'Party intent' no longer relevant for qualification of the employment contract.

Last Friday, on November 6, the Supreme Court ruled that the "party intent" is no longer relevant for the qualification of the employment contract. This judgement is for example relevant for contractors who have entered into a services agreement, but who are in fact working as employees. Think of freelancers and other contractors.

What is relevant to the qualification question is the actual execution of the agreement.

The question that precedes to this question is which rights and obligations the parties have agreed upon ("Haviltex criterium").

If the three following conditions (Article 7:610 of the Dutch Civil Code) are met, the agreement qualifies as an employment contract:

  • Wage 
  • Labour
  • Authority relationship

For example, the aspect of 'authority' often leads to discussion and distinguishes the employment contract from the services agreement. It is a thin line between either authority (article 7:610 BW) and instruction (article 7:402 BW). The Supreme Court does not give further guidelines in its ruling for this distinction, while the Attorney General De Bock had made a proper start for this in this case.

What matters according to the Supreme Court is whether the agreed rights and obligations meet the legal description of the employment contract. If, for example, the contractor with a services agreement factually performs work for a company under the same conditions and relationship of authority as other employees within the company, he/she may be entitled to the same employment benefits, whatever parties’ intent at the start of the contract and the form of contract. This can lead to, for example, wage and pension entitlements, continued payment in the event of illness and protection against dismissal.

The qualification of employment is also important for the tax authorities to assess whether an employment relationship exists, to determine whether income tax should be withheld and whether social security contributions should be paid. The Tax and Customs Administration has its own assessment framework and also looks at the actual implementation. In this sense, the Supreme Court appears to rule somewhat more in line with the assessment criteria of the tax authorities.

This Supreme Court judgment is not entirely surprising. Earlier case law already pointed in this direction. In addition to the parties’ intent, the actual execution of the agreement was always relevant and had to correspond. The Supreme Court has now ruled that the party intent is no longer relevant for the qualification question.

With this judgment, the Supreme Court creates a little more clarity in the ambiguous landscape of the contractor vs. the employee, but leaves enough questions unanswered. As far as I am concerned, this judgement offers not enough guidance, and can only be regarded a prelude to further legislation. A job for the legislator I would say.

The full ruling (In Dutch) can be found here. Attorney General De Bock's conclusion can be read here.

For questions regarding this topic you can contact Marleen van Woerden, labour law attorney at Blenheim. 

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