Ruling:

The appeal is rejected.

Reasoning:

1. The court of first instance ordered the defendant to pay the plaintiff EUR 12,075.82 gross for overtime work performed from February 2016 to June 2018, along with statutory default interest from each monthly amount due on the 19th of each month for the previous month until payment (Item I of the ruling). The court rejected the plaintiff's claim for more (statutory default interest from the 18th of each month for the previous month) (Item II of the ruling). It determined that the defendant unlawfully required the plaintiff to perform work beyond regular working hours without recognizing payment for it.

2. The court of second instance dismissed the defendant's appeal and upheld the challenged part of the first-instance judgment.

3. The Supreme Court granted permission for the revocation in its ruling No. VIII DoR 9/2022, dated February 15, 2022, regarding the question of whether it is permissible, under Article 74 of the Employment Relationships Act (ZDR-1, Official Gazette of the Republic of Slovenia, No. 21/2013 and subsequent amendments), to stipulate in an employment contract with a leading employee that payment for work beyond regular working hours is already included in the base salary.

4. In the appeal, the defendant argues that it concluded an employment contract with the plaintiff as a leading employee, stipulating that the plaintiff would perform his duties even during the time that exceeds regular working hours, without additional payment, which allegedly complies with Article 157 of the ZDR-1 and Article 17 of Directive 2003/88/EC of the European Parliament and of the Council of November 4, 2003 concerning certain aspects of the organization of working time. The latter allows deviations from basic principles if, due to the specific nature of the activity, the length of working time is not determined in advance or if it can be determined by the employees themselves, which also applies to cases involving leading personnel or other individuals with authority for autonomous decision-making. The defendant argues that, therefore, it is lawful to reach an agreement with a leading employee that payment for work beyond regular working hours is already included in the base salary.

5. The appeal is unfounded.

6. Pursuant to Article 371 of the Code of Civil Procedure (ZPP, Official Gazette of the Republic of Slovenia, No. 26/99 and subsequent amendments), the court examines the contested judgment only with regard to the specific legal issues for which the appeal was permitted.

7. The court of first instance found that the plaintiff was employed as the branch manager at the defendant's establishment from February 15, 2016, to June 30, 2018. He held the status of a leading employee within the meaning of Article 74 of the ZDR-1. The employment relationship was concluded for a full-time position. At the superior's request, he performed work beyond regular working hours daily from 8 am to 5 or 6 pm. He was required to work a minimum of 192 hours per month or 20 hours of work beyond regular working hours, and accordingly, he had to adjust his schedule. He was not autonomous in scheduling his working hours and had to comply with instructions regarding time spent at the workplace. Such working hours were predetermined for a branch manager. The court of first instance took the position that the provisions of the ZDR-1 do not provide a basis for an agreement on unpaid work beyond regular working hours, even in the case of a leading employee. It pointed out that a different arrangement, as stipulated by law or a collective agreement regarding salary, is only possible with a management employee or a procurator, but not with a leading employee. Therefore, it is not possible to validly conclude an agreement with a leading employee stating that payment for any work beyond regular working hours is already included in the base salary under the employment contract.

8. The court of second instance agreed with the position of the court of first instance. It added that the plaintiff performed work beyond regular working hours in the sense of Article 144 of the ZDR-1, i.e., at the request of the employer and not on his own initiative. He was not autonomous in scheduling his working hours; it was actually predetermined that he would have to perform additional work to ensure the smooth and complete performance of his duties as a branch manager.

9. The appeal unfoundedly refers to Article 157 of the ZDR-1, which allegedly allows for an agreement between a leading employee and an employer stipulating that payment for work beyond regular working hours is already included in the base salary. The plaintiff concluded an employment contract with the defendant for the position of branch manager, which stipulates in the first sentence of the first paragraph of Article 2: "The employee manages a unit at the employer's company and is granted authority for autonomous decision-making; therefore, in accordance with Article 157 of the ZDR-1, the employee and the employer agree that the employee will perform work in additional time, as determined by the employee or at the request of the employer, which is already taken into account in his base salary."

10. According to the second indent of Article 157 of the ZDR-1, the employee and the employer can, in an employment contract, differently regulate the working hours, night work, breaks, daily and weekly rest periods, in deviation from the provisions of this Act if it concerns an employment contract with a leading employee under Article 74 of the Act, if the working hours cannot be predetermined, or if the employee can schedule his working hours autonomously and if the employee is ensured safety and health at work. This provision does not provide a legal basis for the agreement stated in the first sentence of the first paragraph of the employment contract or for the interpretation offered by the appeal. This provision does not regulate payment for work. It only implies that in cases when the working hours cannot be predetermined or when the employee can autonomously schedule his working hours and when safety and health at work are ensured, the working hours are not limited to 40 hours per week (Article 143, paragraph 1 of the ZDR-1) or 8 hours of work beyond regular working hours per week (Article 144, paragraph 3 of the ZDR-1), and there are no restrictions regarding the duration of night work (Article 152 of the ZDR-1). Furthermore, breaks (Article 154 of the ZDR-1), daily rest periods (Article 155 of the ZDR-1), and weekly rest periods (Article 156 of the ZDR-1) may be shorter and regulated differently than stipulated by the law.1

