Labour market reform is on the political agenda. The (now fallen) cabinet has made concrete plans for this in the recent period. In particular, the cabinet has focused on finding a better balance between employees and self-employed workers.
In recent years, more and more people have started working on the basis of commission contracts. For some of those people, the question can be asked whether they are actually self-employed – and therefore entrepreneur – or whether they should actually be classified as employees after all.
There are significant risks associated with this false self-employment, according to the government, both for the worker and for society. Employees are subject to labour law, while self-employed persons are not. There are also big differences for social security and taxation.
The government therefore wants to amend the applicable regulations so that working on the basis of a contract for services is only attractive for real ZZP’ers – and thus for real entrepreneurs.
Legal proposal Clarifying assessment of employment relationships and legal presumption
A major cause of false self-employment, according to the cabinet, is the lack of a clear and manageable test to assess whether there is an employment contract. In other words, the government wants to include more tools in the law to assess whether or not there is an employment contract. This should also make enforcement by the Tax Authorities more feasible.
To discuss the bill in more detail, it is important to know what is currently regulated in the law.
Current definition of employment contract
The law contains a definition of employment contract. If the conditions mentioned in the law are met, then there is an employment contract.
Currently, an employment contract exists when a person is obliged to (1) perform work personally (2) in return for pay and (3) does so ‘in the service of’ another person. The latter means that there must be a relationship of authority between the worker and the work provider.
Whether these three conditions are met in a given situation is not always clear in practice. The lack of clarity is often particularly in the question of whether there is a relationship of authority between the parties. See, for example, our blog regarding Deliveroo deliverymen in which the Supreme Court answered the question whether a relationship of authority existed between Deliveroo and the deliverymen.
Proposal: clarify ’employed by’ criterion
The proposal means that the cabinet wants to give parties more legal tools to assess is an employment contract. The cabinet wants to further elaborate in the law the criterion ’employed by’, or the concept of a relationship of authority.
Extend legal rule
Based on the proposal, the performance of work in the service of another is said to have occurred if:
- the work is performed under work-related direction by the work provider; or
- the work or the worker are organisationally embedded in the organisation of the work provider; and
- the worker does not perform the work for his own account and risk.
Supplement to legal rule: list of indications
It is intended that a list of indications will be established by order in council, in which the elements mentioned above under A, B and C will be elaborated. That list of indications is in principle limitative, meaning that other factors do not play a role in determining whether an employment contract exists.
A list of indications has already been drawn up by the government in the explanatory notes to the bill. These indications are included at the bottom of this article for the enthusiast.
Assessment = weighting elements
Assessing whether there is a relationship of authority always starts with the assessment of elements A and B. Only if elements A and/or B are present, can there be an employment contract.
If element A and/or B (together) outweigh element C, there is an employment contract. If element C outweighs element A and/or B, there is no employment contract. If element A and/or B (together) balance element C, then additional indications are considered (those indications are included in the list below under ‘Element C+’).
Proposal: legal presumption based on tariff
Besides clarifying the criterion ’employed by’, the government proposes to introduce an additional legal presumption based on a rate. If work is performed for payment of (less than) EUR 32.24 per hour, an employment contract will be presumed.
As far as we are concerned, the legal presumption is a good and useful means to get more clarity on whether there is an employment contract. This is all the more true now that we wonder whether the rest of the bill, i.e. elaborating on the relationship of authority in law, will be effective. It remains a weighing up of a range of circumstances, as it does now based on case law. That remains tricky.
Need help assessing whether work can be done under a commission contract? Get in touch!
If the legal proposal is adopted, in the future, whether an employment contract exists will have to be assessed according to the following indications:
Element A (work-based management):
- The work provider is authorised to give directions and instructions on how the worker should carry out the work and the worker must follow them.
- The work provider has the ability to monitor the work of the worker and is authorised to intervene on that basis.
Element B (organisational embedding):
- The work is performed within the organisational framework of the work provider’s organisation.
- The work is part of the organisation’s core business.
- The work is structural in nature within the organisation.
- Work is done side-by-side with employees doing similar work.
Element C (at your own expense and risk):
- The financial risks and outcomes of the work lie with the working.
- When performing the work, the working person is responsible for tools, aids and materials.
- The worker possesses specific training, work experience, knowledge or skills, which are not structurally present in the organisation of the work provider.
- The worker will step out independently while working.
- There is a short duration of the assignment and/or a limited number of hours per week.
Element C+ (whether the worker generally behaves as an entrepreneur or an employee in the economy in relation to similar work):
This could include:
- The working has several clients per year;
- The working spends time and/or money on gaining a reputation and finding new clients or customers;
- The working has business investment of some magnitude;
- The worker behaves administratively as an independent entrepreneur: is registered with the Chamber of Commerce, is a VAT entrepreneur and/or is entitled to the tax benefits of entrepreneurship (such as entrepreneurial allowances).
- If there is none or limited evidence of this, then there is a worker who generally behaves as an employee in economic life.
It follows from the draft explanatory memorandum that element-C, entrepreneurship, should in principle be included in the legal relationship under assessment (or internal entrepreneurship). Under circumstances, entrepreneurship outside the legal relationship may also be relevant. This is referred to as the so-called C+.
Do you have any questions following this blog? If so, please feel free to contact Hian Li without any obligation!