Sometimes a company, for various reasons, prefers to engage a self-employed contractor rather than an employee for the work. The work is then carried out on the basis of a “contract for services”.
In the Netherlands there is a large degree of freedom of contract regarding the content of a contract. With regard to the freedom to choose the type of contract, in this case the choice between a contract for services and an employment contract, that freedom is more limited. This has mainly to do with the protective purpose of employment law towards the employee (which is separate from the tax assessment of the working relationship), which affects that freedom of choice. Although there was still some freedom of choice, unfortunately, due to the new ruling of the Supreme Court of 6 November 2020, that freedom of choice has become even more limited. Exactly how, and what consequences that has for engaging self-employed contractors, you can read below.
From the old to the new Supreme Court standard
Until 6 November 2020, in short, the legal rule was that when answering the question of whether there is an employment contract (or a contract for services), both the parties’ intention and the actual performance of the contract are relevant. So no weight is given to the fact that the contract is headed “contract for services”. The parties’ intention in fact means: what did the parties actually want, intend, when concluding the contract. In the previous Supreme Court ruling, it considered a claim by a tax specialist, Mr Groen, who also occasionally taught at the educational institution Schoevers and did so as a contractor (self-employed). Schoevers terminates the arrangement at a certain point, and Mr Groen argues that he was actually an employee and therefore must continue to be paid wages as long as the employment contract has not been lawfully terminated (read: dismissed through the court). In this case, the Supreme Court does consider it relevant that Mr Groen’s intention, when concluding the contract, was explicitly directed at entering into a contract for services. Partly in view of his social position, i.e. his education and experience with this subject matter from a tax perspective, he cannot later go back on that. Especially since no authority relationship had arisen either.
After 6 November 2020, the Supreme Court holds that the parties’ intention is no longer relevant. This means that, when assessing whether the contract for services actually and therefore legally amounts to an employment contract, the will of the self-employed contractor when concluding the contract, however explicit, no longer plays a role. So even if the self-employed contractor did not want to enter employment, they can nevertheless later rely on the changed circumstances in which they actually came to work as an employee, i.e. under the employer’s authority. Regardless also of what their social position is (education, financial situation, experience), the will therefore no longer plays a role. This makes sense in itself for low-skilled staff, because they sometimes cannot properly foresee the financial and legal consequences of their choice. However, for highly educated self-employed contractors, in my view, that is different. An expensively engaged self-employed contractor is better able to make those choices and protect themselves against illness and unemployment.
What does this mean for practice now?
Despite the fact that the more highly educated and better-paid self-employed contractor knows better what they are doing, they can now switch much more easily if it suits them better, particularly upon termination of the assignment. In this time of crisis, in which clients are rapidly shedding their flexible workforce, that can have quite some consequences. I can well imagine that, because of this ruling, claims by self-employed contractors based on employment law will increase. The fact remains that an authority relationship still has to be demonstrated by the self-employed contractor in order to cash in on that switch (read: among other things, to claim continued pay). Particularly in those situations where the authority relationship nevertheless arose over time, without this being wanted at the outset, the contract therefore changes legally into an employment contract. In that case, the worker can also invoke dismissal protection and continued pay during illness. Whether the client had that in mind or not.
How can you reduce the self-employment risks after the new Supreme Court ruling?
To reduce the aforementioned risk, there are a number of points of attention. Do not rely on a self-employed contractor stating that they absolutely do not want to be an employee. That will, after all, no longer play a role afterwards in the assessment. The only thing that will be looked at is whether an authority relationship nevertheless arose, based on the actual manner of cooperation and the content of the contract.
For now, it is therefore becoming even more important for the client to ensure that:
- The contracts with self-employed contractors do not contain any agreements or elements resembling those of an employment contract. Always have an employment and contract law lawyer look at such a contract;
- No authority relationship actually arises during the performance of the contract. Have this assessed objectively, i.e. externally;
- The self-employment relationship does not last too long, to minimise the risk of a change into an authority relationship and dependency. In principle no longer than 12 months.
- If the relationship lasts longer than 12 months, do not engage the self-employed contractor full-time, and regularly check whether the self-employed contractor also has other clients. Whether they are protecting themselves against loss of the assignment and illness, etc., and thus are not becoming too dependent.
Questions or advice?
Do you, as an entrepreneur, need help assessing your existing self-employment contracts, need help drafting such contracts, or have questions about your self-employed contractors, or need help/advice? The Legal Company can of course help you with this. We specialise in contract and employment law for (international) businesses. Contact us via our contact form or call 020-3450152.
Masterclass Flexible working relationships, 15 and 22 April 2021
Employers and clients can limit the financial and legal risks of self-employed contractors and employees. You can learn exactly how during our online masterclass Working with flexible workers on 15 and 22 April 2021. More information and registration.
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Nothing changes as constantly as laws and regulations. Please note that our blogs may no longer reflect current laws and regulations and may therefore be outdated. If you have questions or an issue relating to this blog, or wish to obtain legal assistance, please contact us.