11. The regulation in Article 157 of the ZDR-1 represents a deviation from the minimum rights regarding working hours. However, Article 157 of the ZDR-1 does not imply that an employer can agree with a leading employee on a different arrangement of working hours, night work, breaks, and rest periods in every case. It only allows for such an agreement if it is not possible to predetermine the working hours or if the employee can autonomously schedule their working hours. In the present case, it was not established that the working hours could not be predetermined, nor that the plaintiff could schedule them autonomously (i.e., decide freely whether to work more than the regular working hours on certain days and less on others). On the contrary, it was found that the working hours were predetermined, requiring the plaintiff to work from 8 am to 5 or 6 pm each day, and he had no autonomy in scheduling.

12. When an employee is required to work beyond regular working hours at the explicit request of the employer, they are entitled to payment for such work. Working beyond regular working hours constitutes work under special working conditions resulting from the scheduling of working hours, for which the employee is entitled to an allowance according to the second indent of the first paragraph of Article 128 of the ZDR-1. A prior waiver of the right to the allowance (i.e., accepting the disputed provision of the employment contract) has no effect, and there is no basis in the ZDR-1 for any other arrangement regarding payment for work. As correctly emphasized by the lower courts, such an agreement is only possible with a procurator or a management employee (Article 73 of the ZDR-1).

13. In light of the above, the assessment of the court of second instance is correct, stating that the agreement between the plaintiff as a leading employee under Article 74 of the ZDR-1 and the defendant, stating that payment for work beyond regular working hours is already included in the base salary, is impermissible (answer to the permitted question). Furthermore, the provision of Article 157 of the ZDR-1 does not provide a basis for the non-payment of overtime hours performed by the plaintiff during the disputed period at the defendant's request.

14. As the court of second instance correctly applied substantive law, the Supreme Court rejected the appeal based on Article 378 of the ZPP. The dismissal of the appeal also includes its cost component.

15. The decision was unanimously adopted.

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1 The provision is also in line with Article 17 of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organization of working time.

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References:

National Legislation:

Constitution, Laws, Agreements, Contracts
Employment Relationships Act (2013) - ZDR-1 - Article 74, 144, 157
EU Legislation:

Directives, Regulations, Decisions, Agreements, Rules
Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organization of working time - Article 17

If you want to check whether the courts have already decided on a case similar to yours and if you need legal assistance for representation in the procedure, please contact the Attorney Jurij Kutnjak, Slovenia, Maribor during working hours by phone at 00386 2 25 23 780 or by email at info@odvetnik-kutnjak.si, and he will try to help you solve your legal issue.

Labour Law - Employee Leasing - Establishing the Existence of an Employment Relationship - Business Model

Main Points:

"The service contract concluded between the defendants had the formal nature of a contract for services (Articles 619 to 648 of the Slovenian Obligations Code). However, this contract (and the work performed by the plaintiff under this contract) was not carried out in such a manner since the first defendant did not perform stevedoring and other services or work similar in content or subject matter, which would be within its scope of activity (for which it would have employed workers). The first defendant permanently and exclusively provided work for the employees who were formally employed by it to the second defendant (as well as some other companies referred to as 'providers of port services'). The second defendant was its sole business partner, and therefore, the first defendant was entirely dependent on it.

The employee leasing (and the business model based on such operations) was unlawful because the first defendant should not have engaged in such leasing, and the second defendant should not have accepted it or even further organized it by imposing conditions for such cooperation (excluding criteria that should not have included companies engaged in employee leasing to another user).

At the same time, the plaintiff was in a disadvantaged position compared to other employees who had employment contracts with the second defendant since he performed work for lower pay (minimum wage) and under less favorable working hours. He was also supposed to perform additional work, being dependent on the calls to work from the second defendant, which further exacerbated his position, and so on.

The business model of the second defendant, in which the first defendant actively participated, and which involved other companies that did not meet the requirements for legal agency work and employed a larger number of workers, indicates evident illegality and abuse of the business operations of both defendants to the detriment of the workers (the first defendant).

This meant that the plaintiff's contractual relationship (under the employment contract) with the first defendant was abused through an illegal business model, and the actual employer of the plaintiff was the second defendant. The employment relationship of the plaintiff with the first defendant was concealed within this business model.

Given the mentioned unlawfulness and abuse of rights, even a formal employment contract cannot take precedence over the existence of an employment relationship between the plaintiff and the actual employer.

However, the question arises as to when the employment relationship can be recognized for the plaintiff with the other employer. The plaintiff already had an employment contract with the first defendant, which affected his rights regarding social status and the characteristics of an insured person, regardless of whether he was deprived of certain rights from the employment relationship or income.

