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At the end of December 2024, the Norwegian Supreme Court handed down a judgement on back pay in the event of misclassification of employees. The judgement is particularly relevant for employers who operate with self-employed persons rather than employees, and for employees who are misclassified as self-employed.
Briefly about the case
The case concerned three healthcare workers who, over a period of several years, had been contracted by a company to provide health and care services for the company's care homes. The healthcare workers had been incorrectly classified as contractors, instead of employees, and had received payment for the work performed after their own invoicing. The question for the Supreme Court was how the post-settlement after the misclassification should be carried out, as well as questions about the determination and limitation of holiday pay claims.
The Supreme Court's judgements
The Supreme Court's starting point was that the rules of the Working Environment Act were to be used as a basis for calculating the subsequent settlement unless otherwise validly agreed. The employees were thus entitled to overtime pay for work that exceeded normal working hours, as well as holiday pay and other benefits they were entitled to under the Working Environment Act.
The Supreme Court further clarified that if the payments made overcompensated for the employees' claims in accordance with the Working Environment Act, a deduction should be made. The deduction would depend on a specific assessment, where the employer had the burden of proof for the overcompensation.
The judgement also states that if the misclassification has led to financial losses for the employee, such as lack of sick pay, the employee could be entitled to compensation.
The significance of the judgement for employers and employees:
For employers: As misclassification of employees can have major financial consequences for employers, it is crucial to ensure correct classification and that the contractual basis is clear. This is to avoid potential claims for back pay and compensation afterwards.
For employees: If an employee has been misclassified as self-employed instead of an employee, the employee is entitled to be treated as an employee and receive benefits in accordance with the Working Environment Act.
Conclusion
The Supreme Court's decision emphasises the importance of classifying employees correctly. A misclassification can lead to a breach of rights and major financial consequences for the employer. Employees should be aware of their rights, and employers should ensure that they enter into valid agreements to avoid claims resulting from misclassification.
If you are unsure how to classify your employees' positions, we recommend that you contact a lawyer. We have a high level of expertise in this area and can advise you.
Contact person
Trine Glorvigen
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