in such

sanctions:1. limitation of participation in public procurement;2. the right to receive subsidies, benefits or other state aid, including the European Union's Structural

Funds and other support, sentenced to 5 years; 3. obligation to return some or all of the grants, benefits or other state aid funds within 12 months.

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The amount of fines, other punishment mechanisms, appeal process on the imposed fines, outcome results of appeal (3)

in year of 2011 in year of 2012 in year of 2013

7

13

4

Foreigners who worked undeclared

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Court proceedings, outcome results

Imposed fines in boundary of sanction

Imposed lesser fines than set in sanctions

Dismissed cases0%

10%

20%

30%

40%

50%

60%

40% 41%

19%

44%45%

12%

58%

36%

6%

in year of 2011in year of 2012in year of 2013

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Court proceedings, outcome results (2)

in year of 2009 in year of 2010 in year of 2011 in year of 2012 in year of 20131500

1800

2100

2400

2700

3000

2597.9

2374.2

2215.32162.1

2447.5

The average amount of the fine

Key issues and challenges in control and supervision of undeclared work

• The main measures applied in Lithuania include: coordination of UDW control, standing groups on illegal work control and public information and awareness-raising campaigns.

• The main characteristic of the systems is cooperation between various institutions responsible for UDW control/labour market regulation.

• SLI, the main controlling institution for UDW in Lithuania, cannot unrestrictedly access all the databases it needs, especially those related to certain confidential financial information.

• There are only national government institutions involved in the UDW prevention and control measures in Lithuania, social partners are actually absent from this process.

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Thank you for attention