The Supreme Administrative Court (SAC) has recently dealt with another case of a fine imposed on a company for allowing illegal work to be performed. This time it was a case concerning a company's long-term cooperation with IT programmers who voluntarily chose cooperation on the basis of a business relationship instead of an employment relationship.
Circumstances of the case
The company concluded a framework cooperation agreement with the programmers, on the basis of which the programmers, as self-employed persons, performed programming activities for the company personally, for a longer period of time, according to the instructions of the project manager, who set deadlines for the completion of individual work tasks and at the same time controlled their fulfilment. The programmers were entitled to refuse the assigned work only in the event of the company’s delay in paying the agreed remuneration. Programmers coordinated with other colleagues – employees of the company and participated in meetings at a set time. The programmers were not responsible for their work to the company and granted the company a free exclusive license to all copyrighted works they created. They worked only for the company in the range of 8 hours a day and were remunerated according to the number of hours they spent on activities for the company and which the company recorded for them for these purposes.
The Labour Inspectorate evaluated the activities of the self-employed programmers as dependent work that was performed outside the employment relationship. Therefore, it imposed a fine on the company for enabling the performance of illegal work, against which the company defended itself in administrative courts. The Regional Court and the SAC both stated that the actual integration of these programmers into the organisational structure of the company and the overall setting of the work relationship clearly showed the fulfilment of the characteristics of dependent work, and confirmed the fine for enabling the performance of illegal work.
Conclusions of the SAC
According to the SAC, the circumstances of the cooperation between the self-employed programmers and the company fulfilled the individual characteristics of dependent work and at the same time did not correspond to the equal position of the two business entities. According to the SAC, a comprehensive assessment of the specific circumstances of the case is crucial. An important circumstance here was also the fact that the self-employed programmers worked with the company’s employees on joint projects and under very similar conditions. In fact, there was no difference between the self-employed persons and the employees.
The company unsuccessfully argued that in the case of activities of a dual nature, which include programming, the aspect of free choice and the absence of coercion are essential criteria for concluding that it is an independent activity. According to the SAC, however, even the voluntary nature of the chosen form of cooperation on the part of programmers cannot break the legal requirement that work fulfilling the characteristics of dependent work shall be performed in an employment relationship. Therefore, in the case where the characteristics of dependent work are met, the contracting parties have limited contractual freedom.
The SAC then reminded that it follows from the tax case-law that activities of a dual nature can be performed both within the framework of an employment relationship and independently, and the parties to the contract can agree on a form of cooperation that will suit them better. However, if the activity in question clearly fulfils all the characteristics of dependent work, the contracting parties do not have such a choice even under tax the case-law.
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