Craft businesses also come under suspicion of undeclared work during audits if documentation of working hours and employees is lacking. (Photo: © lightkeeper/123RF.com)
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Anyone who fails to keep personnel records risks having the authorities estimate the back payments due. This applies even if undeclared work has not been clearly proven, the Berlin-Brandenburg Regional Labor Court clarified.
While this case involves a restaurant, the question arises in many businesses: What happens if working hours are not fully documented or employees are not correctly registered ? Craft businesses also come under scrutiny during audits if such documentation is lacking. The situation becomes particularly critical where family members regularly help out, part-time workers are employed, or working hours are only agreed upon verbally.
The Berlin-Brandenburg State Social Court (LAG) has now clarified: Employers who do not keep records of their employees must accept that the German Pension Insurance will determine the back social security contributions to be paid by estimation during a company audit.
The innkeeper ran two restaurants, each with more than ten tables, open seven days a week. His wife and other employees worked alongside him, some only on a part-time basis.
In 2016, customs officials searched the residential and business premises. Investigators determined that it was impossible to operate the two restaurants solely with the labor of the employees registered for social security. Since conclusive documentation was lacking , the main customs office estimated the necessary staffing level at two employees per restaurant during opening hours. Reported working hours, as well as the owner's daily ten-hour work period, were deducted. The resulting difference amounted to several thousand working hours annually , which—calculated using the lowest local wages—suggested a significant amount of undeclared work.
Operations management
Operations management
Operations management
The German Pension Insurance (Deutsche Rentenversicherung) assessed back social security contributions plus late payment surcharges totaling almost 130.000 euros for a period of approximately five years.
The parallel criminal proceedings were discontinued by the local court upon payment of €2.400. Due to violations of the minimum wage law and a lack of time records, the local court imposed a fine , which was reduced to a total of €4.000.
The innkeeper filed a lawsuit with the Neuruppin Social Court, arguing that the alleged loss of contributions could not be proven in the criminal proceedings. He claimed the pension insurance company's estimate was unfounded. The Social Court dismissed his lawsuit.
The state social court confirmed that the estimate was lawful. Since the employer had failed to comply with his obligation to keep personnel records , the pension insurance provider was entitled to estimate the wages and, based on this, determine the social security contributions.
The authority was entitled to rely on the findings of the main customs office. The procedure used to calculate the hours worked subject to wages was comprehensible. The registered workforce and the plaintiff's own labor were insufficient to maintain the business. According to the plaintiff's own statements, his wife was also employed on a more than marginal basis. The regular employment of family members is not exempt from social security contributions . The wages charged were at the level of unskilled workers and resulted in a consistent estimate.
The principle of "in dubio pro reo" (presumption of innocence) does not apply to assessments in social security administrative proceedings . Unlike in criminal proceedings, proof of specific criminal offenses is not a prerequisite; rather, the relevant social security obligations and the established facts are decisive.
Berlin-Brandenburg State Social Court, judgment of June 11, 2026, file number L 14 BA 63/23 (not legally binding, appeal not admitted, but the plaintiff can apply for admission to the Federal Social Court)
Source: Datev
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