The Labor Court made a revolutionary decision that also a freelancer is entitled to have a hearing before a decision is made to terminate his engagement.
A claim was commenced in the Labor Court in Tel Aviv by a freelancer to recognize him as an employee and to pay him various rights thereunder. The uniqueness of the ruling is that this is the first time a court has ruled that at the end of an engagement with a freelancer, a formal 'hearing' must be held along the lines that an employer is required to act with employees.
The facts of the case are as follows: the plaintiff served as a vicepresident of the defendant company and for two and a half years received payments against of the delivery of his and his wife's invoices to the company. The company paid the plaintiff more than NIS 800,000 for the entire engagement period.
In reaching its decision, the court reviewed the standard criteria for the identification of employeeemployer relations. The considerations that the court took into account in examining the employeeemployer relations were:
The plaintiff did not sign in through a presence card however, this fact did not count for much as it was not proven that other employees had signed in through presence cards. Notwithstanding that the freelancer worked from home, the court was determined on the facts presented that the company supervised the freelancer at his home, so this was not a relevant factor. The nature of the position indicated that the work performed by the freelancer was an integral part of the operations of the defendant company. It was proven that the plaintiff was financially dependent on his livelihood from the defendant and it was noted too that his wife did not work. With respect to the manner in which the parties themselves viewed their relationship, on the one hand, the plaintiff was allowed to present himself in his e mails and business cards as vicepresident of the defendant company. It was noted that in contradiction to this, on several occasions the plaintiff declared and presented himself to third parties as a freelancer. The fact that some of the payments for the work were paid directly to a person's wife's and not to the freelancer has been used to demonstrate that prima facie such a person was not an employee, but the court ruled in this case that the form of payment does not necessarily indicate the relationship between the parties. It was not contested that the plaintiff performed the work by himself and not through another. The plaintiff was provided with an office at the company's premises, together with a computer and an email address. The consideration paid to the plaintiff was based on a number of components: "base payment", "VAT", "commissions", "refunds." The payment of compensation according to "base" and "commissions" also indicate employment relations.
After a review of the above facts, the court ruled that on balance the scales tilted towards there being employeeemployer relations between the parties. The court gave a decision that the company was obligated to pay the plaintiff compensation in lieu of prior notification and severance pay, and due to the nonperformance of payments to a pension fund according to the consideration paid to him (excluding VAT), which was ruled by the court to be regarded as a salary.
With regard to the plaintiff's claim that he was not invited to a formal 'hearing' prior to the termination of the engagement t, the court held that even though a company might consider that no employeremployee relationship existed between the parties, adopting the principles of 'natural justice', and, in this case, taking into account that the termination of this engagement was after a long period of engagement, the service provider should have been given the right to present his position prior to a decision to terminate his engagement. The company was therefore ordered to pay compensation to the plaintiff for the omission to hold a formal hearing process