The Boundary Between Self-Employment and Disguised Employment in a Supreme Administrative Court Decision

In its judgment No. 7 Ads 52/2025-27 of 16 March 2026, the Supreme Administrative Court addressed the boundary between self-employment and a disguised employment relationship. In this case, it assessed a situation involving TechFides Solutions s.r.o., which cooperated with three software developers engaged as self-employed individuals. The company was fined CZK 80,000 for enabling illegal work outside an employment relationship.

The company argued that the arrangement constituted a legitimate business-to-business cooperation rather than a disguised employment relationship. It emphasised that the developers acted as self-employed individuals, invoiced the company for their work, were remunerated on an hourly basis, and bore responsibility for their outputs. It further relied on the autonomy of will of the contracting parties and argued that the chosen model of cooperation was mutually beneficial and voluntarily agreed.

However, the administrative authorities, subsequently upheld by the court, considered the actual substance of the relationship between the parties to be decisive. They argued that the developers worked for the company on a long-term basis, to an extent corresponding to full-time engagement, which effectively prevented them from cooperating with other clients. In addition, the developers were not free to refuse assigned tasks without particularly serious reasons. From this perspective, the relationship was not one between two independent business partners, but rather involved individuals who were personally and economically dependent on the company.

The Supreme Administrative Court confirmed that both the administrative authorities and the regional court had assessed the case correctly; notwithstanding formal invoicing and contractual designation, the relationship constituted dependent work in substance. The Court explicitly stressed that the assessment must be based on the actual content of the relationship. It also reiterated that the voluntary nature of cooperation outside an employment relationship or its economic advantages do not preclude the existence of dependent work. Where the characteristics of dependent work are met, the autonomy of will gives way to the mandatory provisions of labour law, and the relationship must be treated as dependent work.

The Court considered the scope of the developers’ work—corresponding to full-time engagement—to be a key factor. Combined with the obligation to accept all assigned tasks, this led the Court to conclude that the developers could not manage their working capacity in a manner typical of genuinely self-employed individuals and were effectively unable to provide services to other potential clients. This resulted in a strong degree of both economic and personal dependence.

A crucial element in the Court’s reasoning was the degree of integration of the developers into the company’s organisational structure. In this case, the developers worked alongside core employees on joint projects, under comparable conditions, and recorded their activities in the company’s internal system. Although the Court acknowledged that hourly remuneration and time tracking do not necessarily indicate an employment relationship, it took into account that, in practice, the functioning of the parties was indistinguishable from that of standard employees in these respects.

The case builds upon existing case law concerning the criteria used to identify disguised employment relationships. In practice, it is not sufficient for cooperation to be formally described as a business relationship. The courts examine the extent to which the individual bears entrepreneurial autonomy and risk, or whether they are in fact integrated into another entity’s organisational structure.

This new judgment sends an important signal not only to companies engaging external specialists in IT and other professional fields. It confirms that the issue of disguised employment is not limited to traditionally monitored sectors. The associated risks may also arise in situations where cooperation appears, at first glance, modern, flexible, and mutually beneficial. If you are dealing with similar cooperation arrangements in your company, we will be happy to assist you with their assessment.