Can a Claim Submitted by a Freelancer be Dismissed, Despite Having Been Recognised as a Company Employee?

We are pleased to inform you of a legal claim handled by our firm. The claim in question was filed by an installation technician (Eliyahu Chen), who, after 3.5 years of engagement as a freelancer with an industrial company (Sasatech Agricultural Cooperative Society Ltd), argued having employee rights and filed a claim of NIS 121,282 against Sasatech.

After a long, three-year legal dispute, our firm was granted a landslide win, including a complete dismissal of the plaintiff’s claim, and a ruling that he is not entitled to any compensation whatsoever from the respondent.

The importance of this ruling lies in all matters pertaining to claims submitted by suppliers/freelancers, claiming (after the conclusion of a commercial alliance between the parties) that they were in fact employees of the companies with which they had engaged as independent contractors.

The Labor Court accepted our stand, whereby even should it be determined that employer-employee relationship existed between the parties, it was established that the plaintiff had received full rights compared to a hired employee of the company and was therefore not entitled to any additional payment.

This ruling constitutes “a ray of light” concerning claims by freelancers who were in hindsight recognised as employees, and provides prima facie defence to companies and corporations that engage with independent contractors. It should be clarified that this line of defence is not suitable for each and every case, but only in cases and circumstances compatible with the Labor Courts’ ruling on this matter.

Following is a summary of the ruling:

Eliyahu Chen (“Eliyahu”) is an installations technician who has been working as a self-employed professional for some 17 years. In 2013, Eliyahu engaged in an agreement with Sasatech Agricultural Cooperative Society Ltd (“Sasatech”), a cooperative society that deals in the manufacture and marketing of cleaning products, whereby Eliyahu would provide Sasatech with repair services for Sasatech’s customers. 

Sasatech paid Eliyahu for his services against a tax invoice. The payment to Eliyahu was calculated according to number of work days and number of kilometres travelled per day.

In March 2017, the commercial relationship between the parties was terminated, and Eliyahu filed a claim to the Labor Court, whereby he argued that an employer-employee relationship existed between himself and Sasatech, and therefore Sasatech must pay for vacation redemption, convalescence pay, pension allocations, severance pay, advance notification pay, etc, for a total amount of NIS 121,282.

Sasatech counter-argued, through our firm, that their employer-employee relationship never existed between the parties, and even had such a relationship existed, Eliyahu had received, as part of the generous monthly payments by Sasatech, full social benefits.

To prove Sasatech’s arguments, our firm submitted an expert option to the Labor Court by CPA Dana Bar Sadeh. The Labor Court adopted CPA Bar Sadeh’s opinion in relation to the data it included, as well as the conclusions drawn by CPA Bar Sadeh, which assisted in dismissing Eliyahu’s claim.

In summary, Sasatech proved that its employees, who performed an identical role to that of Eliyahu, earned monthly salaries totalling an average of NIS 8,688. Eliyahu’s average monthly income, on the other hand, from the services provided to Sasatech during 2014–2016, amounted to NIS 17,305. Therefore, since the plaintiff’s salary significantly exceeded the salary of a hired employee in the same position, it was determined that Eliyahu had received his full rights as an employee and was not entitled to any additional payment from Sasatech.

Eliyahu’s claim against Sasatech was dismissed in full.

*Case 17706-05-17 Eliyahu vs. Sasatech Agricultural Cooperative Society Ltd., given on date August 17, 2020 at the Haifa Regional Labor Court.

For the complete ruling please click here.