Therefore, the purpose of the violated rule in this case does not imply interference with an already realized employment relationship of the worker and the rights already acquired retroactively.

However, this does not mean that the second defendant is not responsible for the violation of the plaintiff's rights (low wages and other income) and the resulting deprivation of income from the employment relationship during the existence of the employment relationship with the first defendant."

VSRS Judgment and Order VIII Ips 9/2022, from December 13, 2022, published on the website of the Supreme Court of the Republic of Slovenia:

https://www.sodnapraksa.si/?q=VIII%20Ips%209/2022&database%5bSOVS%5d=SOV...

Ruling:

"I. The appeal is partially granted, the judgment of the court of second instance is modified in point I of the operative part, except for the decision on the partial granting of the appeal and the amendment of the judgment of the court of first instance, so that the claim for the establishment of an employment relationship between the plaintiff and the second defendant (the second defendant in the previous proceedings before the courts of second and first instance) for the period from August 28, 2015, to July 18, 2019, and regarding the registration of social security and the registration of employment history for the period from August 28, 2015, to July 18, 2019, is dismissed, and the case is remitted to the court of second instance for a new trial in this scope.

II. The appeal is otherwise dismissed against the decision of the court of second instance in point I of the operative part regarding the dismissal of the claim for the establishment of an employment relationship between the plaintiff and the second defendant (the second defendant in the previous proceedings before the courts of second and first instance), the registration of social security, and the registration of employment history, all from August 28, 2015, to July 18, 2019.

III. The decision on the costs of responding to the appeal is reserved for the final decision.

Reasoning:

1. The plaintiff filed a lawsuit against the first defendant A., Ltd., ... - in bankruptcy, and against the second defendant B., Ltd., ..., which were not in a relationship of necessary co-defendants. The decision on his claim against both defendants has become final. After the finality of the judgment, the bankruptcy proceedings against A., Ltd., Koper were terminated, and the company was deleted from the register, which is why the appellate court no longer refers to it in the introduction of the order. Nevertheless, for the sake of clarity, comprehensibility, and understanding of the relationships, the name A., Ltd., Koper is maintained in this decision.

2. The court of first instance determined the nullity of the employment contracts between the plaintiff and the first defendant from August 28, 2015 (point I of the operative part) and declared the nullity of the termination of the plaintiff's employment contract by the first defendant on July 18, 2019 (point II of the operative part). It found the existence of an employment relationship between the plaintiff and the second defendant from August 28, 2015, for an indefinite and full-time position as a truck driver (point III of the operative part). The second defendant was ordered to invite the plaintiff to work, grant him all rights from the employment relationship from August 28, 2015, until the resumption of work, register him for mandatory social security, and record his work experience in the employment records (point IV of the operative part). The court also ordered the second defendant to calculate the gross monthly salary differences for the years 2015 to 2019 and for the year 2020, based on the salary of a comparable truck driver employee, reduced by the plaintiff's earnings or unemployment benefits, deduct the prescribed taxes and contributions, and pay the net amount to the plaintiff with statutory default interest. The higher claim for payment of monthly differences up to EUR 2,400 was rejected (point V of the operative part). The second defendant was also ordered to reimburse the plaintiff from the specific amounts for the years 2015 to 2019 and for the year 2020 as a holiday allowance, which were received by the employees of the second defendant, calculate the income tax advance payment, and pay the net amount to the plaintiff with statutory default interest, while the higher claim for holiday allowance up to EUR 1,356.70 was rejected (point VI of the operative part). The claim relating to the delivery of the employment contract, the determination of an illegal termination of the employment contract between the plaintiff and the second defendant, and the annulment of the illegal termination of the employment contract, as well as the claim relating to the nullity of the contracts for services concluded between the defendants, were dismissed by the court (points VII and VIII of the operative part). Each party was ordered to bear its own costs of the proceedings.

3. The judgment of the first-instance court indicates that the plaintiff and the first defendant entered into an employment contract for the performance of work as a port transportation worker and heavy machinery driver1 for the minimum wage, with the plaintiff consistently carrying out the work at the business premises of the second defendant. The first defendant terminated the contract for operational reasons due to a decrease in business with the second defendant, who was the sole business partner of the first defendant. The second defendant was in a similar relationship with other companies, which provided it with the labor of employees, even though the first defendant was not registered for labor mediation and therefore was not authorized to engage in such activities. According to the first-instance court's assessment, this rendered these contracts void (Article 86 of the Obligations Code). Importantly, the court also emphasized that the second defendant subcontracted services related to the handling of ships, trucks, wagons, and additional work at the port only to companies that were not labor mediation agencies ("companies that include labor mediation in their statutes").2 This meant that the working conditions of the dispatched workers were inferior to those of employees in an employment relationship in terms of salary, working hours, etc. Both defendants achieved a prohibited outcome through a combination of apparent contracts, circumventing the law that regulates labor mediation. This constituted a specific business model employed by the second defendant, which should have employed approximately 1,200 to 1,500 workers. Furthermore, the nature of the plaintiff's work at the defendant was not temporary. The court also examined the plaintiff's work and the obligations of the first and second defendants. Among other things, it found that the plaintiff received work instructions from the second defendant's dispatcher during working hours, who also supervised his work. This meant that he voluntarily and personally became part of the second defendant's organized work process and continuously performed work under its instructions and supervision.3 Although the first defendant officially paid the plaintiff and granted him rights such as annual leave, occupational safety, and training, the court concluded that it could have recognized the plaintiff's work as an employment relationship with an employment agency if it had been carried out in compliance with the mandatory regulations on labor mediation. Since this was not the case, considering the nature of his work and the continuous need for his services, the court declared the plaintiff's employment contract with the first defendant null and void and recognized the plaintiff's employment relationship with the second defendant from the beginning of such employment, with all the rights arising from an employment relationship, including the difference between the already paid salary and the salary he would have received from the second defendant, etc.

