A costly misclassification

A company offering housing and care services for people with substance abuse, for example, had three healthcare professionals working as independent contractors. Due to the nature of the work, the contractors worked long hours, sometimes several days.

As they were not employees, they were not entitled to overtime pay, supplements or holiday pay. The employees later left the company and claimed payment of this.

No agreement didn’t mean no payment

The Supreme Court concluded that the contractors were, in fact, employees and subject to the mandatory rules of the Working Environment Act. The company, therefore, had to pay overtime pay, supplements and holiday pay.

There was no agreement exempting the employees from the overtime rules. The company could also not prove that the contractor’s compensation already included these payments.

IUNO’s opinion

The case is interesting because it illustrates the importance of correct employee classification. The Working Environment Act does not directly regulate what happens in the event of misclassification, nor has this previously been directly addressed in case law. It is now clear that when nothing is agreed upon, the mandatory rules in the Working Environment Act will serve as a basis for calculating claims.

IUNO recommends that companies carry out a thorough assessment of whether contractors are, in fact, employees. It can be agreed that employees in particularly independent positions are exempt from overtime pay. These agreements will usually not be made with contractors who are already exempt from these rules, and in the event of misclassification, the company risks paying overtime pay, which the employee could have been exempted from.

[The Norwegian Supreme Court’s decision of 12 December 2024 in case HR-2024-2368-A]