Renewed efforts to combat undeclared and illegal work

Discussions on the growth of undeclared and illegal work were renewed at the Ministry of Labour and Social Insurance between June and October 2008. The main issues for discussion were the urgent need to strengthen the country’s inspection procedures and to reform the existing legal framework. The latter would include tougher sanctions penalising employers that illegally employ foreign workers, along with provisions for excluding employers found guilty of such an offence from public support and contracts.

Background

According to the Ministry of Labour and Social Insurance (Υπουργείου Εργασίας και Κοινωνικών Ασφαλίσεων, MLSI), although the phenomenon of undeclared work and illegal employment has been discussed for a long time, the ministry has not yet devised a unified method for handling cases of undeclared or illegal work. One difficultly is the fact that the departments and services involved follow different internal procedures, which fail to deal effectively with the problem. Thus, the phenomenon of unfair competition has been exacerbated among employers: that is, between those that make use of illegal work, mainly involving migrant workers, thus violating labour legislation, and the employers that comply with the provisions of the existing statutory framework. In parallel, unfair competition has been observed between the workers themselves, who in order to find a job are forced to work under poorer terms and conditions of employment in violation of labour legislation provisions and collective agreements – for example in relation to health and safety at work, and social insurance obligations.

Against this background, and in an effort to address the problem of undeclared and illegal employment directly and rationally, discussions were renewed at the MLSI, initially for a period of five months between June and October 2008. The main issues for discussion were the urgent need to strengthen the country’s inspection procedures and to reform the existing legal framework.

Strengthening of inspection mechanisms

In relation to the country’s inspection mechanisms, the main objective is to analyse existing inspection procedures and create specific, immediately applicable measures regarding the strengthening of such mechanisms. More specifically, the following measures are proposed:

• creating channels for communication among all of the MLSI’s departments, at the same time appointing competent functionaries and inspectors in each department and service, who will be notified of the names of employers with illegal workers, so that a relevant database can be created in each department to begin with;

• implementing the system of versatile inspectors, by providing intensive training for all inspectors involved. It should be noted that the MLSI’s Department of Labour Relations (Τμήμα Εργασιακών Σχέσεων) has 13 inspectors at present, and the possibility of appointing another 13 inspectors to the department’s social insurance services is being examined;

• examining the possibility of requiring employers to submit a copy of the terms and conditions of employment when employees are registered for the first time with the social insurance services;

• identifying a way to implement the provision of the Social Insurance Law concerning the immediate registry of employees with the social insurance services;

• introducing a special identity card, which should be carried and shown on demand by all workers employed on sites, in order to facilitate the work of inspectors. Workers could obtain such identity cards either when they register with the social insurance services, or after attending a mandatory training programme on workplace safety and health;

• enforcing the obligation for employers to keep records of employees, both at the worksites and in all workplaces, as provided for by the Standard Rules and other relevant legislation;

• establishing a helpline where people can make anonymous complaints regarding illegal employment.

Plans for reform of legal framework

From a legislative perspective, Cyprus has no special statutory framework directly referring to the definition and regulation of undeclared work (CY0406104T). Moreover, given that the employment of foreign workers is closely linked to the phenomenon of undeclared work, another significant shortcoming is the absence of an integrated statutory framework for migration policy (CY0311103F). In this context, the main objective of the MLSI is to adopt supplementary legislation mainly aiming to combat the illegal employment of migrant workers. A range of measures have been proposed to this end.

Firstly, it is proposed that third-country nationals However, until the relevant decree is passed and implemented, the competent ministries should take appropriate action to ensure that the provisions of the decree are observed, as follows:

• employers should be obliged to ensure, before they hire foreign workers, that these workers have legal residence permits and that they retain the necessary evidence thereof while employed;

• employers should pay any unpaid wages and outstanding contributions, such as social insurance contributions;

• inspectors should conduct inspections in at least 10% of enterprises, mainly to check if foreign workers have been illegally employed;

• in the case of subcontracting, it should be ensured that both the main contractor and the subcontractor are held jointly responsible for paying all financial penalties and overdue debts;

• employers must pay contributions and taxes of all kinds arising from the employment of foreign workers;

• in the event of subcontracting, the relevant provisions of the Standard Rules for Public Contracts must be observed – this provision states that the main contractor is responsible for ensuring that the subcontractors observe all terms of the contract.

Transposing of EU directives

1. is also proposed that framework legislation on employment be introduced, providing for rules on the transposition into national law of all EU directives regarding employment. In particular, this law should provide for the:

• creation of an Employment Committee;

• obligations of employers;

• obligations and rights of employees;

• obligations of private employment agencies;

• criteria for employers’ participation in or exclusion from public contracts, grants for employers and other horizontal measures;

• administration and implementation of the law, as well as the appointment of inspectors;

• imposing of penalties, including administrative fines;

• provisions for the detailed regulation of the abovementioned issues, along with other matters to be decided upon.

Additional preventive measures

To supplement this legislation, it is also proposed that the following preventive measures be adopted:

• exclusion of employers found guilty of undeclared or illegal employment from public assistance, subsidies, public benefits, and participation of enterprises, directors and main shareholders in public contracts, along with the return of any assistance received; at the same time, it is proposed that establishments where illegal migrants have been employed be temporarily or permanently closed;

• a substantial increase in monetary penalties and extrajudicial fines, and the imposing of administrative fines on employers and illegally employed foreigners, obliging both parties to pay repatriation expenses;

• making public the names of enterprises identified as having illegally employed foreign workers.

Commentary

It should be noted that, since the proposed measures have not yet been implemented, it is impossible to evaluate them at this point; for the same reason, the social partners have not given their reaction to these proposals thus far.

Eva Soumeli, Cyprus Labour Institute (INEK/PEO)