Employment of foreign employees – employers’ obligations and risks under Section 4a (5) Residence Act (AufenthG)

The employment of employees who are neither German citizens nor citizens of a European member state is increasing, and not just because of the shortage of qualified professionals in Germany. Many companies in Germany rely – for various reasons – on employees from many different countries. 

The employment of employees with foreign nationality entails certain obligations, special requirements and formalities that employers should be aware of, as violations may result in significant financial risks.

As stated in Section 4a (5) of the Residence Act, among other things, a foreign national may only be employed or assigned other remunerated services or work tasks if they possess a residence permit and there is no related prohibition or restriction. A violation of this regulation constitutes an administrative offense and can be punished with a fine of up to 500,000 euros (!). Due to this drastic sanction, most employers are aware of this regulation and act accordingly. 

However, Section 4a of the Residence Act contains further obligations for employers, which are generally less well known and therefore more likely to be violated. According to Section 4a (5) sentence 3 of the Residence Act, anyone who employs a foreign national in Germany must 

• check whether the requirements set out in Sentence 1 or Sentence 2 are met (i.e. whether a residence permit was granted, or an exception made),
• keep a copy of the residence permit, the work permit from the Federal Employment Agency, the certificate of temporary residence permit, or the certificate of suspension of deportation of the foreign national in electronic or paper form for the duration of the employment and
• notify the competent immigration authority within four weeks of becoming aware that the employment for which a residence permit was issued in accordance with Chapter 2 Section 4 has been prematurely terminated.

A violation of these legal obligations also constitutes an administrative offense under the law and may be subject to a fine. 

Employers who employ foreign nationals should therefore be sure to obtain a copy of the residence permit, the work permit from the Federal Employment Agency, the certificate of temporary residence permit or the certificate of suspension of deportation of the foreign national in electronic or paper form before concluding the employment contract and keep this for the duration of the employment relationship. In order to minimize the risk of illegal employment of foreign nationals, it is also advisable to conclude the employment contract subject to the condition precedent that the employee submits a residence permit that entitles them to work for the employer. The employee should also be contractually obliged to notify the employer immediately of any changes to their residence permit. 

Section 4a (5) Sentence 3 No. 3 of the Residence Act also contains a notification obligation for employers. Accordingly, the competent immigration authority must be informed within four weeks of becoming aware that employment, for which a residence permit was granted under Chapter 2, Section 4, has been prematurely terminated. This notification obligation includes residence titles in accordance with Sections 18a-19f of the Residence Act, in particular the EU Blue Card, ICT Card and other titles that are related to a qualified professional status and thus require a certain level of prior education or qualifications of the employee. This does not include residence permits in accordance with Section 20 of the Residence Act, as these are not issued with reference to specific employment. This also applies to residence permits in accordance with Section 21 of the Residence Act, as these relate exclusively to self-employed activities. These are therefore also not subject to the notification obligation under Section 4a (5) sentence 3 No. 3 of the Residence Act. 

The notification obligation only applies in the event of premature termination of employment. This means that cases in which the termination was planned right from the start, e.g. if the employment relationship was terminated because the fixed-term employment contract expired, and the authorities were aware of this when issuing the residence permit, are not covered by the notification obligation. It is irrelevant why the employment relationship ends prematurely, i.e. whether it is due to a notice of termination or the conclusion of a termination agreement. It should also be noted that the notification obligation may also cover amendment agreements if these lead to a change in employment and the residence permit does not cover this employment. 

A violation of the notification obligation by the employer constitutes an administrative offense and can be punished with a fine of up to 30,000 euros. 

The notification obligation is triggered only when the employer becomes aware of the termination of the employment relationship. Although not defined by law and not specified in more detail in the Federal Employment Agency’s technical instructions, there are voices in legal literature that argue that the period does not begin with the actual termination of the employment relationship, but rather when the termination becomes known. This is likely to be the time of receipt of the notice of termination.