Illegal employment. What penalty? — Supreme Court judgment (I PKN 558/99)

An employer employs a foreigner without a permit and without a written contract. The foreigner actually works — and then demands remuneration. The employer defends itself with the argument: "since there was no permit, the contract is void, so nothing is owed". Is the employer right? The Supreme Court, in its judgment of 27 March 2000 (ref. I PKN 558/99), resolved this question unequivocally. Below: a brief statement of facts, the indicated violations, the content of the judgment, and what penalties for illegal employment apply today.

1. The facts

The case concerned an action by a foreigner (in the judgment: Henny L.) against an employer (Janusz L.) for remuneration for work. On 15 December 1994 the parties concluded a contract which the courts recognised as a preliminary contract: the claimant was to be employed from 1 March 1995 as sales director, and the condition of employment was obtaining the consent of the labour office. The contract also provided (in § 4) for the rules of remuneration for work performed before signing the proper employment contract — on the basis of a mandate contract, with a 50/50 split of net profit.

The employer applied for a permit to employ the foreigner only on 27 February 1995 — a few days before the agreed date. The application had formal defects, so the permit was not issued until 20 April 1995. Nevertheless, from 1 March 1995 — without the required permit and consent — the claimant actually started work as sales director and performed it until 31 May 1995. This was confirmed by witnesses and by company documents signed by the claimant.

2. The violation — what the legal dispute was about

The key question was: does the employment of a foreigner without the required permit (on the employer's side) and consent of the labour office (on the foreigner's side) cause the absolute nullity of the employment contract under Art. 58 § 1 of the Civil Code (a legal act contrary to the law is void), applied to employment relationships through Art. 300 of the Labour Code?

The employer (the appellant) based its cassation on Art. 50 of the then Act of 14 December 1994 on employment and counteracting unemployment, arguing that since the provision prohibited employing a foreigner without a permit, a contract concluded in breach of it is void — and if there was no employment contract, the three-year limitation period under Art. 291 of the Labour Code does not apply and the claim should be assessed differently. The essence of the dispute was therefore whether "illegal employment" entails the automatic invalidation of the contract, or whether the contract remains valid and the illegality gives rise only to other consequences (e.g. criminal and administrative).

3. The Supreme Court judgment and its reasoning

The Supreme Court dismissed the employer's cassation, adopting the thesis: the sanction of nullity (Art. 58 of the Civil Code) does not apply to an employment contract with a foreigner concluded without the required permit or consent of the labour office. The contract is valid, and since the work was actually performed — remuneration is owed.

The Court based this position on several arguments:

• Art. 58 of the Civil Code applies to labour law only accordingly. Through Art. 300 of the Labour Code it is invoked only in matters not regulated by labour law and without infringing the principles of that law. One should strive to eliminate cases of absolute nullity of a contract where the legal relationship has all the features of an employment relationship and the work was actually performed.
• "Illegal employment" ≠ nullity of the contract. Employing a foreigner without a permit is indeed a case of illegal employment (Art. 2(1)(9) of the act), but the same concept also covers, for instance, employment without concluding a written employment contract — and a breach of the written form does not, after all, invalidate the contract. By analogy, the absence of a permit does not in itself invalidate the contract.
• The sanction is a fine, not nullity. Employing a foreigner without a permit was punishable by a fine (Art. 64 of the act), and alongside it there were other measures (e.g. deprivation of a visa, expulsion from the country). These sanctions are sufficient to protect the labour market — without the need to assume that the absence of a permit nullifies the contract.
• The prohibition is addressed to the employer, not to both parties. The requirement under Art. 50(1) of the act was directed at the employer — it is the employer who may not employ a foreigner without a permit. It cannot be extended to both parties and used to infer the nullity of the contract.
• The act assumed the existence of an employment relationship despite the absence of a permit. It followed from Art. 50(7) that withdrawal of the permit obliges the employer to terminate the contract within 3 days — so the contract does not expire by operation of law, but continues until terminated according to the rules of labour law.

4. What penalty today? Risk assessment

The judgment was issued against the background of the now-repealed 1994 act, but its essential idea remains relevant: illegal entrustment of work to a foreigner is punishable primarily by a penalty (fine) on the employer's side, not by automatic invalidation of the contract and deprivation of the employee's remuneration for work already performed. For the employer this means a double risk: a public-law sanction and the obligation to pay for the work performed.

The legal situation has, however, changed. Since 1 June 2025, the Act of 20 March 2025 on the conditions for the admissibility of entrusting work to foreigners in the territory of the Republic of Poland has been in force, replacing the previous provisions of the Act on the promotion of employment. According to data from the National Labour Inspectorate, the new act tightened the sanctions: the fine for illegal entrustment of work to a foreigner now falls within the range of PLN 3,000 to 50,000 (previously PLN 1,000 to 30,000), and its amount is graduated by, among other things, the number of foreigners to whom work was illegally entrusted.

Practical conclusion for both parties. A foreigner who actually performed the work generally retains the claim to remuneration, even if the employer did not arrange the permit — the lack of formalities does not "cancel" the work performed. An employer will not avoid payment by invoking its own negligence, and additionally exposes itself to a fine and other sanctions. It is safest to complete the formalities before admitting the foreigner to work — the order "first the permit/authorisation, then the work" protects both parties.