Kurzarbeitergeld fraud - Legal implications for employees

by ZELLER & SEYFERT

As the Corona crisis continues to impact the German economy, many workers are currently on a temporary short-time work status known as Kurzarbeit. According to the German Federal Employment Agency (Bundesagentur für Arbeit, or Arbeitsagentur), there are possibly over 4,000 cases of fraud in filing for Kurzarbeitergeld, or short-time work allowance, have been reported by various news outlets, with the Neue Osnabrücker Zeitung initially reporting an estimated 4,250, and up to 4,690 indications of fraud reported by numerous additional media outlets. While it should be noted that around 337 of the 4,000+ indications of fraud are currently being investigated and confirmations of fraud cannot yet be made, it is an alarming amount of fraud should they be found to be true by authorities. These numbers involve applications that have been filled since the beginning of the pandemic in Germany.

What is Kurzarbeitergeld?

Originally, the purpose of Kurzarbeitergeld is to prevent unnecessary layoffs and the increase of Germany’s unemployment rate. Particularly in economic emergencies, such as the 2008 financial crisis, the program activates a subsidy for businesses to stay afloat and for the workforce to keep their jobs. Businesses are to keep records of their employees' working hours and the Employment Agency subsidizes a portion of the net wages lost. Normally, companies can receive the work allowance for a maximum of 12 months, but due to the coronavirus pandemic, the term has extended up to 24 months, depending on certain conditions.

How does Kurzarbeitergeld fraud happen?

As we initially explained in our previous article, employers have to first register their intention to reduce hours and fill out the necessary paperwork. Based on the agreed hours, the employer pays the employees accordingly and then the employer is reimbursed by the state. Kurzarbeitergeld fraud is usually caused by the employer manipulating and underreporting their employees’ work hours. For example, while you have continued to work full-time of 40 hours per week–or even overtime hours—your employer altered the recorded timesheet to 20 hours.

When facing the economic fallout due to the pandemic, the federal government made access to Kurzarbeitergeld easier. Due to the high volume of applications to the Employment Agency and internal pressure to process them quickly, it may be possible for such manipulated applications to fly under the radar. After reporting the falsified timesheets, your employer receives the subsidy without passing the benefit onto you, as well as defrauding the social security system.

The Employment Agency has assured that while fraud attempts are indeed being made, it is “not a mass phenomenon”. Regardless, the wide indications of fraud come as no surprise to us, as businesses are continuing to struggle throughout the unpopular pandemic strategy of the Bundestag. Nevertheless, we do not condone fraud of any kind and the act of fraudulent Kurzarbeitergeld applications prevents necessary subsidies from reaching employees who truly need the funds. Should employers engage in such crimes, they may face prosecution under German Subsidy Fraud Laws (§264 of the German Criminal Code, or Strafgesetzbuch – StGB), which can result in severe fines and possible prison sentences.

How to report Kurzarbeitergeld fraud

If you have suspicions of Kurzarbeitergeld fraud by your employer, our attorneys at law of ZELLER & SEYFERT are here for you. German Employment Law expert Dr. Christian Zeller has many years of experience in dealing with such matters and would gladly offer a free initial ‘Corona consultancy’, to discuss the finer points of your case. Feel free to reach us by our contact form, directly via email at mail@zellerseyfert.com, or by telephone (+49 (0) 30-40 36 785-80).

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