Court examines shop's scheme of paying staff only when customers are present

A dispute between a company and Latvia's State Revenue Service (VID) has reached the courts over how a retailer counts and pays for its shop assistants' working hours.

The company argues that its system is lawful: employees may choose to take an unpaid break of up to four hours a day. Under this arrangement, whenever there are no customers in the shop, the employee is formally considered not to be working, and no wage is paid for that time.

The tax authority, however, sees the practice differently, describing it as an attempt to reduce tax obligations. According to VID, an employee who remains at the workplace and is ready to serve a customer at any moment is, in effect, still performing work duties even during lulls with no shoppers present. That would mean wages — and the associated taxes — should be paid for those periods as well.

The core question

At the heart of the case is whether an employee's presence at the workplace, without actively serving a customer, counts as working time under the law. Should the court find that the arrangement breaches legal requirements, the ruling could affect other retail businesses using similar approaches to tracking working hours.

The outcome could set an important precedent for the retail sector, where customer traffic often fluctuates significantly throughout the day and employers look for ways to cut costs during quieter periods.