The construction industry is the backbone of the German economy, but it is also under constant scrutiny. In particular, the Customs Authority’s Financial Control Unit for Illegal Employment (FKS) regularly conducts large-scale raids that can plunge companies into crises that threaten their very existence. Allegations of illegal employment, withholding social security contributions under Section 266a of the German Criminal Code (StGB), or paying less than the minimum wage can affect managing directors, construction managers, and the company itself. In this critical situation, a steady hand and immediate, competent legal defense are crucial.

ROSTALSKI is your highly specialized partner in commercial and criminal tax law. We defend construction companies and their executives nationwide against allegations made by customs authorities and develop tailored defense strategies to avert economic and personal harm.

Table of Contents

1. What does "undeclared work in the construction industry" really mean?
2. The Financial Control Unit for Illegal Employment (FKS): Customs Investigators
3. The Customs Raid: What Happens and How You Should Respond
4. The Most Common Allegations and Their Consequences
   • Withholding of Wages (Section 266a of the German Criminal Code)
   • Violation of the Minimum Wage Act (MiLoG)
   • Bogus self-employment
   • Illegal Employment of Foreigners
5. Penalties That Threaten Livelihoods: What's at Stake
6. Our Defense Strategy: Your Path Out of the Crisis
7. Prevention: How to Proactively Protect Your Business
8. FAQ: Frequently Asked Questions
9. Contact Us: First Aid in an Emergency

1. What does "undeclared work in the construction industry" really mean?

The term "undeclared work" means more than just "cash in hand." Investigative authorities focus primarily on offenses committed by employers. The main allegations are:

• Failure to Pay Social Security Contributions: You fail to register employees with the social security agencies (health, pension, long-term care, and unemployment insurance) or register them with wages that are too low. This is the core allegation of withholding and embezzlement of wages under Section 266a of the German Criminal Code (StGB).
• Violations of the Minimum Wage Act (MiLoG): The statutory or industry-specific minimum wage is not paid, or is not paid on time.
• Illegal employment: Hiring workers without a valid work permit.
• Bogus self-employment: Subcontractors are hired as self-employed workers, even though they effectively act as employees who are subject to the employer’s instructions.

2. The Financial Control Unit for Illegal Employment (FKS): Customs Investigators

The FKS is the customs service’s special unit tasked with combating illegal employment. Its officers have extensive powers similar to those of the police or tax investigators. They are authorized to:

• Enter and inspect company premises and construction sites without prior notice.
• Interview individuals and verify their identities.
• Inspect and seize business records.
• Conduct searches pursuant to a court order.

3. The Customs Raid: What Happens and How You Should Respond

A dozen FKS vehicles pull up at your construction site or in front of your office—an absolutely exceptional situation. How you respond in those first few minutes is crucial. STAY CALM. REMAIN SILENT. CALL.

Checklist: What to Do During a Search

1. Stay calm: Do not panic. Cooperate within the scope of your duties, but do not actively resist.
2. Call a lawyer immediately: Contact ROSTALSKI right away. Tell the officers that you are exercising your right to have a lawyer present and that you will not make any statements until the lawyer arrives.
3. Exercise your right to remain silent: You and your employees are not required to provide any information regarding the matter. Any statement you make can and will be used against you. The only requirement is to provide your personal information.
4. Ask to see the search warrant: Request a copy of the court order. Check which rooms and documents are affected. Object to the search of areas not covered by the warrant.
5. Do not disclose passwords: You are not required to disclose passwords for computers or cell phones.
6. Document everything: Ask to be present during the search. Keep a record of which officers are present and which documents or devices are seized. Insist on a detailed inventory of seized items.

4. The Most Common Allegations and Their Consequences

The defense must understand the complex interrelationships between criminal, labor, tax, and social security law.

• Withholding of Wages (Section 266a of the German Criminal Code (StGB)): This is the central charge. Even an attempt to do so is a criminal offense. The penalties include heavy fines or imprisonment for up to 5 years; in serious cases, up to 10 years. The statute of limitations is long, and the back payments for social security contributions can be ruinous.
• Violation of the Minimum Wage Act (MiLoG): This can result in fines of up to 500,000 euros and exclusion from public contracts.
• False self-employment: Results in the retroactive payment of the full amount of social security contributions (both employer and employee shares) plus late payment penalties for up to four years. In addition, criminal prosecution may be pursued under Section 266a of the German Criminal Code (StGB).
• Illegal employment of foreign nationals: Here, too, there are heavy fines and even prison sentences.

5. Penalties That Threaten Livelihoods: What's at Stake

The consequences go far beyond fines and prison sentences:

• Financial Ruin: Additional tax assessments from social security agencies and the tax office amounting to millions are not uncommon.
• Exclusion from Public Contracts: An entry in the competition registry can spell the end for many construction companies.
• Prohibition on Conducting Business: The authority may prohibit the managing director from continuing to conduct business.
• Damage to reputation: A raid and criminal proceedings can cause lasting damage to a company’s reputation among customers, partners, and banks.

6. Our Defense Strategy: The Path Out of the Crisis

A successful defense begins on the day of the raid. In any case, once the investigation is officially announced, professional legal representation is essential. Our approach is strategic and proven:

1. Immediate Intervention: We immediately contact the customs operations command center, monitor the search, and ensure that your rights are protected.
2. Access to the Case Files: We request immediate and full access to the case files in order to analyze the allegations and the evidence presented by the investigators.
3. Strategy Development: Based on the case file, we develop a tailored defense strategy. We identify weaknesses in the customs authorities’ arguments and seek exculpatory evidence.
4. Communication with the Authorities: We handle all communication with customs, the public prosecutor’s office, and the court. Through well-reasoned arguments, we may be able to prevent charges from being filed and have the case dismissed at an early stage.
5. Legal Defense in Court: Should the case proceed to trial, we will defend you with the utmost determination and expertise to achieve the best possible outcome for you.

7. Prevention: How to Proactively Protect Your Business

The best defense is to prevent an investigation from happening in the first place. We can advise you on implementing compliance structures:

• Comprehensive documentation: Accurate and timely recording of working hours.
• Vetting of subcontractors: Obtaining all necessary documentation (certificate of exemption, certificate of good standing from the health insurance provider, etc.).
• Contract Drafting: Clear and legally sound employment and service contracts to prevent bogus self-employment.

8. FAQ: Frequently Asked Questions

• Question: Are we also liable for our subcontractors? Answer: Yes, general contractor liability in the construction industry is strict. You can be held liable for your subcontractors’ unpaid social security contributions. Careful selection and vetting are essential.
• Question: Customs wants to question my employees at the construction site. What should I do? Answer: Inform your employees (within the limits of the law) that they are not required to provide any information other than their personal details and that they have the right to remain silent.
• Question: What if customs officials show up without a court order? Answer: In cases of “imminent danger,” officials are permitted to act even without a warrant. Nevertheless, you should contact your attorney immediately and, as a precaution, object to the measure.