Ukraine: the difference between employees and independent contractors in focus of the Supreme Court

In Ukraine, the topic of distinction between employees and independent contractors is subject to considerable commentary and debates over recent years. Both the changes in Ukrainian employment law and practice of controlling authorities, as well as emerging transformation of local business environment keep this issue top of the agenda.

On 8 May 2018, the Supreme Court (the "Court") issued a decision, where it for the first time focused on the distinctive features between employees and independent contractors.

In the case that was subject to consideration by the Court, the claimant sought recognition of his employee status in order to carry out correct calculations of his employment record. The claimant in the case was engaged under the contractor's agreement, whereby he was responsible for search of customers for transport services, as well as for support and control over existing transport orders.

The Court found that the lower instances courts failed to establish the facts of the case to the necessary extent and thus returned the case to a new consideration at the court of appeals. At the same time, the Court summarized key features that are important to establish whether the relations qualify as employment ones or not:

• The subject-matter of employment relations is the process of work rather than its specific results. For this reason, the employee shall usually comply with internal organizational rules, while the contractor independently organizes his work and performs it at his own risk. Further, the employment relations do not terminate upon completion of a specific task or assignment, as opposed to relations with an independent contractor.
  In the considered case, the Court found it questionable that none of documents between the patties provided for the volume of ordered work, its specific results, quantitative or qualitative characteristics.

• Systematic and periodic payment for work (similarly to salary payments) rather than one-time payment may evidence that an individual is an employee.

• It is important to assess the manner of formalizing of work and its results. The Court indicated that written orders of a company are typical documents to formalize employment relations. Therewith, parties to contractors relations usually sign work acceptance certificates upon completion of relevant scope of work.

The said decision of the Court is a non-binding precedent, however, it is expected that local courts will take into account the above-referred distinctive criteria, as indicated by the Court, while considering similar cases.

For further information please contact Asters' senior associate Inesa Letych.