4. The second defendant's appeal was partially granted by the appellate court, which modified the judgment of the first-instance court in the III. and IV. points of the operative part, as well as the first paragraph of the V. and VI. points of the operative part, by rejecting the plaintiff's claim for the determination of the existence of an employment relationship with the second defendant from August 28, 2015 onwards, for the call to work and the recognition of all rights arising from an employment relationship, for the calculation and payment of gross monthly salary differences with statutory default interest, and for the payment of annual leave (I. point of the operative part). In all other respects, the appeal was dismissed, confirming the decision of the first-instance court on costs (II. point of the operative part) and ordering the second defendant to bear its own costs of the appeal (III. point of the operative part).

5. The appellate court disagreed with the finding on the existence of elements of an employment relationship with the second defendant since the plaintiff was formally in an employment relationship with the first defendant and was daily dispatched to the second defendant by the dispatcher of the first defendant, who also ensured his rights arising from the employment relationship. The second defendant had the right to exercise control within the scope of its obligations in port management according to the concession agreement and service contracts (Article 622 of the Obligations Code), but this did not imply the exercise of control in accordance with the first paragraph of Article 4 of the Employment Relationships Act (ZDR-1). The order for services from the second defendant to the first defendant (work performance) pertained to the number of workers of the appropriate profile and not to a specific worker by name. Since the plaintiff was already in an employment relationship with the first defendant during the same period, it was not possible to recognize an employment relationship with the second defendant. Furthermore, this determination is not dependent on the decision regarding the claim for the determination of the nullity of employment contracts. The provisions of Articles 13 and 18 of the ZDR-1 are not intended to recognize an employment relationship for an employee who already has such a relationship but rather apply to those who are not in an employment relationship. If the employee's rights arising from the employment relationship are violated, the employee has the option to request the rectification of these violations from the employer, not the determination of the existence of an employment relationship.

6. The Supreme Court, by its decision in Case No. VIII DoR 131/2021 dated November 23, 2021, allowed the plaintiff's motion for permission to file a revision regarding the issue of whether the plaintiff can claim the existence of an employment relationship with the second defendant and the recognition of all rights retroactively, as well as the reinstatement of employment with the second defendant and the recognition of rights prospectively.

7. In the revision, the plaintiff alleges significant violations of procedural provisions, which, however, were not permitted for revision, and therefore the revision court does not address or respond to them.4 Regarding the permitted revision question, the plaintiff argues that the appellate court unjustifiably followed the second defendant's claims, claiming that the second defendant did not exercise directive authority since the plaintiff performed work in the same manner as the port workers, with all the elements of an employment relationship, and even worked more hours on average than the average port worker. He was on standby, had more difficult and worse working conditions, and received significantly and unlawfully lower wages. Furthermore, his employment relationship was terminated instead of the second defendant employing him. He disputes the conclusions of the appellate court that the first defendant provided him with certain work equipment, work clothing, and footwear since he mainly used the work equipment owned by the second defendant and performed work according to the orders and instructions of the second defendant. The finding of the court that the second defendant only ordered workers of the appropriate profile in terms of quantity is arbitrary and incorrect since each worker's name, surname, professional and health qualifications were concealed behind each worker's assigned number, just like with other port workers, and the second defendant verified these qualifications using the plaintiff's card and work documentation. The plaintiff received work instructions from the second defendant's dispatchers, warehouse workers, and foremen, not from the first defendant. The first defendant did not have a dispatched worker as a work process manager or a person qualified to exercise supervision. Therefore, the first defendant did not organize or supervise the work; rather, the plaintiff's work was an integral part of the work process of the second defendant. The relationship between the plaintiff and the second defendant was not a civil law relationship but rather the work of employees of a foreign company in the manner defined by the first paragraph of Article 163 of the Employment Relationship Act (ZUTD, Official Gazette of the Republic of Slovenia, No. 80/2010 and subsequent amendments). It involved the mediation of workers' labor to the user, but without meeting the legal requirements, as the first defendant did not fulfill them. The second defendant was the actual employer, not merely a nominal one. In this regard, the plaintiff also refers to the reasoning of the first-instance court, as well as the elements of an employment relationship under the Employment Relationships Act (ZDR-1, Official Gazette of the Republic of Slovenia, No. 21/2013 and subsequent amendments) and the positions of the International Labour Organization. Furthermore, he cites provisions of the ZUTD, ZDR-1, and the Prevention of Undeclared Work and Employment Act (ZPDZC-1, Official Gazette of the Republic of Slovenia, No. 32/14 and subsequent amendments). He also points out that the second defendant only concluded employment mediation contracts with the first defendant under the condition that the first defendant was not a labor mediation company. This constitutes an impermissible inducement that significantly influenced the conclusion of such contracts. Both defendants circumvented the regulations regarding labor mediation, and in the case of the employment contracts between the plaintiff and the first defendant, there was a gross violation of mandatory regulations. As the first defendant did not meet the conditions for labor mediation, the second defendant was not allowed to conclude employment contracts with it for the purpose of dispatching. Such contracts are void and clearly have an impermissible basis. Additionally, the first defendant was not registered as an employer for labor supply, conducted business without the necessary permits, and also highlights the fact that the work was not temporary, that both defendants grossly violated his rights and mandatory labor legislation from the very beginning, and the years of work performed at the second defendant's workplace prove that the second defendant had a long-term need for his work, and the first defendant could not be his employer at all. He believes that it is justified, correct, and morally ethical to recognize all his rights from an employment relationship with the second defendant and rectify all the violations.

