Outcome Achieved by Brisc Legal in Court
Lawyers at Brisc Legal Cluj specializing in labour law and contraventional law obtained a final decision from the Cluj Tribunal, annulling a fine of 210,000 lei that had been illegally applied by ITM against our client, a company operating in the logistics services sector.
Factual Context
In this case, our client provided inventory services of goods stocks for an international retail chain. In order to carry out the inventory work, the company entered into multiple service-contracting (works/service provision) agreements with different natural persons.
Following an unannounced inspection, ITM agents applied a contraventional fine to our client in the amount of 200,000 lei, asserting that the client had violated the provisions of Article 260 paragraph (1) letter (e) of the Labour Code, which prohibits business operators from having one or more persons perform work without concluding an individual employment contract.
After an unfavorable judgment in first instance (Cluj-Napoca Justice Court), in which the company was assisted by other attorneys, the company engaged our specialized labour/contraventional law attorneys for the appeal phase, aiming to reverse the unfavorable ruling and obtain exemption from payment of the 200,000-lei fine.
Key Argument: Our Client’s Specific Business Model Falls Outside the Employment Contract Relationship
On appeal, our attorneys demonstrated that the business model of the sanctioned company involves providing inventory services by contracting a large number of natural persons in different locations across the country, at irregular and spontaneous intervals, each natural person collaborating with the company, in principle, only once.
Moreover, simply because the economic operator continuously organizes inventory activities for different clients nationwide, which each time involves contracting services from natural persons, this does not lead to the conclusion that there is an obligation to conclude individual employment contracts.
Occasional Nature of Services by Natural Persons Removes the Obligation to Conclude Employment Contracts
The Brisc Legal attorneys convinced the Court of Appeal to annul the fine imposed on our client, taking into account that, with respect to the subject and purpose of the contracts concluded with natural persons, these persons performed inventory activity for the business operator that was occasional and spontaneous, and the incomes received by those natural persons were isolated.
Thus, the majority of natural persons contracted by the business operator provided services on only one day in the year, for a few hours, with the possibility to choose the time interval in which to provide those services.
Consequently, besides the fact that the activity performed does not have continuity (being occasional), there is no subordination relationship essential for there to be an employment contract between the economic operator and natural persons.
Spontaneous, Isolated Activities Do Not Oblige the Business Operator to Conclude Employment Contracts, Even in the Absence of “Registration or Authorization” of Natural Persons
The main argument used by the first instance court to reject the company’s complaint was the view that the natural persons contracted by our client had to be previously registered as traders (commercial persons) in order to enter service contracts (works provision contracts).
On appeal, our attorneys persuaded Cluj Tribunal that the mere fact of not being registered/authorized as traders by natural persons cannot lead to the impossibility of entering service-provision agreements by those persons and cannot, by consequence, lead to an obligation of our client to enter individual employment contracts with the natural persons.
Moreover, the Court of Appeal concluded, in agreement with our attorneys, that the legislator (by Article 114 of the Fiscal Code regarding “Income from other sources”) provides for the possibility of natural persons generating spontaneous and isolated income without requiring registration/authorization of activity. Further, the sanctioned company had fulfilled its obligation to withhold and pay to the state budget the income tax owed by those natural persons.