Court held employer guilty of failing to pay social insurance contributions and apply for contribution cards.

[*715] 1982 October 9

(KALLIS, AG. D.J.)

IN THE DISTRICT COURT OF NICOSIA

Social Insurance Officer,

v.

Argyros HjiChristodoulou,

Accused.

(Case No. 4078/82).

Social Insurance -

"Employee" and "employer" within the meaning of the Social

Insurance Law, 1980, the Annual Holidays with Pay Law, 1967 and the Termination

of Employment Law 1967 - "Contract of Service" - "Contract for

Services" - Employer's obligation to pay contribution in respect of his

employees under the above laws - How fulfilled.

S. HjiChristofis, for the

Prosecution.

A. Haviaras, for the Accused.

JUDGMENT

The following judgment was delivered

by:-

KALLIS. AG. D.J.:

The accused was charged [*716] on a charge-sheet containing six counts as

follows:-

Count 1:- Failure to pay Social Insurance contributions, as an employer,

contrary to the provisions of sections 3(a), 4(1), 5(1)(2)(4), 9, 10, 11(1)(3),

14(1), 21, 73(1)(b)(c) (g), 80(1)(2)(3)(4)(5)(9), 81, 84 and 90(1) of the

Social Insurance Law, 1980 and Regulations 8, 9, 11, 12 of the Social Insurance

(Contributions) Regulations, 1980. The particulars of this count were that

between 2.10.81 and 25.1.82 at Nicosia he failed to pay Social Insurance

Contributions, as he was bound to pay in respect of the months of July and

August, 1981, and which amounted to a total of £33.840 mils.

Count 2:- Failure to pay additional charge, contrary to sections 73(1)(0),

80(1)(2)(4)(9), 81, 84 and 90(1) of the Social Insurance (Contributions)

Regulations 1980. The particulars of this count were that the accused from

1.9.1981 and thereafter at Nicosia he failed to pay additional charge in

connection with Social Insurance Contributions, due by him for the period from

27.7.81 until 8.8.81.

Count 3:- Failure to pay Annual Holiday Contributions, contrary to sections

3(1), 5, 9 (1) (2) and 14(1)(b) of the [*717] Annual Holidays with Pay Law,

1969 to 1980 and Regulations 9, 11, 17 and 18 of the Annual Holidays with Pay

Regulations 1980.

The particulars of this count were

that he failed to pay Annual Holidays contribution amounting to £12.150 mils in

respect of the period mentioned in the particulars relating to count 1.

Count 4:- Failure to pay Redundancy fund contributions, contrary to

sections 25(1)(2)(a)(b) of the Termination of Employment Laws 1967 to 1980 and

Regulations 7, 9, 10, 19, 21 and 22 of the Termination of Employment

(Redundancy Fund) Regulations 1977 to 1980.

The particulars of this count were

that he failed to pay redundancy fund contributions amounting to £1,410 mils,

in respect of the period mentioned in the particulars relating to count 1.

Count 5:- Failure to pay industrial training fund contrary to sections

20(1), (2), 32 and 37(1)(2)(c) of the Industrial Training laws 1974 to 1980 and

regulations 4(1) (2), 6, 7(1), 8, 10 and 11 of the Industrial Training

Authority (Fund Payable by Employers) Regulations 1979 to 1980. [*718]

The particulars of this count were

that he failed to pay Industrial training fund amounting to £1,410 mils in

respect of the period mentioned in the particulars relating to count 1.

Count 6:- Failure to submit an application for the issue of a contribution

card, contrary to sections 3(a), 4, 5, 9, 73(1)(N), 80(8)(9), 81 and 84 of the

Social Insurance Law 1980 and regulations 5(1)(2)(3) of the Social Insurance

(Contributions) Regulations, 1980.

The particulars of this count were

that between 27.7.81 and 25.1.82 at Nicosia, he failed to apply to the nearest

Social Insurance Office for the issue of contribution cards in respect of his

employees Christakis Constantinou and Charalambos Petrou.

