According to the Labor Code, if the conditions under which work is performed meet the definition of an employment relationship, a civil law contract (including B2B contracts) may be deemed an employment contract. The Labor Code states that an employment relationship exists when an employee performs work for an employer under the employer's supervision, at a place and time specified by the employer, for remuneration.
Article 22 § 1¹ of the Labor Code provides that “employment under the conditions specified in § 1 (work performed under supervision, at a place and time designated by the employer, for remuneration) constitutes employment based on an employment relationship, regardless of the name of the contract concluded by the parties.” In practice, this means that even if a B2B contract is signed, but its actual execution resembles that of employment, the court may classify it as an employment contract.
Consequences of reclassifying a B2B contract as an employment contract
Reclassifying a B2B contract as an employment contract entails significant legal and financial consequences for both the self-employed individual and the employer. On the one hand, the self-employed individual may claim employee rights, such as paid vacation or overtime pay. On the other hand, the employer may be required to pay social security contributions for the last five years of the relationship, covering both the employer's and employee's portions. While the employer can seek reimbursement of part of these contributions from the self-employed individual, this is a complex process and poses a risk of conflicts.
Furthermore, reclassification of a B2B contract as an employment contract may result not only in financial consequences but also in legal liability. Such a situation may be deemed a violation by the entrepreneur, subject to fines. Under the Labor Code, an entrepreneur circumventing regulations on employment relationships, including improper civil contract arrangements, may face fines ranging from PLN 1,000 to PLN 30,000.
New powers for the State Labour Inspectorate (PIP)
Legislation is currently under discussion to limit the phenomenon of sham self-employment. Under the proposed changes, the PIP would gain new powers, enabling it to reclassify civil law contracts, such as B2B contracts, contracts for specific tasks, or mandate contracts, as employment contracts via administrative decisions.
Until now, the Inspectorate lacked such authority, and contract reclassification was solely within the purview of the courts.
Important!
Understanding is key
B2B contracts are popular among entrepreneurs due to their flexibility, potential for higher earnings, and independence in work organization. However, their use requires an understanding of the distinctions that separate this legal relationship from an employment contract.
