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Cyprus Employment Law – When is an “Employer–Employee” Relationship Established?

Introduction

The key starting point when reviewing an Employment issue which has arisen, is to always establish whether the “employer-employee” relationship was established between the persons concerned; this is due to the fundamental factor that all relevant Laws which govern employment issues in Cyprus refer to rights and obligations which are derived from one’s capacity as an “employee” or as an “employer”.

Definition of “Employee” under the Law

Article 2 of the Termination of Employment Law, L.24/1967 (as amended) defines an “Employee” as “any person working for another person, either under a contract of employment or tutelage, or under such circumstances by which it could be deemed that there is a relationship of employer-employee, and the term “employer” shall be construed accordingly and shall also include the Government of the Republic”. The wording of the definition was expanded by an amendment to the law in 1994, to include that “…  the term “employee” includes any person which is a shareholder in a private company, as this is defined in the Companies Law, and works for that company, but not under an employment contract or under such circumstances which could be deemed as the existence of the relationship of employer and employee”.

It must be noted that the subject matter of the Law is to provide for and protect the depended employment. Although the Law does not define the term of “dependency”, its definition was and remain within the ambit of the Court’s review and judgement.

This is in line with existing cases of the Cyprus Supreme Court judgements, which state that the existence of an employment relationship (employer-employee) which is created by the provision of depended employment in exchange of valid consideration (such as monetary payment), is always an objective and real matter which must be examined under the influence of all relevant facts in a case.

There is no specified definition of the employer-employee relationship, and its existence remains a fact-finding mission for the Court. The criteria on which a person might be considered as an employee for another is not limited to only a review of whether payment was received for the services offered; other factors will come into play, such as whether the employer was exercising control over the work performed by the employee (i.e. whether the employer had the right to direct and supervise the work performed, and whether the employee was obligated to listen to an obey to the directions given by the employer as to the kind of work, manner of work, amount

of work and place of work), and whether the economic benefit (or loss) from the work performed relates to the employer and not the employee.

In the case of AVRAAM K. PROUSI v. REDUNDANT EMPLOYEES FUND (1988) 1 C.L.R.  363 the Court said that: “The question as to whether the relationship of employer and employee exists is always a question of fact and the facts of each particular case have to be taken into consideration. The only criterion for making a person an employee of another is not the payment of a salary for services rendered by him but also it has to be established that the employer can exercise control over the work of the other”.

Furthermore, in the case of Tsapaco Catering Ltd v. Republic of Cyprus,  via the Ministry of Labour (1998) 3 ΑΑΔ 796 the Court pointed out that: «It might be said that the employer-employee relationship presupposes, amongst other, the right to choose your employees as an employer, the employment to be for specific hours and at a specific place, the existence of control and oversight, ensuring the continuity of employment and the payment of salaries (see Chitty on Contracts (Specific Contracts) 27th Edition, p.698.). The payment of remuneration for the services offer is an indication which could support the existence of an employee-employer relationship, without it by itself being sufficient to establish this relationship. The relationship can be proven mainly if: (a) there is an obligation of the employee to offer his services and (b) the employer has the right to control the work to be performed by the employee”.   This is also in line and has been followed by subsequent cases, such as Aggelos Aggelides vs 1. Kipris X”Markou & Son Ltd 2. Redundant Employees Fund (2000) 1 (Α) ΑΑΔ 465 and P. Proiki vs Filikis Insurance Company (2002) 1 (Β) Α.Α.Δ. 736.

In the book of Colin BournRedundancy  Law  and Practice (1983) page 77, the following is stated: “The  approach which is now adopted by the courts  is to question whether  the employee is in reality performing  his duties ” as person in business in his own account” ……rather than working for a superior. A multiplicity of factors could influence that decision, such as the degree to which the person is free from detailed control by another, as to his hours or working methods, whether he has invested any capital in the business or whether he bears any of the economic risks of profit and loss.”     

Can the Capacity of the Employee Rule Out him/her being an “Employee”
There are three main groups of personal capacities which have been reviewed by Cyprus Courts and have been deemed to not present an obstacle in being defined as an “employee”, as follows:

  • Capacity as Spouse

In the case of Anthi Aggeli vs Redundant Employees Fund, Case No. 328/1984, the Court stated that “the capacity as a spouse does not rule out by itself the existence of an employer-employee relationship”.

  • Capacity as a Relative

In the case of Christos Patala vs Redundant Employees Fund, Case No. 120/1987, the Court stated that “no were in the Law is it mentioned that any relative of an employer is precluded from enjoying the full protection and the benefits of the Law, as these are provided to all employees who offer a dependent employment”.

  • Capacity as a Manager, Shareholder or member of the Board of Director

Although there is a plethora of case law on these matters, the following two cases sufficiently summarise this issue:

  • Holding a directorship or participating in the board of directors of the company as an employee, does not preclude the employee from establishing an employer-employee relationship” – Miltiades Protopappas vs Redundant Employees Fund, Case No. 265/1992
  • “In order to avoid any misunderstandings, we point out that the fact that the employee is a shareholder in a company, or one of its directors, or one of its managers, is not sufficient proof that an employer-employee relationship does not exist; this shall be judged on the face of the facts to be presented before the Court on a case-by-case basis.” – Georgios Anastasiou vs Redundant Employees Fund, Case No. 167/1992

Practical Examples where Employer-Employee Relationship was Rejected

The following cases are presented only as a way of example of what the Courts have to this day considered not to be a valid employer-employee relationship, and there are in no way a full representation of such cases. Our aim is merely to provide the reader with some key practical examples, and we wish to stress that, as the Courts have stated time and time again, all such issues are to be decided on the specific facts of each individual case before the Court.

  • Payment to various Funds is only an indication

In the case of Xristoforos Zannetou vs Redundant Employees Fund, Case No. 355/1995, where the shareholder of a company was also working in the company as a Director and the company was paying the various contributions to the various funds as required under Cyprus Law (e.g. social insurance), but failed to present any evidence to the Court that this employment with the said company was a “dependent employment”, the Court stated that it could not find an employer-employee relationship having being formed, and that the mere payment of these contributions was not sufficient to evidence a dependent employment.

  • Participation in the company’s “risks and dangers”

In the case of Aggelos Aggelides vs (1) Kipris X”Markou & Son Ltd (2) Redundant Employees Fund, Case No. 1/1996, which was reaffirmed by the Cyprus Supreme Court in Appeal No.340, Aggelos Aggelides vs (1) Kipris X”Markou & Son Ltd (2) Redundant Employees Fund, dated 27/03/2000 where the claimant was a shareholder for 25% of the company and also one of the four directors, as well as a co-guarantor of the obligations of the company with banking institutions, it was shown in Court that he, together with the other directors, had decided hiring himself as an employee, had then decided on the level of his remuneration (and later decreased it due to bad financial results, and later on increased his salary again), had also participated in the decision to terminate his employment, and generally it was indicated that he controlled the pricing of the products of the company, the hours he would work, and was not controlled or supervised by anyone, and would rarely inform the other directors as to his actions. Given these facts, the Court decided that there was no “dependent employment” and the relationship of employer-employee could not be established.

  • Lack of control and oversight

In the case of Giannakis Tsouri vs  Redundant Employees Fund, Case No.134/1995 and 135/1995, where the company had three directors, all with equal powers and all employed by the company (and where the company was paying for their various contributions to the funds as required by Law), the Court stated that as all three directors had equal powers and none of the three of them exercised any control or oversight over the actions of the others, then they could not be deemed to be “employees” within the meaning of the Law.

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