Supreme Court clarifies employment contract qualification test

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Supreme Court clarifies employment contract qualification test

Whether parties intended to enter into an employment contract is irrelevant.

Ever since the 1997 Groen/Schoevers judgment, the parties’ intentions is a major criterion in assessing whether an employment contract exists. However, in its judgment of 6 November last the Supreme Court made it clear that those parties’ intentions are relevant only for the purposes of determining which rights and obligations the parties have agreed upon. Whether the parties intended to enter into an employment contract is irrelevant. You can read about the practical consequences of this judgment in the blog below.

On 6 November 2020, the Supreme Court ruled that, contrary to what was implied by the leading Groen/Schoevers judgment, the parties’ intentions should not play a role in determining whether a contract is to be considered an employment contract. Hence, in qualifying a contract as an employment contract it is irrelevant whether the parties actually intended it to be covered by the statutory provisions governing employment contracts. The key issue, according to the Supreme Court, is whether the agreed rights and obligations meet the legal definition of employment contract.

Nevertheless, the above does not mean that the parties’ intentions are completely irrelevant when it comes to qualifying a contract. According to the Supreme Court, before addressing the matter of qualification, the first question to be answered is what rights and obligations the parties have agreed on. The Haviltex criterion must be the basis for answering this question. In this respect the parties’ intentions most certainly have an – often important - role to play.

The qualification of an employment contract in a nutshell

In the leading Groen/Schoevers judgment of 1997, the Supreme Court answered the question how to substantively address a dispute on the qualification of a contract. At the time, the Supreme Court, in respect of assessing the existence of an employment contract, not only considered the actual performance of the contract to be important. The parties’ intentions, too, had to be taken into account. Thus, the Groen/Schoevers judgment meant that from that point onwards, any consideration and assessment of the presence or absence of the various elements of an employment contract as laid down by law (work, remuneration and supervision and control), from a labour law perspective also had to include an assessment of the parties’ intentions.

The Supreme Court’s 6 November judgment puts an end to the above practice. According to the Supreme Court, the fact that the parties may or may not have intended to agree on an employment contract should not be taken into account when qualifying the contract. Hence, the parties’ intentions are considered irrelevant to the qualification issue as a whole.

Still, as briefly touched upon above, this does not mean there no longer is any room at all for the parties’ intentions. The Supreme Court concludes that two questions should be distinguished. First of all, based on the Haviltex criterion the rights and obligations that the parties have agreed on need to be established. Logically, the parties’ intentions still play a major or minor role in this respect. Once the agreed rights and obligations have been established based on the Haviltex criterion (explanation), the court can proceed to the next question. On the basis of those agreed rights and obligations it can subsequently assess whether the contract has the characteristics of an employment contract (qualification).

In so doing, the Supreme Court appears to be following the advice of Advocate General Ruth de Bock, in which she argues for a reassessment of the Groen/Schoevers judgment in terms of the parties’ intentions. However, a further reading of De Bock’s opinion shows her proposing a new interpretation of the supervision and control criterion as well. De Bock is of the opinion that working under supervision and control - the authority to issue instructions - should no longer be central and should make way for a new starting point. According to De Bock it is much more important to look at how the work is embedded within the organization and examining whether the work forms an essential part of the business operations. De Bock opines that merely looking at the matters recorded on paper is not enough. The actual and economic reality, too, should be assessed. Since the Supreme Court has failed to comment on this suggestion, the Supreme Court obviously did not want to burn its fingers on a new interpretation of the supervision and control criterion.

Possible practical consequences

The question of whether an employment contract can arise between parties, even if this has not been agreed, is one of the most familiar and most topical issues in labour law. Distinguishing whether a contract qualifies as an employment contract or a contract to perform services is important. Not only in terms of determining any consequences under employment law, such as protection against dismissal, entitlement to continued payment of wages in the event of illness, or mandatory participation in a pension fund. Considering the equal status of the concept of employee under Dutch civil and tax law, answering the qualification issue is equally important for any payroll taxes to be paid. This is why being considered “an employee” has more than just civil law consequences. It also has social security and tax consequences. This means the qualification issue likewise affects self-employed persons without personnel (in Dutch: ZZP’ers) and their principals. All the more so since the independence of part of the Dutch self-employed community can be questioned. For that matter, the 6th progress letter “working as a self-employed person”, published on 16 November 2020, states that the exact consequences of the Supreme Court's judgment on assessing employment relationships are still being studied. So, it remains to be seen whether the envisaged web module as a guide to tax and other sectors will have to be adapted in this respect.

The government's response to the Committee for the Regulation of Work and the report “Het Betere Werk” (The Better Work) published by the Dutch Scientific Council for Government Policy on 11 November 2020, clearly show politicians to also be aware of the above area of tension. After all, in its response the government acknowledges that “further political steps are needed to make choices within the inherent interchange between the principles of adequate protection, a sustainable system, and freedom of choice”.

Ultimately, it is therefore not up to the Supreme Court to make fundamental changes to the qualification framework. It is up to politicians - and, more specifically, the next government - to make these changes.

Marloes van der Duim (Deloitte Legal), Stella Evers (Deloitte Legal), Fraukje Panis (Deloitte Legal) & Kevin van de Wal (Deloitte Global Employer Services)

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