Reforming the labour market is high on the political agenda. The current caretaker government has developed concrete plans for this in recent years. In doing so, the government has focused in particular on finding a better balance between employees and self-employed workers.

Background

In recent years, more and more people have started working on the basis of a contract for services. For part of this group, there is no doubt that they should be regarded as self-employed workers – and therefore entrepreneurs. For others, however, it is less clear whether they should be classified as employees.

If this shift towards self-employment is not sufficiently regulated, it can have significant risks and consequences for both workers and society. Employees are protected by employment law, whereas self-employed workers are not. There are also major differences in social security protection and taxation.

The government therefore intends to amend the legislation to ensure that working on the basis of a contract for services remains attractive only for genuine self-employed workers – and therefore genuine entrepreneurs.

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

An important cause of the shift towards self-employment is, according to the government, that there are currently no clear and manageable tests for determining whether an employment contract exists. In other words, the government wants to reduce the differences between employees and self-employed workers and tackle false self-employment by clarifying when an employment contract does or does not exist. This should also make enforcement by the Dutch Tax and Customs Administration easier.

To discuss the bill in more detail, it is important first to understand what the law currently provides.

Current definition of an employment contract

The law contains a definition of an employment contract. If the statutory requirements are met, an employment contract exists.

Under the current legal definition, an employment contract exists where: (1) a person performs work, (2) in return for remuneration, and (3) in the service of another party. The latter requirement means that there must be a relationship of authority between the worker and the employer.

Whether a relationship of authority exists is often the most difficult part of the assessment. The lack of clarity lies mainly in determining whether there is such a relationship of authority. For example, this issue was central in the Deliveroo case. The Supreme Court had to decide whether a relationship of authority existed between Deliveroo and its couriers.

Proposal: clarification of the “in the service of” criterion

The bill aims to provide more statutory guidance for assessing whether an employment contract exists. The government intends to further elaborate the “in the service of” criterion, i.e. the concept of authority, in legislation.

Expansion of the statutory framework

Work is deemed to be performed in the service of another party under the bill if:

1. the work is performed under substantive direction and supervision by the engaging party; or
2. the work or the worker is organisationally embedded in the engaging party’s organisation; and
3. the worker does not perform the work at their own account and risk.

In addition to the statutory test: a list of indicators

It is intended that a list of indicators will be established by Order in Council (delegated legislation), further elaborating the elements referred to above under A, B and C. In principle, this list of indicators is exhaustive, meaning that other factors will not play a role in determining whether an employment contract exists.

In the explanatory memorandum accompanying the bill, the government has already drawn up a list of indicators. For those interested, these indicators are set out at the end of this article.

Assessment = weighing the elements

The assessment of whether a relationship of authority exists always begins with an examination of elements A and B. An employment contract can only exist if element A and/or element B is present.

If element A and/or element B (taken together) carry more weight than element C, an employment contract exists. If element C carries more weight than element A and/or element B, no employment contract exists.
Where element A and/or element B (taken together) are in balance with element C, regard must be had to a number of additional indicators (these indicators are listed below under “Element C+”).

Proposal: legal presumption based on an hourly rate

In addition to clarifying the “in the service of” criterion, the government proposes introducing an additional legal presumption based on an hourly rate. Where work is performed for a fee of EUR 32.24 per hour or less, it is presumed that an employment contract exists.

In conclusion

In our view, the legal presumption is a useful and effective tool for providing greater clarity as to whether an employment contract exists. This is particularly so because we question whether the other part of the bill—namely the codification of the relationship of authority in legislation—will achieve its intended objective. Ultimately, it remains a matter of weighing a range of circumstances, just as is currently the case under the existing body of case law. And that remains a difficult exercise.

Need advice on whether a working relationship can be structured as a contract for services? Contact us!

Indicators

If the bill is adopted, the existence of an employment contract will in future have to be assessed on the basis of the following indicators:

Element A (substantive direction and supervision):

• The engaging party has the authority to give directions and instructions regarding the manner in which the worker must perform the work, and the worker is required to comply with those directions and instructions.
• The engaging party has the ability to monitor the worker’s performance of the work and is authorised to intervene on the basis of that monitoring.

Element B (organisational embedding):

• The work is performed within the organisational framework of the engaging party’s organisation.
• The work forms part of the core activities of the organisation.
• The work has a structural and ongoing character within the organisation.
• The work is performed side by side with employees who carry out similar work.

Element C (working at one’s own account and risk):

• The financial risks and rewards associated with the work are borne by the worker.
• When performing the work, the worker is personally responsible for providing the tools, equipment and materials required.
• The worker possesses specific education, work experience, knowledge or skills that are not structurally available within the engaging party’s organisation.
• The worker presents themselves to third parties as an independent professional while performing the work.
• There is a short-term engagement and/or the worker performs only a limited number of hours per week.

Element C+ (whether the worker generally conducts themselves as an entrepreneur or as an employee in the market in relation to similar work):

This may include, for example:

• The worker has multiple clients each year;
• The worker invests time and/or money in building a reputation and acquiring new clients or customers;
• The worker has made business investments of a meaningful scale;
• The worker conducts their affairs administratively as a self-employed entrepreneur: they are registered with the Dutch Chamber of Commerce (KVK), are registered for VAT purposes, and/or are entitled to tax benefits available to entrepreneurs (such as entrepreneurial tax relief schemes).
• If little or no weight can be attached to these factors, this may indicate that the worker generally conducts themselves as an employee in the market, rather than as an entrepreneur.

Do you have any questions following the above? If so, please feel free to contact the lawyers at Ko & Co Advocaten for a no-obligation consultation.

Hian Li Ko | Ko & Co Advocaten