Evidence for an “Under-the-Table” Agreement – Judgment of the Regional Court Itzehoe, Case No. 2 O 136/23
“Under-the-table” work can be sanctioned with substantial fines or imprisonment. If a client and a contractor make such an agreement, they not only commit a crime, but the client also cannot claim their money back if the work is faulty or not performed at all. This is also demonstrated by a judgment of the Regional Court Itzehoe from December 8, 2023 (Case No.: 2 O 136/23).
“Under-the-table” agreements are often made to “save” taxes or social security contributions. Such agreements are illegal, and those involved must expect substantial penalties. Furthermore, the parties involved in an “under-the-table” agreement cannot assert any civil claims against each other, as a contract becomes invalid due to such an agreement, according to the business law firm MTR Legal Rechtsanwälte, which also advises on economic criminal law.
Cash Payments Without Receipts
In the case before the Regional Court Itzehoe, the plaintiff had contracted the defendant to carry out renovation work on his house. The defendant had previously been self-employed with his own company, but was now employed by a roofing company. He no longer had his own business, business license, or tax number for a company. The contact between the two came about through a work colleague of the plaintiff, who at the time was also the defendant’s partner.
The plaintiff and the defendant discussed the work to be done, and on the same day, the plaintiff made an advance payment of €4,600 in cash to the defendant. Further advance payments followed, sometimes in cash, sometimes by bank transfer. No receipts were issued for the cash payments.
The defendant carried out various works on the house. Other agreed works were either not done or not completed. No invoice was issued.
Plaintiff Demands Repayment
The plaintiff eventually demanded a repayment of €9,500. This amount resulted from the work that was paid for but not performed. He claimed to have assumed that the defendant had his own company and had requested an invoice for each service.
The defendant did not comply with the repayment request. According to his statements, it was agreed from the outset that the work would not be invoiced but done “under the table.” Therefore, the transaction was immoral and void, and the plaintiff could not demand repayment.
The Regional Court Itzehoe ruled that the plaintiff had no claim to repayment. The court reasoned that while a client may generally have a claim for the repayment of overpaid advances or interim payments under a contract for work, no valid contract for work was established between the parties in this case, so the plaintiff could not demand repayment under the contract. The contract agreed upon by the parties was void under Section 134 of the German Civil Code (BGB) in conjunction with Section 1(2) No. 2 of the Act to Combat Illegal Employment (SchwarzArbG), according to the court. Thus, repayment of advance payments made is also excluded.
“Under-the-Table” Agreement Established
The Regional Court Itzehoe was convinced that the parties had made an “under-the-table” agreement in this case. There are various indications for the existence of such an agreement, the court said. These include, among other things, that the business relationship originated in a private context and the work was carried out to a significant extent without a written contractual basis. Another important indication is cash payments by the client without a receipt. Additionally, an agreed hourly rate that is significantly below usual conditions and the absence of interim or final invoices showing VAT are signs of an “under-the-table” agreement.
These indications were present in the case at hand and suggested the existence of an “under-the-table” agreement, according to the Regional Court Itzehoe. Furthermore, the fact that the work was largely carried out on weekends was another factor. Although work services are sometimes performed on weekends even without an “under-the-table” agreement, the chat history between the parties indicated that it was work outside the defendant’s professional activity.
As a result, both parties violated Section 1(2) No. 2 SchwarzArbG, making the contract void, the Regional Court Itzehoe ruled. Therefore, the plaintiff has no claim to repayment, even if the defendant did not perform the agreed work.
MTR Legal Rechtsanwälte advises on allegations of illegal work and other areas of commercial criminal law.
Feel free to contact us!
