(…)

 

Executive Summary

 

Australia

In Australia, a person performing paid work will be either an employee or an independent contractor. An employee is someone who serves their employer within the employer’s business, whereas an independent contractor carries on a business of their own. Misclassification of an employee as an independent contractor may amount to “sham contracting”, which is prohibited under Australian employment law, and may also lead to other contraventions. Employers who engage in sham contracting can be subject to heavy fines and forced to compensate the employee for any unpaid employment entitlements.

 

China

In China, workers are classified either under employment law or civil law. An employee under employment law refers to those who have established an employment relationship with an employer according to the employment law and labour contract law of the PRC. An employee under civil law refers to those who concluded the contract with the employer in accordance with contract law or other related civil law. The rights and obligations of employees shall comply with contracts concluded with employers, where the employment law will not be applicable.

Misclassification may cause some consequences to the employer, such as overtime pay, economic compensation for termination of contract, and double monthly pay for failing to conclude a written contract. The misclassification may give rise to administrative or criminal penalties.

 

England

Generally in England an individual will fall into one of three main categories: employee, worker and independent contractor. Although there are definitions of an employee and a worker in English legislation, there is no such definition for an independent contractor and much of the law in this area has developed through case law.

Employees have a full suite of statutory right and protections, including the right not to be unfairly dismissed and the right to maternity leave and pay; workers have fewer rights than employees, as against their employer; and genuinely self-employed independent contractors have almost no statutory employment rights against the people to whom they provide services. Misclassification as an independent contractor as opposed to a worker or employee can lead to an employer being liable for, amongst other things, the national minimum wage, holiday pay, the worker’s torts and any unpaid tax and employee and employer national insurance contributions.

 

France

Hiring independent contractors is particularly appealing in France where the classical employee status comes with significant constraints and risks. However, in a context where employees’ rights are fiercely protected, there is a strong resistance against the current on-demand economy trend and companies should carefully double-check whether the independent contractor criteria are met i.e. that there is no subordination link: the independent contractor should be free to organise his work, use his own tools, bring skills that are distinct from the company’s core business, and be able to provide services to other clients. The outcome of the current litigation launched against Uber will provide useful guidance as to the definition of independent contractors.

 

Germany

The legal consequences in cases of worker misclassification in Germany are severe and a very recent reform will further restrict the use of temporary agency workers and increase the sanctions in cases of bogus self-employment and illegal temporary agency work. In cases of bogus self-employment or illegal temporary agency work, employment law and social security law are fully applicable, leading to the duty to repay all outstanding social security contributions plus surcharges. Other major risks include the personal liability as well as criminal liability of directors and board members and a loss of the entitlement to deduct input tax.

In order to reduce the risk of employee misclassification, it is highly advisable to introduce or review corporate guidelines on the deployment of external staff, conduct spot-checks regarding the current deployment of external staff, and raise the awareness for bogus self-employment and illegal temporary agency work as compliance risks.

 

Ireland

While some legal commentators have questioned whether Ireland’s employment categories are out of date, suggesting that the new ‘gig’ economy requires Ireland to create a category of ‘worker’ it seems the Irish Courts have already made provisions for such an employment relationship and a ‘gig’ worker in Ireland is more than likely to be deemed an employee as opposed to self-employed.

 

Italy

Workers in Italy can be either subordinate employees or autonomous workers depending on the activities they carry out and on the manner of performing them. Whilst an employee is a person who works within a hierarchical structure, under the employer’s organisational and disciplinary powers and strictly follows the employer’s orders (in terms of working hours, place of work, assigned duties, manner of performing the working activities, etc.), the autonomous worker is a person who carries out his / her activity by autonomously establishing the timing, the place and the modalities of work.

Misclassification of workers is forbidden in Italy and the consequences are heavy: in fact, misclassification leads to a declaration of a subordinate relationship between the parties with all the relevant consequences in terms of salary, social contributions and sanctions (and in some cases also in terms of compensation for damages).

 

Netherlands

Dutch legislation covers numerous categories of workers. Most of them can be classified as employees. If the relationship of authority is missing, the worker will be qualified as a contractor. Employers who misclassify their workers can face serious consequences. It is important to keep in mind that the way in which an agreement is executed takes precedence over the wording of the agreement.

 

Portugal

The key distinction to be made when considering paid workers is between an employee and an independent contractor. It can be seen as advantageous to hire independent contractors since the legal framework applicable to the employee is much more protective and restrictive. Still, if a self-employment arrangement is deemed to be false, the contractual relationship with the misclassified self-employed contractor will be reclassified as an employment contract. This brings severe consequences for the employer: contractual termination will amount to an unlawful dismissal resulting in the compulsory reinstatement of the worker or compensation, repayment of outstanding social security contributions and in the application of an administrative misdemeanour fine. The best advice is always to enter into a written contract with a self-employed contractor.

 

Spain

In Spain, labor authorities particularly tend to control the misclassification of employees given that classification as a self-employed worker is often abused. Consequences of misclassification are severe. Therefore, it is advisable to apply the correct employment regime to an individual. In order to distinguish between employee and self-employed worker it is important to look at the following criteria:

i)    the payment of a periodic remuneration;
ii)   the provision of tools and materials by the employer; and
iii)  the subordination and dependence to the employer’s working organisation, among other factors.

In Spain, there is also a current concern regarding the legal articulation of new forms of relationships between digital platforms (Uber, etc.) and service users or suppliers as usually they represent false self-employed workers.

 

Switzerland

Under Swiss law persons who carry out paid work for someone else are either classified as employees or self-employed persons. An employee is integrated into the employer’s work organization, serves under its directives and does not bear a significant economic risk whereas a self-employed person is free to determine how to perform its services, works with its own equipment and organization, bears its own economic risk and is often paid with a fixed fee for a project or even a specific success. Misclassification bears a high risk for employers since they may retroactively be obliged to pay all the social security contributions and employment protection benefits.

 

 

Full report here.

 

 

 

 

 

Picture: Courtesy of Pixabay/AmarilyMoreno

 

 

 

---

 

The Collection… Hier alle bis anhin erstellte Beiträge zu WFA:

 

Sozialversicherungen: Ausnahmevereinbarung für Grenzgänger (Fristen wurden kontinuierlich verlängert)