The case arose in the wake of Avlaster I (Rt-2013-354) and Avlaster II (HR-2016-1366-A), where the Supreme Court ruled that two municipal relief workers had incorrectly been regarded as contractors, and that they should now be regarded as employees under section 1-8 of the Working Environment Act. Such conversion of labour law status not only entails the right to benefits pursuant to law, but often also pursuant to a collective agreement. A relatively unresolved question in this connection was when any obligation to make back payments arises, which the Supreme Court addressed in its recent judgement.
Specifically, Avlaster III concerned a relief worker’s claim against his municipal employer for back payment of salary and holiday pay as well as supplementary enrolment in the municipality’s occupational pension scheme. The relief worker was not considered an employee until after the ruling in Avlaster II in June 2016. The question was how far back in time her claim could be asserted, specifically whether the parts of the claim that were accrued before the claim was made had lapsed according to the doctrine of delimitation of supplementary settlement claims under collective agreement law.
The parties agreed that the relief worker was to be regarded as an employee under both the Working Environment Act and the relevant Master Agreement, and that she was in principle entitled to the benefits under the collective agreement from the time before the claims were made. The size of these claims was not in dispute. The disagreement only concerned the cut-off point for the municipality’s obligations, more specifically whether the relief worker was entitled to subsequent payment of benefits and subsequent enrolment in the pension scheme for the period before she, through her trade union, submitted the claims against the municipality in November 2016.
In its assessment, the Supreme Court began by pointing out that the general principle of the law of obligations is that monetary claims become time-barred after three years, and that this also applies to benefits to which an employee is entitled under a collective agreement, cf. section 2 of the Limitation Act.
The Supreme Court then pointed out that there is normally nothing in the way of agreeing shorter limitation periods than what follows from the law, and that this is the case in collective bargaining law, where there is a doctrine of forfeiture of claims for back pay and other benefits in addition to the rules on limitation.
According to the Supreme Court, the content of this doctrine is evident from the Labour Court’s judgment in ARD-2006-38, paragraphs 42 and 43, where it is established that the obligation to make back payments on the basis of a collective agreement does not exist until the employees, through their trade union, have submitted a claim for back payment or raised a dispute that has formed the basis for such a claim. The reason for this practice is that it is only when a claim for payment has been made or marked that the employer generally has sufficient reason to realise that the claim may be successful. Collective agreements may apply to a large number of employees, and for the individual company the total claim in such cases can therefore be very high. Unless the employee representatives submit a claim for payment, the employer must therefore be able to assume that wages and other benefits are in line with the collective agreement. Exceptions to this rule are only made when there are “special circumstances”.
The parties in Avlaster III agreed that such a doctrine exists in collective bargaining law on the lapse of claims for back pay and other benefits in addition to the statute of limitations, but disagreed on the scope of the doctrine. The decisive factor for this question was whether the shipper’s claim was based on law or collective agreement.
The relief worker and her counsel (Fagforbundet) argued that the relief worker’s claim was based on the Supreme Court’s clarification of the concept of employee in the Holiday Act and the Working Environment Act through Avlaster I and Avlaster II, and not on the interpretation of a collective agreement. The collective agreement law doctrine on cancellation of claims for back pay thus did not apply.
On the other hand, the municipality and its partner (KS) argued that the employee’s claim was based on a collective agreement, and that the claims back in time were therefore not only limited by the statute of limitations, but also by the collective agreement marking date.
The Supreme Court found that the relief worker’s claim was based on both the law and the collective agreement, and that the concept of employee was the entry condition for protection under both these bases. The decisive factor was thus that the underlying dispute – whether the relief worker was an employee – was resolved through the Supreme Court judgements Avlaster I and Avlaster II, which exclusively concerned statutory interpretation. It was thus not a collective bargaining dispute, which was substantiated by the fact that the Labour Court lacked jurisdiction to hear the case as it stood, cf. paragraphs 33-34 of the judgment:
“The understanding of the employee scope determines whether A is entitled to back pay. The employee concept is the entry condition for protection under the Working Environment Act and the Holiday Act and for collective agreements. The underlying dispute in this case – whether relief workers are employees – was resolved by the Supreme Court in two judgements in 2013 and 2016. These rulings dealt exclusively with questions of statutory interpretation, i.e. the interpretation of the prescriptive definition of employee in section 1-8 of the Working Environment Act, cf. section 1-9 and section 2 of the Holiday Act.
The Labour Court can take a position on the employee scope of collective agreements, including the Master Collective Agreement. However, it has not been established in this case that A is not also an employee under the Master Collective Agreement. In other words, there is no uncertainty associated with the interpretation of a collective agreement. The uncertainty up to 2016 was, as mentioned, linked to the employee scope of the Act.”
The Supreme Court also held that real considerations regarding the mutual duty of loyalty in employment relationships, as well as system considerations related to the Labour Court’s role in the two-track procedural system, indicated the same result, cf. paragraphs 35 and 36 of the judgment.
On this basis, the shipper’s claim was upheld on the grounds that it was not a collective agreement dispute, so that the claim was not to be limited by the doctrine on the delimitation of collective agreement claims. The claim could thus also be asserted for the period before it was submitted, within the framework of the limitation rules. The municipality’s appeal was thus rejected.
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