Misclassification may be expensive for the employer

Employees who are misclassified as independent contractors may be entitled to back-pay for many years. This back-pay may include holiday pay, overtime pay, inconvenience allowances, and other benefits.

In a recent Supreme Court judgment, Recoveryakademiet was ordered to pay several million NOK to three healthcare workers. These healthcare workers had agreements as independent contractors. This was incorrect. They should have been treated as employees with salary and other benefits according to the provisions of the Working Environment Act.

Additional Claims

The Supreme Court established that for additional claims due to such misclassification, the following principles apply:

• The Working Environment Act is decisive for the calculation of additions, unless otherwise validly agreed.
• Employees are not entitled to overcompensation. It must be assessed in each case what the paid fee compensated for. What has already been compensated must be deducted from the claim.
• The employer must prove any overcompensation.

Holiday Pay

Furthermore, the Supreme Court took a position on what constituted the basis for holiday pay and the limitation period for the holiday pay claim.

Employees are entitled to holiday pay from “wages” according to the Holidays Act. The fee the healthcare workers had received was considered wages. Therefore, the calculation of holiday pay should be based on the fee.

Not Time-Barred

Monetary claims are generally time-barred three years after one first had the right to demand fulfillment. Before the misclassification was discovered, the healthcare workers had no opportunity to take vacation, claim holiday pay, or other rights under the Holidays Act. The result was that the limitation period for the holiday pay claim did not start until the end of employment. This was more specifically at the last regular payday before termination. The employees could thus claim holiday pay based on the fee they had received throughout their years at Recoveryakademiet.

Two out of five judges in the Supreme Court partially dissented. The minority had a somewhat different view on the calculation of the back pay.