Bill on the clarification of the assessment of employment relationships and legal presumption

Are you an employer and do you (also) work with self-employed workers? Then, a legislative proposal has been submitted for (internet)consultation that may be relevant to you. If you work with self-employed workers and pay them € 32.24 gross per hour or less, this legislative proposal means, in short, that it will be presumed that there is no contractor relationship, but a contract of employment. This means that the worker will have the rights of an employee (continued pay during illness, holiday allowance, an indefinite employment contract after a number of contracts, etc.).

Part of the ‘Hoofdlijnenbrief Arbeidsmarkt’ (‘Letter Outline Labour Market’) as presented by the Minister of Social Affairs and Employment last summer was a focus on the assessment of employment relationships. When is someone to be considered self-employed, and when is someone to be considered an employee? For some time now, ways to better interpret this distinction and to better filter and thus prevent false self-employment have been explored.

A draft legislative proposal in this regard was published for (internet)consultation on the 6^th October 2023. With this publication, you will also find the accompanying explanatory memorandum. Responses to the legislative proposal can be submitted until 10 November 2023. Below, we will discuss the most important parts of the proposal.

Amendment of section 7:610 Dutch Civil Code: ‘in dienst van een werkgever’ (‘in the service of an employer’)

Essentially if there is work, pay and authority, then legally there is an employment contract. But when exactly is there a relationship of authority? This criterion is also seen as the criterion that distinguishes between a contract with a self-employed person (a contractor relationship) and an employment contract.

In jurisprudence, this criterion has often been addressed, however, the legislator has until now remained silent. The legislative proposal seeks to change this and further defines the concept of performing work ‘in the service of an employer’ (from which the authority criterion follows) in the law.

According to the legislative proposal, work is carried out ‘in the service of an employer’ if:

1. The work is performed under work-related direction by the employer, or;
2. The work or the worker are organisationally embedded in the organisation of the employer (this seems to mean that the work itself belongs to the core activities of the employer and that this work is also performed by ‘real’ employees), and;
3. The worker does not perform the work for his or her own account and risk.

It is subsequently clarified that if (a) or (b) is present to a greater extent than performing the work for one’s own account and risk, the work is carried out ‘in the service of an employer’.

The legislative proposal does not further define what is considered as (a), (b) or (c). However, the proposal does provide for the possibility to further define these concepts by lower legislation. This lower legislation may then also determine how a relationship is to be assessed if it involves (a) or (b) and the performance of work for one’s own account and risk to a comparable extent.

The explanatory memorandum to the proposal already identifies some indications that are likely to be included in this regard in lower legislation:

• For the concept of ‘work-related direction’, indications are that the employer is authorised to give directions and instructions on how the worker should perform the work and the worker should follow them and/or that the employer controls the work of the worker and is authorised to intervene on that basis;
• For the concept of ‘organisational embedding’ it is referred to work that is performed within the organisational framework of the employer’s organisation (e.g. within the frameworks, rules and (behavioural) norms applicable there or with the help of operating resources made available by the employer), that the work is part of the core activity of the employer’s organisation, that the work is structural in nature within the organisation and that the work is performed side-by-side with employees performing similar work;
• For the concept of ‘performing work for one’s own account and risk’, indication are that the financial risks lie with the worker, that the worker is responsible for tools and materials himself, that the worker acts independently during the work, that the worker has had an education or has experience that is not structurally present in the organisation of the employer, and that the assignment is only for a short period of time or only for a few hours a week. These are thus contraindications of the existence of an employment contract.

If this legislative proposal is adopted, it will thus be important, when entering into an employment relationship and especially if you want to enter into a contractor relationship, to consider the aforementioned points and check whether these will apply in practice. If there is work-related direction or organisational embedding and the other criteria of an employment contract are also met, there is good chance that the relationship qualifies as an employment contract and not as a contractor relationship, regardless of what you as an employer and the worker qualify the relationship as. The hourly wage paid also plays a role here (see below).

Legal presumption of an employment contract: hourly wage

Additionally, a legal presumption regarding the hourly wage has been included in the proposal. Previously, such a presumption based on the hourly wage was dismissed, but now it has been included after all: if a worker performs work for another person for remuneration, and that remuneration is no more than € 32.24 per hour, it is presumed that this work is carried out on the basis of an employment contract. The maximum amount of the hourly wage will increase in percentage with the statutory minimum wage.

For you as an employer, this legal presumption means in particular that a self-employed worker working for you, at an hourly rate below € 32.24, could invoke the legal presumption either with you or at the court and claim that there actually is an employment contract in place instead of a contractor relationship. While it is possible to refute this legal presumption, this requires good arguments. This therefore makes it easier for the (false) self-employed to invoke the existence of an employment contract.

In short

By including the changes as discussed above, the government aims to combat false self-employment, but also to provide clarity for self-employed and employers on how they can shape their relationship without qualifying as a contract of employment.

We look forward to the reactions from the (internet)consultation and will follow the developments in this area for you.