In short the case for the prosectuion

was that during the period 27.7.81 - 8.8.81 the accused employed Costas

Demetriades (P.W.1), Charalambos Petrou (P.W.2) and Christakis Constantinou

(P.W.3) to plaster (να σουβατίσουν) his house at Orounda at a weekly

wage of £50.-, £40 and £45.- respectively, and he failed to pay the

contributions referred to in the charge-sheet. In support of its case the

prosecution called the abovenamed [*719] Costas Demetriades, a mason, who testified that he and P.W.2 and 3

were working with a certain contractor, Nicos Theodorou, who terminated their

services because he would be going abroad and told them that they could be

employed by accused. They went to accused and told him that they could

undertake the plastering of his house at Orounda on a wage basis. The wage of

this witness was agreed at £50.-, that of witness Petrou at £40.-, and that of

witness Constantinou £45.- a week. They started work on 27.7.81, and left on

8.8.81, that is for two weeks. The accused at the end of each week used to pay

the total of the weekly wages i.e. £135 to this witness and he used to

distribute it to the other two at the rate stated above. After the accused had

paid the wage of the first week the witness enquired from him about the social

insurance contributions and the accused told him ”I will arrange them, this is

your net wage" (θα τα βάλω εγώ, τούτα είναι το καθαρό σας μεροκάματο). They worked for 5 days a week (Monday-Friday) and that during the

whole of this period Theodorou never went to their place of work whilst the

accused used to go to the place of work and checked it particularly the volume

of work. Accused failed to pay to them the various contributions and they

reported him to the S.I. Office. [*720]

P.W.2 Christakis Petrou testified that

he worked for two weeks for. accused at a wage of £40.- which was paid to him

by the previous witness.

P.W.3 testified that he worked for

two weeks for accused at a wage of £45.- which was paid to him through witness

1 and that Theodorou never went to the place of work whereas accused used to go

there and check the work.

In cross-examination, witness Petrou

stated that his weekly wage from Theodorou used to be £35.- and recently

increased to £37.-; that accused did not terminate their services and that they

left on their own; and that when accused proposed to give them the same wages

they were receiving from Theodorou and inquired why they demanded more from him

they explained to him that Theodorou used to pay the Social Insurance

Contributions, the contributions to the holiday fund and the Trade Union

Holiday Contributions and that is why he used to pay them a smaller wage. (Ο κ. Θεοδώρου μας επλήρωσε τις κοινωνικές ασφαλίσεις, εισφορές εις το

Ταμείον Αδειών και τις φίσιες της συντεχνίας μας και γι’ αυτό μας επλήρωνε

λιγότερα.)

The version of the accused as

appearing from his line of cross-examination and from his evidence in chief was

that [*721] during the period in question, the accused were the employees of

Theodorou and that the wages were paid to witness 1 who would have given them

to Theodorou to make the distribution amongst the three employees after deducting

the Social Insurance Contributions; that it was agreed with Theodorou that the

wages of the three witnesses would be £120 weekly provided they plastered 120

meters; that accused were dismissed from work because they did not perform the

agreed volume of work; that the agreed wages of witness Demetriades was £45.-,

witness Petrou £35.- and. witness Constantinou £40.- (total £120) and that he

(accused) had agreed with Theodorou to give these wages to witness Demetriades

plus £25.- weekly Social Insurance contributions which he did (όταν ερώτησα τον κ.

Θεοδώρου τι θα γίνει με τις κοινωνικές ασφαλίσεις μου είπεν, είναι £25.- δώστα Κώστα (Μ.Κ. 1) και γίνεται.)

