Court rules in favour of Polish workers claiming to be ordinary employees

A Norwegian court has ruled in favour of 19 Polish construction workers who claimed they were in a standard employment relationship with a company and not engaged as self-employed workers. The ruling delivered in November 2007 awarded the workers the right to damages equalling the difference between their actual pay at the time of employment and the legally binding minimum wage, which totals about €245,000 in compensation.

In November 2007, 19 Polish construction workers who were hired as self-employed workers by their Norwegian employer won a lawsuit against their employer where they claimed to be working as ordinary employees. The lawsuit was brought against the employer on behalf of the workers by their representative trade union, the Norwegian United Federation of Trade Unions (Fellesforbundet). The employer was ordered to pay damages to the workers equivalent to the difference between what they had been paid since the time of employment and the minimum wage for construction work, including overtime pay and holiday pay.

Background to case

A legally binding minimum wage for the construction sector was introduced in parts of Norway from 1 December 2004; this provision was then gradually extended to other parts of the country, and finally made applicable to the whole country from 1 January 2007 (NO0411103F, NO0612029I). The minimum wage should apply to all employees conducting work in the construction sector in Norway. However, self-employed workers are not covered by this regulation. Such a stipulation has led to a situation where some employers have chosen to hire self-employed workers instead of regular employees. The principal question at the centre of this lawsuit was the extent to which the Polish construction workers were to be regarded as ordinary employees in the company or whether they were conducting work for several employers as self-employed workers.

At the time of employment by the company, the Polish workers were paid an hourly rate of NOK 65 or NOK 70 (about €8 or €9 as at 18 December 2007). From 1 September 2005, the minimum wage for this sector was set at NOK 115 (€14) an hour – prior to this date, no minimum wage was in place for this area of work. While recruiting the Polish workers, the Norwegian company asked them to bring certain documentation to Norway, including evidence showing that they had registered their own companies in Poland. The Norwegian company collected the documentation from the workers and then had the Polish companies registered in Norway.

Although the workers were only paid NOK 65 or NOK 70 an hour, the contractors were charged NOK 169 or NOK 179 (€21 or €22) an hour. Invoicing was conducted by the Norwegian company, and the difference between the contract price and the workers’ actual pay was kept by the company as a fee for having arranged the contracts. The company also claimed that the pay difference included accommodation costs.

Court ruling

According to Norwegian law, several factors are relevant when evaluating whether a work relationship should be considered as ordinary employment or not. Important elements include whether the worker is subject to control and command by the employer, and the extent to which the worker is paid for their work efforts or for the result of the work conducted.

The court considered that the workers were in an employment relationship with the company. The rationale behind this argument was, among other things, the fact that it was not up to the workers to decide where or when to conduct the work, since this was already decided by the company. It also emerged that the workers did not purchase building materials themselves, and tools and personal working equipment were provided by the company. Furthermore, the workers did not invoice for their work themselves as this was done by the company, and they got paid by the company in accordance with the number of hours they had worked, and not in accordance with the actual outcome of this work. As a result, the company was ordered to pay the 19 plaintiffs damages totalling NOK 1.96 million (about €245,000).

Commentary

The employer may still appeal the court’s decision. However, this case illustrates a major weakness of the Norwegian minimum wage system, as well as how much money a company can save by evading this regulation. In many cases, foreign workers will not have enough knowledge of the Norwegian employment system to take on these cases themselves, and will thus have to rely on others, such as Norwegian trade unions, to protect their legal rights. The effect of the legally binding minimum wage in Norway will partly depend on the extent to which employers bypass the law in force. The court ruling illustrates how a company may or may not organise its business when it comes to hiring economically dependent workers, and how this affects the workers. Problems such as this one faced by foreign workers – which were frequent in the construction sector in the late 1980s and early 1990s – have once again caught the public interest, as cheap labour from eastern European countries arrives in Norway.

Kristin Alsos, Fafo Institute for Labour and Social Research