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When can Self-Employed individuals still be considered as Employees?

The Employment Status National Standard Order (Subsidiary Legislation 452.108) considers how the employment status of an individual as self-employed may be considered as an employment relationship by satisfying a number of criteria. It holds that where an individual deems himself to be self-employed, and is therefore not prima facie considered as an employee, he may still be presumed to be engaged in an employment relationship (with the person for whom the service is being provided being the employer), if five out of the following eight criteria are adequately satisfied:

  1. The individual depends on another sole person, being the person for whom services are rendered, for at least 75% of his total income over a period of one year;
  2. The individual depends on another sole person, being the person for whom services are rendered, to determine what work must be done and where and how the said work must be assigned and carried out;
  3. The individual performs his work with tools and materials provided by the person for whom the service is provided;
  4. The individual is subjected to a working time schedule or minimum periods of work, which are determined by the person for whom the service is provided;
  5. The individual is not allowed to subcontract his work to another individual as a substitute in the carrying out of his work;
  6. The individual has become integrated in the structure of the production process, the organisation of work, or the company’s hierarchy;
  7. The individual’s activity has become a core element in the organisation and in the pursuit of it objectives for which services are rendered;
  8. The individual is responsible to carry out tasks which are greatly similar to those carried out by current or past employees.

In the case where five out of the aforementioned eight criteria have been satisfied, and hence an employment relationship has been established, it is possible for either the employer or the employee (so considered) to submit a written request to the Director responsible for Industrial and Employment Relations, to exempt such a relationship from being considered as an employment relationship. The Director is empowered to do so if he believes that there are adequate grounds for this review, including the relationship being an uncommon occurrence, or of a very short duration.

Any individual, who is a party to an employment relationship as an employee by virtue of this Order, is considered as having been engaged as an employee on an indefinite contract with whole-time hours. Subsequently, the date of engagement of the indefinite contract is considered to be the date where the continuous provision of services was initiated.

The probationary period is deemed to have commenced on the initial date of engagement to provide services.

The employer in this type of relationship must ensure that the employee is granted the following conditions:

  1. The same wages paid to a comparable employee, or in the absence of a comparable employee, the same remuneration the employee used to receive in return for the same services rendered on a self-employed basis; and
  2. The same conditions of employment enjoyed by a comparable employee, or in the absence of a comparable employee, to the applicable minimum conditions granted under the Employment and Industrial Relations Act, together with the associated regulations and orders.

It is crucial that the employing party in this type of relationship sends the employed party a signed statement or letter of engagement, including the necessary information laid down in the Information for Employees Regulations. This must be done as soon as possible, but in any case, within eight weeks. Where the employee does not agree with the conditions of employment or with the proposed remuneration as laid down in the letter of engagement, and subsequently leaves his employment, he may institute proceeding before the Industrial Tribunal on the basis of Unfair Dismissal.

It is interesting to note that any provisions of the Constitution or which are found in any other law which apply to employment within the public sector or service prevail over this Order. Hence, nothing mentioned in the Order allows any person the right to determine the existence of an employment relationship between a service provider and a public service or sector for whom the service is provided.

Where a relationship in the public service has been established after the entering into force of the Order as a self-employed one, satisfying five of the eight criteria required to be determined as an employment relationship, but nonetheless unable to be deemed as an employment relationship as explained above, the service provider may refer his case to the Industrial Tribunal to claim compensation from the person in receipt of services, at any time during the relationship, or within four months from termination.

If the Tribunal is convinced that the reason for the continuation of the contract on a self-employed basis is the fact that the relationship was established within the public sector, it shall grant compensation and establish an amount to be paid by the person for whom the services are being carried out, to be awarded to the service provider. The award of compensation is equivalent to one week’s wages for each year if the relationship had been terminated, and where it had not been terminated, the Tribunal must order the employer to proceed with paying this annual penalty until the relationship is terminated.

It is the duty of the employer (the person for whom the services are being provided), to provide the employee (the service provider), with a written statement once the latter submits a request for it and when he considers that his employer has maltreated him in a manner which results in the infringement of his right granted to him by the Order. The employer has 21 days to present such a written statement, which must include reasons and justifications explaining the different treatment.

The employee may also file a complaint to the Industrial Tribunal that his rights under the Order have been infringed by his employer (the person for whom services are rendered). This must be done within four months from when the employee has become aware of the infringement, and the Tribunal may award compensation in favour of the employee, if it deems it necessary to remedy the breach.

Moreover, any individual who is found guilty of contravening the provisions of this Order is deemed liable on conviction to a minimum fine of €1,000 with respect of every employee which has been affected.

For more information on Employment Law or if you have any questions, please feel free to contact Dr Robert Tufigno on rtufigno@gtgadvocates.com and Dr Cynthia Borg Barthet at cborgbarthet@gtgadvocates.com

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.