The Labour Court recently issued two decisions which further outline the principles for determining the 'real' employer when an employer-employee relationship is unclear (AD 2018 29 and AD 2019 17).
The starting point for determining an employer is to identify the natural or legal person that:
- enters into an agreement with others regarding the execution of work; and
- is responsible for any requirements relating to the employment relationship.
Therefore, employers are legal entities that are considered to be an employees' counterparty in an employment relationship. An employment relationship can be established by signing an employment contract or through declarations of intent in the form of tenders and acceptance. They can also result from an employer acting in such a way that a job seeker with fairness believes that they have become an employee.
On this basis, employment relations require a voluntary commitment, but such contractual liability can arise when an employer, without intent to sign an employment contract:
- acts in a way that gives an individual a reasonable impression that they have become an employee; or
- does not act to clarify that an employment relationship has been established.
Therefore, employers have a strong responsibility to eliminate any ambiguity regarding their status as employers.
In this case, a person had been employed by and signed a contract with a limited company. However, he had received salary payments from a registered one-man business. The natural person behind the one-person business also owned the limited company's shares. The one-person business had issued salary statements and submitted tax reports to the Swedish Tax Agency.
The Labour Court found that the person had reason to believe that he was in fact employed by the one-person business and not the company with which he had signed the employment contract. The court also took into consideration that it was the same natural person behind both entities.
In this case, the question before the Labour Court was whether three Polish painters had been employed by a staffing company or a painting company.
After arriving in Sweden, the painters met a representative of the painting company, which provided them with work clothes and equipment, and proceeded to work under the company's supervision.
However, the painting company agreed to have a staffing company employ and pay the painters. In order to calculate salary payments, the painting company provided the staffing company with the painters' timesheets. The staffing company issued invoices to the painting company for the work performed by the painters. However, the staffing company failed to pay the painters.
The Labour Court accepted that the painting company had intended for the staffing company to employ the painters. However, the painters:
- had not been informed about the agreement between the two companies; and
- despite not having a signed employment contract, had had reason to believe that they were employed by the painting company.
These cases confirm that the Labour Court still places a strong emphasis on protecting employees' rights and that employers have the full burden of proving the 'real' employer when an employer-employee relationship is unclear.
In the interests of full transparency, employers must fulfil their legal obligations by ensuring that employees have full knowledge of any agreement between their employer and another company that performs employment-related functions (eg, outsourced salary payments).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