8. In response to the revision, the second defendant argues that the plaintiff exceeded the permitted revision questions, challenges the factual findings (which is not allowed), and rejects the substantive reasons for recognizing an employment relationship and rights. It believes that even if the court were to determine that the relationship between the defendants lacked the elements of a service contract as defined in Article 619 of the Obligations Code, but rather had elements of an agreement between the user and the employer for labor supply as defined in Article 62 of the Employment Relationships Act (ZDR-1), there would still be no grounds for recognizing an employment relationship or for claiming nullity of the employment contract between the plaintiff and the first defendant and asserting rights from an employment relationship retroactively or for a period of more than five years prior to filing the lawsuit.

9. The revision is partially justified.

10. The revision is an extraordinary legal remedy against a final judgment issued at the appellate level (Article 367, Paragraph 1 of the Code of Civil Procedure).

11. According to Article 9 of the Employment Relationships Act (ZDR-1), the autonomy of the contracting parties is limited; the employer and the employee are obliged to comply with the provisions of this and other laws, ratified and published international agreements, other regulations, collective agreements, and the employer's general acts. According to the first paragraph of Article 13 of the ZDR-1, general provisions of civil law apply mutatis mutandis to the conclusion, validity, termination, and other matters concerning employment contracts, unless otherwise provided by this or other laws. This means that both the employee and the employer are also bound by the fundamental principles of civil law, such as conscientiousness and fairness, prohibition of causing harm, prohibition of abuse of rights, etc.5

12. The service contract concluded between the defendants had the formal nature of a contract for services (Articles 619 to 648 of the Obligations Code), and the subject of the agreed obligations was the performance of port handling and other services that the first defendant would provide to the second defendant. However, this contract (and the plaintiff's work under this contract) was not implemented in such a way, as the first defendant did not carry out port handling and other services or work of a similar nature that constituted its activity (for which it would have employed workers). The second defendant did not perform such work as an executing or subcontracting company organizing and supervising such work through its employees. Instead, it permanently and exclusively provided work for the second defendant (similarly to some other companies operating as "providers of port services") through formally employed workers. The second defendant was its sole business partner, and therefore, the first defendant was entirely dependent on it.

13. The plaintiff worked for the second defendant based on its orders for the necessary number of workers of the appropriate profile. The first defendant would then assign the plaintiff to work for the second defendant according to the communicated needs. However, the plaintiff worked continuously in an organized process under the instructions of the second defendant for several years until the first defendant terminated his employment contract for business reasons. This termination was a direct consequence of a decrease in orders from the second defendant.

14. This way of doing business and performing work by employees involved multiple companies, which allows us to speak of a specific business model of the second (and first) defendant and some other companies. In terms of content and purpose (regardless of the formally concluded service contract), this model not only concealed the mediation of workers to the user but also concealed an employment relationship. The first and second defendants, although operating in coordination within the legal framework, used it in an unlawful manner, depriving the plaintiff of an employment relationship with the actual employer and the rights stemming from it.

15. The labor supply (and thus the model of such business operations) was illegal, as the first defendant should not have engaged in such mediation, and the second defendant should not have accepted it or, furthermore, organized it through its conditional cooperation (exclusion criteria that should not have included companies engaged in labor supply to another user). The first defendant did not meet the requirements for an employer providing worker supply to another user as required by Article 163 of the Employment Relationships Act (ZUTD) and did not obtain the necessary permit to carry out this activity.6 The first defendant also did not conduct labor supply activities to users within the legal framework, as the plaintiff (as well as other workers) worked continuously and permanently for the second defendant, while the work of dispatched workers is supposed to be of a temporary nature according to the third paragraph of Article 163 of the ZUTD and the first paragraph of Article 61 of the Employment Relationships Act (ZDR-1).7 On the other hand, a user may only accept dispatched workers from an employer for labor supply who has obtained a permit under Article 167 of the ZUTD and is registered or listed.

