Penalties for undeclared employment (and how to report it)

Undeclared work, commonly known as “black work” or, in italian “lavoro nero”, refers to employment that is not reported to the authorities and is therefore potentially devoid of any legal protection for the worker. The PNRR 4 (Italian Decree Law No. 19/2024, converted into Law No. 56/2024) has increased penalties for employers who engage workers without regular contracts, introducing fines of up to € 46,800 per worker, with further increases in the event of repeat offenses or the employment of minors or foreign nationals without residence permits. This article outlines what the law entails, the risks for employers, and how workers can protect themselves.

Introduction: undeclared employment

Undeclared or irregular work refers to any employment relationship established without a proper employment contract and without the required notifications to tax and social security authorities.

This form of employment is entirely untraceable by public institutions and offers no legal protection for the worker.
The term “gray work” refers to an intermediate situation between fully declared employment (i.e., with a formal contract) and completely undeclared employment. In other words, gray work involves partial reporting of work activities—some elements may be declared, while others remain hidden.

The rationale behind combating irregular employment—whether black or gray—lies in the protection of workers’ rights and the preservation of the integrity of the tax and social security system. Not only does undeclared work harm the individual worker, but it also affects the broader public by reducing tax revenue and undermining the welfare system.

Worker: how to report irregular employment

Anyone may report undeclared work, including workers themselves, labor union representatives, or any individual wishing to report irregularities. Reports can be submitted through various channels, including the Italian National Labor Inspectorate (INL). The person filing the complaint may submit a Request for Inspection (RI) by providing a detailed account of the facts and supporting evidence.

If the inspection confirms the presence of undeclared workers, the INL immediately issues a violation report and serves a formal notice to the employer, who is then obligated to regularize the employment relationship and pay the corresponding fines.

However, this process does not always proceed smoothly. In many cases, employers pay the fines but fail to complete the regularization process. In such situations, it is essential to consult a specialized law firm to ensure:

• the employer has paid all required social security contributions and to report any missed payments;
• to claim unpaid wages for the period of undeclared work, calculated based on the applicable National Collective Agreements (CCNL);
• to assess the worker’s entitlement to additional compensation or damages caused by the irregular employment.

In any case, before filing a formal inspection request, it is advisable to first send the employer a formal notice by registered mail (or for example with a “RACCOMANDATA A/R”), demanding full regularization of the employment relationship and payment of outstanding wages and contributions.

Employer: applicable penalties under the new PNRR 4 (D.L. 19/2024)

Decree PNRR 4 has increased the penalties for cases in which an employer hires staff without submitting the mandatory prior notification to establish an employment relationship (undeclared work).

In line with the latest decisions of the Italian Supreme Court (see Judgments No. 10746/2023, No. 35978/2021, No. 25037/2020), the Labor Inspectorate, in its Circular No. 1156 of 2024, confirmed that the employment of subordinate workers without prior notification to the Employment Center—which must be submitted no later than 24:00 on the day before the employment begins—constitutes an instantaneous omission offense with permanent effects.

The violation is considered committed at the time the employment relationship begins and is complete once the relationship displays the typical elements of subordination, pursuant to Article 2094 of the Italian Civil Code.

Application of penalties

Penalties are imposed by the National Labor Inspectorate (INL) during workplace inspections. If irregular employment is discovered, the INL issues a violation notice, and the employer is sanctioned based on the length of undeclared employment:

• Up to 30 days: € 1,950 to €11,700 per worker
• From 31 to 60 days: € 3,900 to €23,400 per worker
• Over 60 days: up to € 46,800 per worker

Penalties are increased by 20% if the employer engages foreign workers, underage workers, or recipients of citizenship income or the new inclusion allowance. In serious cases – such as the employment of minors or undocumented non-EU nationals – the employer may also face criminal sanctions.

Additionally, the penalty for non-traceable payments may be added to the standard fine for undeclared employment. Employers also face collateral consequences, such as suspension of business activity and potential civil lawsuits for damages or unpaid wages and overtime.

The employer is further required to pay all missed social security and insurance contributions for the period of undeclared work.

Beware of repeat offenses! If the employer has received a final administrative or criminal judgment for the same violations within the previous three years, fines may be increased by up to 60%. To establish repeat offense status:

• The sanction must apply to the same individual who committed the prior violations within the same company. There is no repeat offense if different individuals committed the violations—even within the same legal entity—or if the same person acted on behalf of different legal entities.
• The prior violation must have resulted in a final judgment within the three-year period, measured both from the commission of the new offense and the date of final adjudication of the previous one.

Employer: how to regularize the employment relationship

To avoid the maximum fine and benefit from the minimum statutory penalty, the employer may proceed to regularize the employment relationship.

This process is subject to strict deadlines and specific legal conditions. Therefore, it is strongly recommended to seek the assistance of a labor law attorney to ensure compliance with legal requirements.

Regularization may occur through the signing of a permanent employment contract, or, where applicable, a professional apprenticeship contract. The employer must also demonstrate the payment of all contributions, premiums, and fines required under the law.