In cross-examination accused admitted

that he used to measure the volume of work and he found out that it was not the

agreed one and that when he informed Theodorou about it he told him to

terminate the services of the witnesses if the arrangement was not to his

benefit; (αν δεν σου συμφέρει σταμάτα τον). He further stated that he did not know

whether Theodorou ever went to the place of work. [*722]

Having seen and heard the witnesses

and having assessed their credibility and having in mind the evidence as a

whole adduced by both the prosecution and the defence I arrived at the

conclusion not to believe that part of the testimony of P.W.1 to the effect

that accused told them that he would pay himself the Social Insurance

contributions and that the amount of £135.- was their net wage.

On the remaining issues I have no

reason to disbelieve the evidence oí witnesses 1, 2, 3 and I cannot

believe the version of accused that during their working in his house they were

the employees of Theodorou because had he been their employer he would be

expected to show some interest in their work and in the progress of their,

work, which he did not, nor his version that he paid £120.- weekly plus £25.-

separately for social insurance contributions.

On the basis of my above findings as

to credibility, I make the following findings of fact.

a) That

prosecution witnesses 1 , 2, 3 worked for two weeks on a wage basis namely from

27.7.81 - 8.8.81 and did plastering work in the house of accused at Orounda,

after being introduced to accused by Theodorou. [*723]

b) That

Theodorou did not have anything to do with the quality or volume of work

performed at the house of accused or with the amount of their wages or with

their conditions of employment nor did he have any other interest whatsoever,

and he never went to check or inspect their work.

c) That

accused paid to P.W.1 £135.- each week out of which he retained £50.-for

himself and paid £40.- to witness Petrou and £45.- to witness Constantinou.

d) That

accused used to go to the place of work and check what was performed by the

witnesses during the aforementioned period and was particularly concerned about

the volume of work.

e) That

P.W.1, 2 and 3 came to an understanding or arrangement with accused that in the

aforesaid amount of £135.- weekly there was included his contributions for the

Social Insurance Fund.

f) That the

various contributions mentioned in the charge-sheet concerning witnesses 1, 2

and 3 were not paid by the accused to the Social Insurance Office and they reported

him to the Social Insurance Office. [*724]

In making my finding (e) above, I

relied on the admission of witness Petrou in cross-examination to the effect

that Theodorou was paying to them a smaller wage because he was paying all the

contributions to the Social Insurance Fund and all other contributions, and

from this finding I can draw the inference that the witnesses demanded and were

paid a larger wage by accused than by Theodorou because they have come to some

understanding or arrangement with him that by paying a larger wage they will

relieve him of his obligation to pay social insurance and other contributions.

For the prosecution to succeed it

must prove that accused was the employer of the three witnesses during the

aforesaid period and he failed to pay the contributions mentioned in the

charge-sheet. In the Social Insurance Law there is no express definition of

employer (εργοδότης) and this

word has to be interpreted by giving to it its ordinary meaning. In Δημητράκου Νέον Λεξικόν Ορθογραφικόν και Ερμηνευτικόν όλης της

Ελληνική γλώσσης,

2α έκδοσις, there is

given the following meaning of the word that is ο αναθέτων

εις τινα την εκτέλεσιν έργου. Ιδιοκτήτης επιχειρήσεως ως μισθωτής της εργασίας

άλλων.

Now in both the Annual Holidays with

Pay Law, 1967 [*725] (Law 8/67) and the Termination of Employment Law, 1967 (Law

24/67) there is a definition of employee and employer which was introduced by

means of section 2 of the Annual Holidays with Pay (Amendment) (No.2) Law, 1972

(Law 66/72) and the Termination of Employment (Amendment) Law, 1972, (Law

67/72) respectively. This definition is identical in both the laws and runs as

follows:-

"εργοδοτούμενος σημαίνει πρόσωπον εργαζόμενον δι' έτερον

πρόσωπον είτε δυνάμει συμβάσεως εργασίας ή μαθητείας είτε υπό τοιαύτας

περιστάσεις εκ των οποίων δύναται να συναχθή η ύπαρξις σχέσεως εργοδοτουμένου

και εργοδότου, ο δε όρος 'εργοδότης' θα ερμηνεύηται αναλόγως και θα περιλαμβάνη την

Κυβέρνησιν της Δημοκρατίας·"

In Market Investigations Ltd. ν.

