Thousands of companies are receiving notifications from the Authority for Labour Conditions (“ACT”) to verify the potential existence of employment relationships with service providers whose turnover to such companies has exceeded the limits at which economic dependence is considered to exist.
In this context, we remind you that economic dependence is considered to exist when more than 50 per cent of the total annual value of the self-employed worker’s activity is provided to the same entity.
The notifications that companies are receiving stem precisely from the cross-checking of data between the ACT and Social Security, identifying the self-employed workers for whom, in the light of the aforementioned criteria, economic dependence is considered to exist.
According to the notifications that are being sent out, companies have until 16 February 2024 to regularise the employment relationship of “false” self-employed workers, namely by (i) informing the workers of the change of employment relationship (to an employment contract) and (ii) communicating this to the Social Security.
If you receive one of these notices, you should be very careful, so we have prepared a brief Q&A below to help you react if you have been one of the recipients:
Does the fact that I received the notification mean that I am obliged to recognise the self-employed worker as a subordinate worker of the company?
No. The notices were sent to organisations that benefit from the activity of service providers to whom there is economic dependence. Although this is one of the indications of the existence of an employment relationship, it is neither the only one nor the determining factor, so a case-by-case analysis of the way in which the activity is carried out by the provider must be made in order to assess the existence of an employment relationship.
In this context, we remind you that the fundamental criteria for assessing whether the relationship between a service provider and the beneficiary of the activity is of a labour nature is the existence of legal subordination. According to the Labour Code, an employment contract is presumed to exist when some of the following characteristics are met:
- The activity is carried out in a place belonging to or determined by the beneficiary;
- The equipment and work tools used belong to the beneficiary of the activity;
- The provider of the activity observes start and end times determined by the beneficiary;
- The activity provider is paid a certain amount of money at certain intervals;
- The activity provider fulfils management or leadership functions within the company’s organisational structure.
What are the consequences for the company if an employment contract is found to exist and the situation is not regularised?
The consequences may not be automatic, but the ACT may initiate the verification of situations in order to ascertain the nature of the labour relationship.
We would like to point out that the ACT has extensive powers to supervise and control the activity of companies in labour matters and that providing work in an apparently autonomous way under conditions that are characteristic of an employment contract constitutes a very serious administrative offence, punishable by fines of between €2,040.00 and €61,200.00, depending on the company’s turnover and the degree of guilt.
In the event of a repeat offence, the following additional penalties may also be imposed on the employer:
- Deprivation of the right to support, subsidies or benefits granted by a public body or service, namely of a fiscal or contributory nature or from European funds, for a period of up to 2 years;
- Deprivation of the right to participate in public tenders for up to 2 years.
Managers, administrators or directors may be jointly and severally liable for the payment of fines.
In addition to liability for administrative offences, payments to workers that would have been due if the relationship had been assumed to be of an employment nature from the start of the activity may also be at stake, namely payment of holiday and Christmas allowances and other sums arising from the legislation applicable to employment contracts or collective labour regulation instruments.
VCA’s Labour team has extensive experience in analysing and qualifying the nature of the legal relationship between activity providers and their beneficiaries and in advising companies on labour administrative offences.
Labour Department
Hugo Martins Braz | Tiago Lopes Fernandez