16. In such a contractual relationship between the first and second defendants or in the business model of the second defendant (along with other similar employers), in addition to failing to meet the formal requirements and violating the temporary nature of dispatch, there were also violations of the basic conditions of employment for workers who, if employed by employers for labor supply, must be at least as protected as if they were directly employed by the user on the same job. The employer for labor supply and the employee must agree in the employment contract that the remuneration for work and benefits will depend on the actual performance of work for the user, taking into account collective agreements and general acts binding on the respective user (second paragraph of Article 61 of the ZDR-1), which the plaintiff and the first defendant failed to do. Moreover, the user and the employee must, during the performance of work for the user, comply with the provisions of this law, collective agreements binding on the user, or the general acts of the user regarding rights and obligations (second paragraph of Article 63 of the ZDR-1). None of this was done.

17. Additionally, the plaintiff was in a disadvantaged position compared to other workers who had employment contracts with the second defendant since he performed work for lower pay (minimum wage) and under less favorable working conditions. He was alleged to have performed more work while being subject to the intermittent calls for work by the second defendant, which further complicated his situation, etc.8

18. The resulting business model of the second defendant, in which the first defendant actively participated, and which involved other companies that did not meet the requirements for legal labor supply, and employed a significant number of workers, demonstrates the obvious illegality and abuse of the business operations of both defendants to the detriment of workers (the first defendant). The first defendant was entirely dependent on the second defendant in this business model, and the second defendant continuously ordered the plaintiff's work through its work organizers. Although the second defendant was primarily interested in the number of workers needed for its activities, each worker was important individually since the second defendant also maintained records of workers and their qualifications were a condition for employment. Furthermore, the work of the plaintiff, like the work of regularly employed workers of the second defendant, was entirely managed and supervised by the second defendant.9 Despite the formal employment with the first defendant, which carried out certain activities typical of an employer providing labor supply to another user, it should not have operated in this manner and violated the rights of workers. Such operation was enabled or even organized by the second defendant, which had a permanent need for the work of such employees.

19. This meant that the plaintiff's contractual relationship (through an employment contract) with the first defendant was abused through an unlawful business model, and the actual employer of the plaintiff was the second defendant. The plaintiff's employment with the first defendant was concealed within this business model, representing an employment relationship with the second defendant.10 This is evidenced by several circumstances: the unlawful operation of the first defendant and its complete dependence on the second defendant, the plaintiff's engagement tied to the immediate work requests communicated by the second defendant through its work organizers, despite the permanence of such engagement, the plaintiff's complete subordination to the ordering regime of the second defendant, who could terminate the collaboration at any time, and the eventual termination of the plaintiff's employment due to reasons on the side of the second defendant, as a consequence of reduced orders from the second defendant. It is evident that all of this resulted in non-compliance with labor laws regarding remuneration (which the defendants circumvented). Such a business model represents the externalization of employment relationships that are transferred to external contractors, with the actual employer (as the leading company - the second defendant) retaining decisive control over the activities of the other employer (the first defendant) and their employment and the content of employment relationships. The aim of such transfer of employment relationships to external contractors, who themselves operate unlawfully, is typically to reduce workers' rights for the sake of profit, as was established in this specific case.11 This abuse represents a violation of fundamental principles of contractual and employment relationships (principles of good faith and fairness, prohibition of abuse of rights under Articles 5 and 7 of the Obligations Code), which cannot enjoy protection. It also constitutes an infringement of the constitutional right of the employee to personal dignity and security (Article 34 of the Constitution of the Republic of Slovenia).

20. Given the mentioned unlawfulness and abuse of rights, even a formal employment contract cannot take precedence over the existence of an employment relationship between the plaintiff and the actual employer for the protection of workers' rights.12 The will of the parties, as expressed in the signing of employment contracts with the first defendant, is not decisive; this is already an established unified position of the case law when deciding on disputes concerning the existence of an employment relationship.13 Furthermore, the concept of an employer under the second paragraph of Article 5 of the ZDR-1 cannot be understood solely in a formal sense, meaning a person employing a worker based on an employment contract. This position has also been surpassed in our case law.14

21. Therefore, the appellate court's view that Articles 13 and 18 of the Employment Relationships Act (ZDR-1) are intended only for those who are not in an employment relationship is also not agreed upon by the appellate court. Worker protection must also be ensured in cases where contractual performance of obligations (in this specific case, an unlawful business model) would deprive workers of their rights and hinder their enforcement, specifically the rights in covert employment relationships.15