Minister of Social Security, (1968) 3 All E.R. 732 at p. 737, the following

were stated:

"…… The fundamental test to be applied is

this: is the person who has engaged himself to perform these services,

performing them as a person in business in his own account? If the answer to

that question is 'yes', then the contract is a contract for services. If the

answer is ‘no', then the contract is a contract of service." [*726]

In Ferguson v. John Dawson and

Partners, (1976) 3 All E.R. p. 817, it was held that:-

"Although the parties expressed intention

might be a relevant factor in deciding what was the true nature of the

contract, it was not a conclusive factor. Regard should he had to the

arrangement as a whole and in particular to the rights and obligations of the

parties. The terms of the contract, whether implied or added by agreement

during the plaintiff’s employment, indicated that the reality of the

relationship was employer and employee, i.e. a contract of service."

In Cleanthis Christofides Ltd. v.

The Fund for Redundant Employees, (1978) 1 C.L.R. 208, a case which deals

with the interpretation of the word "employee" as definied by the

Termination of Employment Laws 1967-68, A. Loizou, J. in giving the judgment of

the Court of Appeal stated the following at p. 219:-

"The employee-employer relationship has

always been understood to be one of master and servant and the expression in

circumstances from which its existence may be concluded, does not change the [*727]

nature of the relationship of employee-employer; in other words, it includes

cases where there does not exist a contract of service or could not exist as

such, and yet, the relationship of employee- employer may be concluded from the

surrounding circumstances. The purposes of the law itself would have been

defeated were we to include agents and independent contractors within the

definition of an 'employee' in this Law."

Having regard to the state of the law

as enunciated in the aforequoted passages, to the meaning of the word

"employer", its definition as appearing in the above laws, and to the

facts and circumstances of this case, I hold that the accused was the employer

of the witnesses within the meaning of all the relevant laws stated in the

charge- sheet. Now once he has been held to be an employer what were his duties

and obligations under the relevant legislation and whether he discharged them?

His duties are stated extensively in the various sections and regulations

mentioned in the charge-sheet and I would only refer to: section 5(1) and (4)

of the Social Insurance Law 1980 (Law 41/80) and to regulations 5(1) (2)

(3),12(1),(2) and 24 of the Social Insurance (Contributions) Regulations, 1980

which are relevant to counts 1, 2 and 6 and run as follows:- [*728]

"5.-(Ι)

Τηρουμένων των διατάξεων του παρόντος Νόμου, το ποσόν των εισφορών των

καταβλητέων αναφορικώς προς την απασχόλησιν μισθωτού, είναι ίσον προς

ποσοστόν 15.5% επί των ασφαλιστέων αποδοχών αυτού, εκ του οποίου ποσόν

ίσον προς ποσοστόν 6% επί των ασφαλιστέων αποδοχών του μισθωτού καταβάλλεται υπό

του εργοδότου αυτού, ποσόν ίσον προς ποσοστόν 6% επί των τοιούτων αποδοχών υπό του μισθωτού και ποσόν ίσον προς

ποσοστόν 3.5% επί των τοιούτων

αποδοχών εκ του Παγίου Ταμείου της Δημοκρατίας.

(4) Ο εργοδότης ευθύνεται, τηρουμένων των διατάξεων του άρθρου II, διά την καταβολήν

τόσον των υπ' αυτού καταβλητέων εισφορών όσον και των υπό του μισθωτού

καταβλητέων τοιούτων, εισφοραί δε καταβληθείσαι υπό του εργοδότου διά

λογαριασμών του μισθωτού λογίζονται ως εισφοραί καταβληθείσαι υπό του μισθωτού.

