Disguised labour supply: why Czech labour inspectors impose multimillion-crown fines

A Slovak company sends a team to a Czech factory and invoices for “assembly work”. Yet the workers follow the customer’s shift schedule, use its tools, receive instructions from its foreman and are billed by the hour. Czech labour inspectors call this “disguised employment intermediation” or disguised labour supply, and it has attracted some of their toughest enforcement in recent years.

What is disguised labour supply?

Section 5(g) of Czech Employment Act No. 435/2004 Coll. defines it as hiring out labour to another person without meeting the conditions for employment intermediation under section 14(1)(b). Only licensed employment agencies may hire out their employees’ labour. A business using a works or services contract that exists as such only on paper is operating an unlicensed agency. The actual workplace arrangements are decisive: who assigns tasks, whose working hours and tools apply, who supervises results, and whether payment covers a completed result or hours worked by hired personnel. Inspectors question workers directly.

The enforcement figures

According to the annual inspection programme for 2025, labour inspection authorities identified 245 cases of disguised labour supply and 169 entities enabling it in 2024. They imposed 161 fines totalling CZK 71.714 million for providing it and 81 fines totalling CZK 67.198 million for enabling it. The average penalty runs into hundreds of thousands of crowns. Detecting unlicensed agencies and their users remains a main inspection priority.

The statutory range is substantial. Disguised labour supply or enabling it under section 140(1)(f) of Act No. 435/2004 Coll. carries a fine of up to CZK 10,000,000, with a minimum of CZK 50,000 under section 140(4)(f). A prohibition on activity and publication of the decision on the authority’s official notice board may also be imposed under section 140(5) and (6). By comparison, allowing illegal work under section 140(1)(c), including bogus self-employment, resulted in 58 fines totalling CZK 7,689,000 from inspections conducted in 2024. Enforcement has therefore shifted from individual nominally self-employed contractors towards structures hiring out entire teams.

Both parties face penalties

Since 2021, the law has expressly penalised the client—the “pseudo-user”—that enables disguised labour supply. The figures show that inspectors use this power: the combined value of 81 client fines almost matched the fines imposed on the agencies themselves. A Czech company cannot simply say that the supplier manages its own personnel. If it actually directs those workers, it assumes a penalty risk. Checking the supplier’s licence, payment model and actual supervision is now part of a customer’s due diligence in the Czech Republic.

Slovak companies can be affected on both sides. Sending employees to a Czech customer without a genuine works arrangement or licensed agency assignment can constitute operating an unlicensed agency in the Czech Republic; the customer can be a pseudo-user. Similar reasoning applies in Slovakia: section 2 of Act No. 82/2005 Coll. defines illegal employment, including using dependent labour without an employment relationship, and Slovak labour inspectors also penalise comparable arrangements.

How to distinguish your business from an unlicensed agency

There are two lawful routes. For a genuine supply of work or services, the supplier must direct the work through its own supervisors, bear responsibility for the result, generally use its own equipment and charge for the result rather than personnel hours. If the arrangement is labour hire, it must be recognised and operated as licensed agency employment under the applicable rules. The worst option is a works contract contradicted by workplace reality: it will fail inspection, with consequences for supplier and customer alike.

If your workers operate in the Czech Republic, we can assess and adjust the arrangement before an inspection. Our legal services for employment agencies address agency status and licences. Our service for working with self-employed contractors examines the boundary between contracting, agency work and bogus self-employment. If an inspection has already begun, we assist with the labour inspectorate inspection.