22. Nevertheless, the question arises as to when the plaintiff can be recognized as having an employment relationship with the second employer. The plaintiff already had an employment contract with the first defendant, which affected his rights in terms of social status and insured status, regardless of whether he was deprived of certain rights or received lower remuneration. He held the status of an employee of the first defendant and the status of an insured person in social security systems based on the employment relationship (with the first defendant). According to case law - which has been established in cases of unlawful terminations of employment contracts and subsequent court decisions, where workers had the right to return to work (or their employment relationship was recognized for a certain period) and were already in an employment relationship with other employers (full-time) during the interim period (between the day of the unlawful termination of the employment contract and the court's decision) - these employment relationships cannot be undermined in a way that would attribute the same period of employment to the worker with another employer (full-time), thereby "overlapping" an already existing employment relationship. This is not a case of confronting different statuses (such as in the case of work performed under a civil law contract that de facto has elements of an employment relationship, where the worker performing such work has the status of a student, cultural worker, self-employed person, etc.). Therefore, the purpose of the violated rule in this case does not indicate an interference with an already realized employment relationship of the worker and already acquired retroactive rights.16

23. However, this does not mean that the second defendant is not responsible for the plaintiff's deprivation of remuneration from the employment relationship (low wages and other benefits). The sixth paragraph of Article 62 of the ZDR-1 stipulates that the user is subsidiarily liable for the payment of wages and other benefits from the employment relationship to the worker for the period when the worker performed work for the user. However, this provision remains within the framework of the provisions on worker protection in cases of labor supply to users. Due to the established unlawfulness, abuses, and covert employment relationships, these provisions need to be exceeded; therefore, the subsidiary liability of the second defendant is not applicable in this case. It is important to emphasize that even subsidiary liability, in the case of a (lawful) labor supply, does not merely imply classic tort liability but, taking into account the wording of the law, also entails the user being subsidiarily obligated to compensate the worker for the difference in underpaid wages and other benefits from the employment relationship. In this specific case, the second defendant's liability is not just classic tort liability but is equivalent to the liability of an employer for remuneration from the employment relationship - meaning reimbursement including all taxes and contributions, as in the case of an employment relationship with the same employer. Therefore, this deprivation (including for the period of the existing employment relationship with the first defendant) must be addressed within the framework of claims for compensation from the employment relationship and not solely based on tort liability.

24. Given the explained circumstances, the plaintiff's employment relationship could not lawfully terminate. Therefore, the plaintiff is justified in asserting an employment relationship, work summons, and rights (payment of wages and other benefits) from the second defendant as his actual employer since the termination of the employment relationship with the first defendant.17

25. This means that the plaintiff's appeal is justified, except for challenging the decision of the appellate court to amend the judgment of the first-instance court by rejecting the plaintiff's claim for establishing the existence of an employment relationship between the plaintiff and the second defendant for the period from August 28, 2015, to July 18, 2019, as well as the registration in social security systems and the registration of employment period in the register of insured persons and beneficiaries of mandatory pension and disability insurance for the period from August 28, 2015, to July 18, 2019. In this respect, the appellate court dismissed the appeal. The date of July 18, 2019, is the date of termination of the employment contract with the plaintiff and was used by the appellate court because, in the ongoing proceedings, it has not been precisely established when the termination was served on the plaintiff and when his employment relationship with the first defendant actually ceased. Therefore, this decision is only confirmed for this time interval, and in further proceedings, it will also be necessary to establish the date when the plaintiff's employment relationship with the first defendant terminated. Until that date (or between July 18, 2019, and the actual termination of the employment relationship with the first defendant), the plaintiff's employment relationship with the second defendant and registration in social security systems and the employment register cannot be recognized.

26. The Supreme Court has annulled the challenged judgment and remands the case to the appellate court, except to the extent specified above. The second defendant insisted on the dissolution of the employment relationship and objected to the awarded amounts of differences in payments, pleaded non-compliance of these claims, raised the objection of prescription, etc., in the appeal; however, the appellate court has not yet addressed or ruled on these objections due to a different legal stance on these matters.

27. Based on the above, the Supreme Court has rendered a decision as stated in the operative part of the decision.

28. The decision on the costs of responding to the second defendant's appeal is reserved for the final decision. The plaintiff did not claim any costs for the appeal.