5.-(Ι) Έκαστος

εργοδότης, εκτός εάν τη εγκρίσει του Διευθυντού γίνωσιν εν τη περιπτώσει αυτού

έτεραι διευθετήσεις, άμα τη υπ' αυτού προσλήψει οιουδήποτε μισθωτού

προμηθεύεται πινακίδα εισφορών διά τον μισθωτόν τούτον.[*729]

(2) Ο εργοδότης

προμηθεύεται πινακίδα εισφορών υποβάλλων αίτησιν προς το πλησιέστερον γραφείον

ασφαλίσεων εν τω καθωρισμένω υπό του Διευθυντού τύπω, παρέχων το ονοματεπώνυμον

και τον αριθμόν Κοινωνικών Ασφαλίσεων εκάστου μισθωτού διά τον όποιον η τοιαύτη

αίτησις υποβάλλεται και οιανδήποτε άλλην πληροφορίαν η οποία ήθελε ζητηθή υπό του Διευθυντού.

(3) Οσάκις ο

εργοδότης κατά την υποβολήν αιτήσεως δι' έκδοσιν πινακίδος

εισφορών, ως προείρηται, δεν παρέχει τον αριθμόν Κοινωνικών Ασφαλίσεων του

μισθωτού, η τοιαύτη αίτησις δέον να συνοδεύηται υπό αιτήσεως του μισθωτού προς

εγγραφήν δυνάμει του Κανονισμού 4:

12.--(Ι) Άπασαι αι

εισφοραί τας οποίας ο εργοδότης υποχρεούται

όπως καταβάλη, καταβάλλονται υπ' αυτού εις το γραφείον

ασφαλίσεων το οποίον ο Διευθυντής ήθελε προς τούτο ορίσει ή καθ' όν τρόπον ο

Διευθυντής ήθελεν εγκρίνει αναφορικώς προς ειδικήν τινα περίπτωσιν ή κατηγορίαν

περιπτώσεων.

(2) Καθ' εκάστην καταβολήν εισφορών ο εργοδότης-[*730]

(α) προσάγει τας

πινακίδας εισφορών απάντων των μισθωτών αναφορικώς προς τους οποίους

καταβάλλονται αι εισφοραί·

και

(β) υποβάλλει πιστοποιητικόν εισφορών εν τω καθωρισμένω υπό

του Διευθυντού τύπω.

24.-(I) Πας εργοδότης ή

αυτοτελώς εργαζόμενος όστις παραλείπει να καταβάλη εισφοράς εντός της υπό των

παρόντων Κανονισμών οριζομένης προθεσμίας, υποχρεούται εις την

καταβολήν προσθέτου τέλους υπολογιζομένου εις ποσοστόν επί

τοις εκατόν του ποσού των οφειλομένων εισφορών εν αναφορά προς

τον χρόνον καθυστερήσεως."

I would, also, refer to regulation

11(2) of the Annual Holidays with Pay Regulations 1900 which is relevant to

count 3, regulation 10(1 ) of the Termination of Employment (Pund for Redundant

Personnel) Regulations 1977 which is relevant to count 4 and to regulation 7(1)

of the Industrial Training Authority (Fund paid by employers) Regulations which

are all to the same effect as Regulation 12(1) of the Social Insurance

(Contribution) Regulations, 1980 namely that all contributions which the employer

is bound to pay are paid by him to the [*731] Insurance Office to be designated

by the Director of Social Insurance Services.

That the accused failed to pay to the

Social Insurance Office any of the contributions mentioned in the charge-sheet

and to apply for a contribution card, as expressly ordained by the above

regulations, it has not been disputed but it was proved beyond doubt. That he

has made a sort of arrangement or understanding is irrelevant and is far beyond

what is required of him by the law though it may be relevant with regard to

sentence. Accused has also failed to apply for contribution card as ordained by

regulation 5(2).

In view of my above findings and the

state of the Law as above stated I have come to the conclusion that the prosecution

has proved beyond reasonable doubt, as it was its duty to do, all the charges

against the accused, who is therefore, found guilty on all counts as charged.

Accused found guilty on

all counts as charged.