international employment law firm alliance L&E Global

2. Re-Characterisation of Independent Contractors as Employees

a. Laws and Guiding Principles

A re-characterization may take place if the person performing the work tasks is judged as an “employee” according to the 2005 Working Environment Act, the 1988 Holiday Act or the 1997 Social Benefits Act.

A kind of re-characterization may also take place if the tax authorities conclude that the payment for work tasks performed by a person in reality is a payment for a work performance done as part of an employment relationship.

b. The Legal Consequences of a Re-Characterisation

If the person who has performed work tasks for the employer is re-characterized as an “employee” by the courts, the re-characterized employee is normally entitled to permanent employment with the employer. This gives him full protection from the 2005 Working Environment Act, related to i.e. protection against dismissals, working time and overtime regulations. In addition, an employee is entitled to holiday pay in accordance with the 1988 Holiday Act and full social benefits according to the 1997 Social Benefits Act. In addition, see section d) below.

c. Judicial Remedies Available to Persons Seeking ‘Employee’ Status

The person Seeking “Employee” status may seek negotiations, but will normally have to file a lawsuit in the Courts claiming his employee status.

d. Legal or Administrative Penalties or Damages for the Employers in the Event of Re-Characterisation

If the employee is granted “employee” status according to the 2005 Working Environment Act, he may be entitled to compensation for any economic loss or holiday pay for the last 3 years.

If the re-characterization is done by the tax authorities related to tax questions, both the employer and the person performing the work tasks may be liable for extra tax payments and punitive tax payments. Such tax obligations may be claimed for work performed during the last 10 years.

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