29. The decision was unanimously adopted.

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1. Initially, fixed-term employment contracts were concluded, followed by indefinite-term contracts. The contracts specified that they were concluded for the position of driver in categories C and E and heavy machinery or port transport worker. The place of work was designated as "on the field, i.e., outside the company's premises or headquarters (B. d. d.)."
2. See the invitation of the second defendant to submit an offer - Annex A6.
3. The plaintiff entered the premises of the second defendant using her access card and a name card indicating his qualifications for the job. The second defendant's order for work referred to the number of workers of a specific profile, but the second defendant had the personal data of the workers, including their professional and health qualifications, etc.
4. The appellate court reviews the contested judgment only to the extent and regarding the specific legal issues for which the appeal was allowed (Article 371 of the Code of Civil Procedure - ZPP, Official Gazette of the Republic of Slovenia, No. 26/99 and subsequent).
5. See, for example, the decisions of the Supreme Court of the Republic of Slovenia that relate to abuse - II Ips 1186/2008, II Ips 286/2012, II Ips 87/2019, II Ips 180/2015, II Ips 4/2022, II Ips 10/2021, II Ips 104/2021, etc.
6. The second paragraph of Article 163 of the ZUTD: The employer who provides workers to the user as referred to in the preceding paragraph shall be any legal or natural person who concludes employment contracts with workers to provide their work to the user in the manner specified in the preceding paragraph and obtains permission to engage in activities under Article 167 of this Act, and is registered with the Ministry responsible for labor in the register of domestic legal and natural persons engaged in the provision of workers to the user or in the register of foreign legal and natural persons engaged in the provision of workers to the user. Additional conditions for the performance of activities by such an employer are determined in Article 164 of the ZUTD, and its obligations in Article 165 of the ZUTD. Before commencing the activity, the employer must obtain permission from the Ministry responsible for labor if it meets the conditions laid down in the first paragraph of Article 164 of this Act (first paragraph of Article 167 of the ZUTD). The employer who provides work and has obtained permission as referred to in the preceding paragraph shall be entered in the register or record (second paragraph of Article 167 of the ZUTD). The ZUTD also imposes high fines for illegal actions by employers providing work and users (Articles 177 and 178 of the ZUTD), and specifically provides that the employer who carries out the activity without the required permission and is not entered in the register or record shall be punished for an offense (Article 179 of the ZUTD).
7. See also Directive 2008/104/EC of the European Parliament and of the Council on temporary agency work.
8. The plaintiff also referred to other irregularities and violations of rights, which were not established by the lower courts in the current proceedings. This is not crucial for the assessment since the already established irregularities are severe and sufficient for legal evaluation.
9. In this regard, the first defendant's statement in the response to the lawsuit is illustrative, stating that "it is true that the plaintiff has been working according to the instructions of the second defendant since May 25, 2015."
10. A covert employment relationship is not only a relationship that gives the appearance of a different relationship between the parties with the aim of reducing legal protection but also a relationship that outwardly exists between two parties but is actually carried out between other parties with the aim of reducing rights and legal protection.
11. It is immaterial which company received the larger share of the profit.
12. A worker who is denied the existence of an employment relationship can assert the protection of rights at any time during the duration of such a relationship in accordance with the first paragraph of Article 200 of the ZDR-1. After the termination of such a relationship, the worker can assert the protection of rights within 30 days in accordance with the third paragraph of Article 200 of the ZDR-1. The plaintiff asserted the protection of rights against the second defendant on August 9, 2019, when his employment relationship with the first defendant had not yet actually terminated, and he filed the claim within the 30-day period after the termination of the employment contract with the first defendant.
13. See, for example, decisions of the Supreme Court of the Republic of Slovenia VIII Ips 129/2006 of December 18, 2007, VIII Ips 35/2008 of February 10, 2009, VIII Ips 321/2009 of September 6, 2011, X Ips 265/2017 of January 17, 2018, VIII Ips 77/2018 of September 12, 2018.
14. For example, in disputes regarding the existence of an employment relationship, despite the formal existence of civil contracts for work, in the case of a change of employer, etc. See also Dr. Darja Senčur Peček: Zakon o delovnih razmerjih s komentarjem [Employment Relationship Act with Commentary], GV Založba, Ljubljana 2016, pp. 42-44. See also the reasons for defining the actual employer in the judgment of the CJEU C-610/18, which also relates to social security matters.
15. See also the introductory statement of Recommendation No. 198 of the ILO on employment relationships, 2006, and (among other things) point 17, which recommends the implementation of a system that ensures effective measures to prevent covert employment relationships.
16. Although it is not the subject of the appeal, based on the above, the Supreme Court adds that, considering the consequences of this decision, the validity of the employment contracts of the plaintiff with the first defendant is questionable. However, this does not affect the decision on the plaintiff's claim for the existence of an employment relationship with the second defendant going forward.
17. The decision on the existence of an employment relationship with the second defendant does not depend on the finding of the invalidity of the termination of the employment contract with the first defendant - similar to the case of a change of employer.

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Reference:

RS - Constitution, Laws, Agreements, Contracts
Employment Relationships Act (2013) - ZDR-1 - Articles 9, 13, 15, 61, 62, 63
Code of Obligations (2001) - OZ - Articles 5, 7
Labour Market Regulation Act (2010) - ZUTD - Articles 163, 167, 177, 178, 179
Constitution of the Republic of Slovenia (1991) - URS - Article 34

If you want to check whether the courts have already decided on a case similar to yours and if you need legal assistance for representation in the procedure, please contact the Attorney Jurij Kutnjak, Slovenia, Maribor during working hours by phone at 00386 2 25 23 780 or by email at info@odvetnik-kutnjak.si, and he will try to help you solve your legal issue.

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