France: Multinational Groups Transferring Employees to France Risk Significant Penalties for Undeclared Employment
Employers that engage in unlawful or undeclared employment of foreign nationals in France can face fines, imprisonment and debarment from work permit programs under new guidelines that clarify a May 2009 French Social Security Code provision. The guidelines outline the types of undeclared employment prohibited by the provision, specific penalties, and the liability of French employers, parties contracting with such employers, and the parent or holding companies of such employers found in violation of the law.
The French government recently published guidelines on employer penalties for unlawful or undeclared employment of foreign nationals in France, clarifying a provision added to the French Social Security Code on May 12, 2009. Under the provision, multinational companies and organizations with branches or subsidiaries in France that use France’s intra-group transfer programs and that engage in undeclared employment (travail dissimulé) may be subject to significant penalties.
According to the new guidelines, employers can be found to have engaged in undeclared employment for:
• Failing to obtain a work permit for a foreign national employee;
• Failing to declare foreign national employees to the authorities;
• Failing to accurately declare the number of hours a foreign national employee has worked; and/or
• Engaging a foreign national to conduct activities that are not permissible under his/her specific type of intra-group transfer work permit (e.g., engaging a foreign national to provide temporary assistance to the French host company, or to work for a client of the French subsidiary under the sole supervision of the subsidiary under the détachement intra-group work permit).
Fines and Penalties; Scope of Liability
French employers found to have engaged in the undeclared employment of a foreign national face criminal sanctions, including fines of up to 45,000 € and three years’ imprisonment. French authorities may also elect to refuse future work permit applications filed by such employers. Additionally, if the activities in which the foreign national is engaged are related to a contract between the employer and another party valued at 3,000€ or more, the other party can also be held liable for payment of salaries, social contributions, penalties and taxes which would have been due had the employment been properly declared. The other party may also be required to refund any state aid or benefits received.
The guidelines also detail the principle of “joint but subsidiary” liability for undeclared employment, a concept that was introduced in the May legislative provision. Where a French employer has been found guilty of undeclared employment, the parent or holding company of the employer’s group may also be liable for payment of social contributions or penalties, provided the controlling interest of the parent or holding company as of the date of the offense can be established. However, it may be difficult for French authorities to enforce this provision against companies located outside the European Union.
In preparing this alert, Fragomen has worked closely with Cabinet D’Avocats – Karl Waheed (Paris).
The content of this alert is provided for informational purposes only. If you have any questions, please do not hesitate to contact the global immigration professional with whom you work at Fragomen Global Immigration Services or send an email to EMEA@fragomen.com.