The judgment of the Supreme Administrative Court of the Czech Republic (hereinafter “NSS”) dated 16 March 2026, case no. 7 Ads 52/2025, dealt with when cooperation with programmers—formally conducted as self-employed individuals—actually constitutes dependent work outside the employment relationship, i.e., illegal work.
Summary of the Facts
The company collaborated with three programmers as freelancers (OSVČ). The programmers worked as programmers for an extended period, invoicing based on an hourly rate and working in the same teams as the company’s employees. The regional labor inspectorate concluded that this represented dependent work outside an employment relationship and imposed a fine on the company. After an appeal, the fine was reduced from CZK 135,000 to CZK 80,000.
The Programmers:
- worked long-term and approximately 8 hours a day,
- worked under the instructions of the company’s project manager,
- attended meetings and were integrated into the company’s teams,
- could not refuse individual assignments unless the company failed to pay,
- tracked their work in the JIRA system and were paid according to the hours worked,
- did not represent themselves to clients but acted on behalf of the company.
Legal Questions Addressed by the NSS:
- Whether the “regularity” of illegal work can be inferred even if only one day of work is mentioned in the administrative decision,
- What circumstances indicate that the formal OSVČ relationship in reality represents dependent work according to § 2 of the Labour Code,
- The significance of the economic dependence of workers and their inclusion in the company’s organizational structure.
Regarding the Regularity of Work, the NSS confirmed that:
- The regularity does not need to be explicitly stated in the administrative decision,
- It is sufficient if the reasoning makes it clear that the work was performed long-term or had a permanent nature,
- Regularity can be inferred from an inspection conducted on a single day if other circumstances indicate long-term cooperation.
The NSS concluded that the characteristics of dependent work were fulfilled in this case because the programmers:
- Performed the work exclusively personally,
- Were effectively integrated into the company’s organizational structure,
- Worked under the same conditions as the company’s employees,
- Were subject to the project manager’s instructions,
- Could not freely organize their own business.
Regarding Economic Dependence, the NSS emphasized that a significant feature of dependent work was the programmers’ economic dependence:
- They worked for the company on a full-time basis,
- They exclusively collaborated with this company,
- Their income from the company represented their main source of livelihood,
- Due to the volume of work and inability to refuse assignments, they had no real opportunity to obtain other clients.
The NSS explicitly stated that neither the common use of the OSVČ model in the IT sector nor its economic advantage could obscure the fact of dependent work.
The NSS admitted that:
- Payment by hourly rates or tracking “person-hours” is not in itself a sign of dependent work,
- However, in combination with other circumstances, it can confirm the personal performance of work and the worker’s integration into the employer’s organization.
The company further argued that the transfer of copyright to the created software complied with § 58(7) of the Copyright Act and could not be a sign of dependent work. Although the NSS acknowledged that the existence of a license or employee work regime alone is not proof of dependent work, it noted that in this case, it was merely a supporting circumstance confirming that the programmers did not act in their own name but on behalf of the company.
Decision:
- Confirms that when assessing the so-called “sham contracting” (švarcsystém), the actual content of the relationship is decisive, not its formal contractual designation,
- Highlights the importance of economic dependence and the inclusion of the worker in the employer’s organizational structure,
- Confirms that long-term work as a freelancer under the same conditions as employees can be considered illegal work,
- Limits the ability of employers to argue voluntariness or the commonality of the OSVČ model in the IT sector,
- Shows that individual circumstances must be assessed cumulatively, not in isolation.
Download the full HR Legal Update 04/2026 here.