How companies can hire illegal labour without even knowing it

Employers unknowingly hire illegal workers due to inadequate transparency and communication between government agencies. And while politicians are calling for tougher penalties on businesses employing illegal labour, Katia Østergaard, director at Horesta, warns it will only make companies shun workers from non-EU countries, legal or not

Think of an illegal worker, and what do you see? Maybe an underpaid foreigner doing manual labour. But while this certainly happens, it is more often the case that when businesses are fined for using illegal workers, neither the employee nor the employer were aware they were doing anything wrong.

The issue was raised following a freedom of information request by TV2, which found that 117 companies were fined 121 times for employing illegal labour last year, costing a total of 5.6 million kroner. In 22 of these cases, the businesses were charged under a tougher law, entailing heavier fines, for employing someone who lacked both the right to live and work in Denmark.

While politicians have called for increased enforcement, higher fines, and stronger measures such as the closure of businesses that are repeat offenders, the situation is more nuanced than it appears – in most cases, the workers were employed on a valid contract and paid income taxes to the state.

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Katia K. Østergaard, director of the hotel, restaurant and tourism trade association Horesta, explains that companies often unknowingly employ illegal workers due to a lack of transparency in the system.

“You can get a tax card regardless of whether you are in Denmark legally or illegally,” she says, adding that many companies believe that only legal workers can be given a way to pay income taxes.

“It seems absurd that a company can lawfully pay an employee their salary and hand over a share to the state, according to a contract, with no indication that anything is amiss. But then they are suddenly fined 10,000 to 20,000 kroner for every month that the worker has been with the company. And of course it is easy for the government to calculate the fine – they know exactly how long the worker has been there, because of the tax records!” says Østergaard.

SKAT does not care
The central problem is that the tax authority, SKAT, must issue a tax card even if a non EU-citizen refuses to provide residence and work permits when submitting their application.

To help businesses avoid hiring illegal workers – who happen to have tax cards – in 2014, the government gave SKAT the responsibility to inform companies if a tax card belonging to an illegal worker was being used.

Two years on, the ordinance has still not been fully implemented. Instead, SKAT has begun reminding employers that, when hiring, a tax card is not sufficient evidence that the potential employee has the legal right to work – they must also ask to see a valid work permit.

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Police commissioner Kenneth Damkjær stresses that employers must always keep this in mind.

“It is the responsibility of employers to make sure that the person they are hiring has a valid work permit. SKAT is interested in collecting tax, not in verifying whether your workers are legal are not. Workplaces need to have procedures in place in order make sure that they are complying with the law.”

Other government-issued documents do not qualify a person to work legally. For example, an immigrant without a work permit can still go to the police and ask for a copy of their criminal record for their employer.

Damkjær explains that this is possible because the issuing of criminal records is done electronically, and is tied to the personal identification number. He agrees, however, that there is still need for a better exchange of relevant information between government agencies.

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Østergaard is disappointed that different branches of the government have difficulty communicating with each other – except when it comes to issuing fines.

“We have been drilling this into our members, that a tax card and a health insurance card are not enough, and that a valid work permit is needed as well,” she says.

No room for honest mistakes
There are still more pitfalls that companies unwittingly fall into, however. According to TV2, many of the companies that were fined last year were acting in good faith and unaware they were violating the law. This is because work permits often come with conditions or restrictions, and the employer may have no way of knowing what these are or whether they are being met.

Østergaard explains that one common type of case relates to work permits for foreign students, which can be very difficult to navigate. As a foreign student at an institution of higher education or a qualifying course approved by the Ministry of Education, you are allowed to work 20 hours a week  – 15, if you obtained your residence permit before January 1, 2015 –  as well as full-time during June, July and August.

If the student drops out of their study programme, they also lose their work permit. But if their employee does not tell them, the company has no way of knowing this. It does not matter that all the papers were in order at the time they were hired. Alternatively, an employer can be liable if a student gets a second job that exceeds the 20 hour limit without telling either employer.

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According to TV2, the second-highest fine last year was issued to Zen Cph nightclub. They had employed a Chinese student who worked more than the 15 hours allowed, and who also continued to work after his studies concluded, causing him to lose legal residence.

Speaking to TV2, Zen Cph nightclub stated that it had been a single mistake and that the club had not been informed that the work permit had been rescinded. The mistake ended up costing them 300,000 kroner.

Foreigner workers a risk
Østergaard argues that issuing high fines in these situations is counterproductive.

“The whole idea of fines is that they are intended to regulate behaviour – that companies will not commit the offence if they know the penalty is this crippling. But in these cases, companies have no idea they are breaking the law, so you can make the fine as high as you want, but it is just not going to change anything.”

She argues that companies end up refusing to hire workers from non-EU countries because of the risks involved.

“Businesses do not have an easy way to comply with the rules, and cannot take the risk of owing sky-high fines like these. So they stop hiring. And I can say that there are already some large chains that have stopped hiring non-EU foreigners. Businesses are simply afraid of making a misstep.”

Harsher punishments
Politicians aren’t listening to the hospitality industry, however, and following TV2’s revelations, some argued that tougher penalties were needed to reduce the number of businesses employing illegal workers.

“The Danish People’s Party proposes higher fines and making it easier to shut down the businesses that hire illegal immigrants,” MP Martin Henriksen of the Danish People’s Party (DF) wrote on Facebook. “Both the government and the Social Democrats are open to more severe punishments.”

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Østergaard concedes that if the issue of illegal labour was simply about ‘black’ work (in which companies don’t pay taxes and therefore operate in bad faith), she would be fine with stiffer penalties.

“There is no excuse for off-the-books labour. It is extremely destructive for competing businesses that act in a professional manner. But until there is a functioning system that helps honest companies comply with the rules, higher fines for everyone is unacceptable,” she says, adding that it is important to differentiate between off-the-books illegal work – which is much more difficult to detect – and administrative offenses.

“There are many ways we can reduce these problems. We have suggested that if the government cannot figure out how to warn businesses, why not make a registry in which companies can look up their employees, so that they can regularly check their worker’s status for themselves?” M

The May 2017 issue of The Murmur with historian Adam Holm on the cover.


By Johanna Sveinsdottir

Johanna Sveinsdottir Editorial intern. Originally from Iceland, Johanna has a masters in English with a focus on linguistics and language psychology.

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