Criminal proceedings for tax evasion (§ 370 AO) and social security evasion (§ 266a StGB) have regularly been initiated by customs offices and public prosecutors' offices against managing directors of freight forwarding companies who – particularly in the case of violations of the EC "Driving and Rest Periods" regulations – paid the fines for their drivers without disclosing these payments as "wages".
The argument here, among other things in a now probably outdated decision by the LSG NRW (judgment of June 20, 2007 – L 11(8)R 75/06), was that the money paid was so closely related to the work that that the employee ultimately receives the payment "for his work" and that it is therefore taxable income within the meaning of § 14 I S.1 SGB IV.
Such a procedure was accompanied by the penalty of § 370 AO and § 266a StGB, each with a maximum of 5 years imprisonment, and the back payments of wage tax and social security contributions.
In its judgment dated January 20, 2010 - L 6 R 381/08, BeckRS 2010, 68928 - the LSG Rheinland-Pfalz has now ruled that the assumption of fines by a freight forwarder for drivers, upon prior request to violate the law, does not constitute contributory wages. The LSG states: "If an employer in the freight forwarding industry pays fines imposed on the dispatchers and drivers employed by him for violating freight transport regulations, this allowance is not a contributory wage if, on the basis of an overall assessment, the employer's own interest was the main consideration and he therefore instructed his employees to disregard the relevant freight traffic regulations."
So if a freight forwarding company instructs its truck drivers to strictly adhere to delivery dates, even if it means violating freight traffic regulations, and then assumes the fines imposed on the drivers and dispatchers, this does not constitute taxable wages. The applicable reasoning states that in such cases, the employer's own interest is at the forefront when paying the fines and no interest of the employee is served. According to the LSG, it is irrelevant for the assessment of the operational objective of the payments whether the employer's behavior is approved by the legal system.
The LSG refers to a decision of the BSG that is already known (judgment of May 26, 2004 – B 12 KR 5/04 R). It was formulated here: "Benefits are not considered to be part of the compensation if they are granted in the employer's own interest, which is overwhelmingly in-house." The reasoning behind the decision of the Federal Fiscal Court (Bundesfinanzhof, BFH) of July 7, 2004 – VI R 29/00 (violations of the no-stopping zone by employees of a parcel delivery service in competition with Deutsche Bundespost Bundespost for which there was a general exception to the stopping restriction) complements the appropriate assessment of the LSG Rheinland-Pfalz.
However, the clear operational objective of the allowance is important for all freight forwarding companies. Attention must be paid to this. Without such an objective, there is a risk of back payments/taxation for the company and the drivers, and a risk of criminal prosecution for those responsible. With knowledge of the decision of the LSG Rheinland-Pfalz, criminal proceedings can be avoided and ongoing proceedings can be discontinued.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.