The government plans to expand the powers of the National Labor Inspectorate – What does this mean for employers?

Poland’s employers often fear a visit from the National Labor Inspectorate (PIP). This is a key state institution responsible for, among other things, monitoring compliance with labor laws. The PIP can impose financial penalties and issue post-inspection recommendations that oblige employers to make appropriate changes at the workplace.

Inspection of contracts concluded with employees – What does the PIP pay attention to?

One of the important subjects of PIP inspections is the verification of contracts that the employer enters into with the people it employs. During the inspection, the inspectorate verifies, among other things, what the cooperation with individual persons consists of and checks whether the contracts concluded by the employer reflect the actual nature of the cooperation.

The inspectorate thus checks whether an employer deliberately enters into civil law contracts with employees (e.g., a contract of mandate, a B2B contract) in a bid to circumvent the application of labor laws or avoid paying contributions.

Establishing an employment relationship – What are the consequences?

Currently, if the PIP finds that a civil contract has the characteristics of an employment contract, it can file a lawsuit in court against the employer to establish an employment relationship. If the court determines that the employer has an employment relationship with the employee, the biggest risk for the employer is financial loss.

This is because, in this case, he must pay outstanding contributions and advance tax payments for the employee, along with interest from the time of his employment. In addition, the employee must be granted all entitlements related to the employment relationship, for example, such as annual leave, sick leave and overtime pay and allowances. Until now, the PIP could not determine on its own that a contract was in fact an employment contract, but had to take the matter to court.

New powers of the PIP – What will change?

The government is working on an amendment to the Law on the National Labor Inspectorate, which is expected to give inspectors broader powers, particularly in determining the employment relationship. The government wants the labor inspectorate to be able to independently order the change of a civil contract to an employment contract, in cases where the contract meets the conditions of an employment contract.

According to the draft, a PIP inspector will be able to issue an order to convert a civil law contract into an employment contract, without having to take the case to court. In addition, such an order is to have immediate effect – meaning that its enforcement will not be able to be stretched over time.

If such an order is issued, the civil-law relationship will immediately change to an employment relationship, which will entail treating the employee as an employee under an employment contract (e.g., making contributions and advance tax payments, granting leave, being able to exercise parental rights or taking paid sick leave).

As the draft currently stands, the will of the parties as to the type of contract entered into (e.g., the programmer’s desire to remain on a B2B contract) will be irrelevant in the decision-making process. However, the order is to be appealable, meaning that the parties will be able to appeal it to a court, which will then examine the case.

According to the government, the changes are necessary because lawsuits in labor relations cases often result in years of litigation, and require cooperation between the inspector and the employee, which is often difficult because employees are afraid to come into conflict with their employer.

The government wants to clarify the definition of an employment relationship, which will then be used by inspectors when assessing whether a particular civil law contract is, in order to disguise an employment contract.

When will the changes take effect?

Work on the draft is still underway, and its final content has not yet been determined. The draft is currently being consulted by the Chief Labor Inspectorate, and the government says it will be ready in the next few months. We can therefore expect the changes to be implemented soon, as the government seeks to reform the PIP as soon as possible.

Criticism of the changes – What do the experts say?

There is already criticism from labor law experts. Many of them believe that the proposed powers are too broad and may violate freedom of contract.

In addition, there are concerns that the number of inspectors is insufficient to effectively implement and enforce the new regulations. Experts stress that granting PIP decisions immediate enforceability could lead to arbitrary decisions that will not take into account the will of the parties and the originally intended framework for cooperation.

Particularly worrisome are the potential effects on the liberal professions, which generally prefer civil law contracts to employment contracts.

How will the changes affect employers?

There is no doubt that the upcoming changes will have an impact on employers’ future decisions on employment structure. Employers will have to plan more carefully what kind of contracts they intend to enter into with employees and how to organize work in the plant.

However, it is worth noting that employers are already at risk of having their employment relationship established during a PIP inspection, so for informed and attentive employers, these changes should not come as a surprise.

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Specialists in the labor law department of our law firm support clients on a daily basis in planning the structure of employment, selecting appropriate contracts and organizing cooperation with the employed.

If you have any questions or need support in the hiring process, we encourage you to contact us at: [email protected].