Netherlands Employment Law Update: Assignment or employment contract? That’s the question….

Both in politics and in case law, a ‘hot issue’ is what exactly is the difference between an employment contract and a contract of assignment. This difference is of great importance. Unlike an employment contract, there is no obligation to continue to pay wages in the event of illness, there are no prohibitions on termination and the person who performs the work is responsible for his or her working conditions.

Tax advantage

Many self-employed people voluntarily opt for an assignment agreement. It is true that they do not have the protection of labour law, but it provides a lot of freedom. They can work when they want, for whom they want and where they want. And because the government stimulates entrepreneurship fiscally, it often yields more net. On the other hand, there is also a group of self-employed people who have no choice because they cannot perform their work other than by means of a contract of assignment, simply because no employment contracts are offered for their work.

But, if the agreement is not continued or the self-employed person becomes ill and loses his or her income, he or she sometimes wants to take the position that there was ‘actually’ an employment contract. Sometimes it is fairly clear, think of an external ICT professional who is available on demand to keep the ICT running for a company where ICT is not the core business. That will be a contract of assignment. But sometimes it is less clear, think of the secretary who rents herself out to that same office through her sole proprietorship while other secretaries who are employed there also work there. This can be an assignment agreement, but it can just as easily be an employment contract.

What’s the difference?

What is the difference between an employment contract and a contract of assignment? An employment contract has the characteristics that (i) personal work is performed, (ii) that is done against payment and (iii) there is a relationship of authority. In practice, an assignment agreement often has the same characteristics. And therein lies an important part of the problem.

Because politics has not yet been able to solve this problem, the Supreme Court issued an important ruling on this in 2020. According to the Supreme Court, there is a two-stage rocket. First, it must be established which rights and obligations the parties have agreed towards each other (the interpretation phase). It must then be determined whether these rights and obligations comply with the legal obligations for an employment contract (the qualification phase). And in the latter question, the intention of the parties is irrelevant.

Viewpoints

Because we have seen before that the rights and obligations associated with an employment contract (personal work, wages and a relationship of authority) can often also be found in an assignment agreement, we are not there yet. So the Supreme Court came through again, this time in 2023 with the so-called Deliveroo ruling.

In the Deliveroo judgment, the Supreme Court formulated a number of characteristics that may be important in the question of qualification whether or not there is an employment contract. For example, the Supreme Court considers it important, but not necessarily decisive: (i) whether the worker must perform the work personally and (ii) whether there really is ‘entrepreneurship’. Is the relationship such that the worker can really behave and behave like an entrepreneur? Is he or she at risk of business? Can the conditions, the rate, being able to work for other clients and the duration of the assignment be freely negotiated? Finally, the Supreme Court considers it important (iii) whether the work is a core activity of the company, or at least whether the work is embedded in that company. If the latter is the case, there is a considerable chance that there is a relationship of authority that may indicate an employment contract.

Controversial?

Clearer, but still not really clear. In December 2022, the government announced that it would come up with legislation that should provide further clarity when something qualifies as an employment contract and when as a contract of assignment. Issues such as pension or compulsory disability insurance for self-employed persons must also be discussed. There is a good chance that this topic will be declared controversial and will only be picked up again when there is a new cabinet.

It can be guessed that a cabinet on the right will want to emphasize entrepreneurship and therefore the contract of assignment, while a cabinet on the left will want to emphasize legal protection and therefore the employment contract. Exciting, but until then, we will have to make do with the views of the Supreme Court.

By Höcker, Netherlands, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact netherlandslabor@transatlanticlaw.com

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