Self-employed entitled to paid annual leave?
The Court of Justice of the EU provided a positive answer to a question raised by British courts whether self-employed persons are entitled to paid annual leave similarly as employees where their relationship in fact fulfils the criteria of employment. In its decision, the court made clear that, in the light of EU law, self-employed persons really are entitled to four weeks of paid leave. However, as this type of employment is identical to the problematic and illegal Švarc system, self-employed persons in the Czech Republic don’t really have any reason to celebrate.
In proceedings before the CJEU, Mr King requested an answer to a preliminary question whether he as a self-employed person was entitled to paid leave before his retirement. He could not claim his paid leave between 1999 and 2012, as the company he was cooperating with did not enable him to do so. Mr King worked as a contractor paid only through commission on a long-term basis for deals mediated for a window and door producer, but his relationship with the cooperating company in fact met the criteria of employment. The court held that the company as an employer must know its duties and granted Mr King his annual leave, rejecting the employer’s defence that they (mistakenly) believed Mr King was a self-employed person and not an employee. In a way, the CJEU followed the decisions of British courts that had recently acknowledged employment rights, for example, to Uber drivers.
An important aspect for assessing the self-employed person’s entitlement to paid leave is the nature of work such a person performs. In this particular case, Mr King would meet the Švarc system criteria under Czech law, such as dependent work features, regular compensation, superiority and subordination relationship, regular working hours and narrow specialisation.
In the Czech environment, the Labour Code does not allow the replacement of an employment contract with a business cooperation contract enabling employers to pay lower taxes and social and health insurance contributions. Employers may be heavily penalised for such actions by the State Labour Inspection Office and the tax authorities. The same applies to self-employed persons who may also be penalised by the State Labour Inspection Office for being involved in a Švarc system. Self-employed persons should always conscientiously assess the nature of their work so as not to be accused of circumventing the law, and they should be aware that they are generally entitled to neither paid leave nor allowance in lieu of such leave.