Qualification of an employment agreement: even if parties intended otherwise!

Given the fact that employees are well protected from a Dutch employment law perspective an agreement being qualified as an employment agreement will have legal implications. You may think of payment during illness, minimum wages, holiday allowance and protection against dismissal. Whether parties intended to enter into an employment agreement is not relevant for the question if their agreement qualifies as an employment agreement!

Definition employment agreement

Under Dutch law an employment agreement is defined as an agreement under which one of the parties (the employee) obliges him- or herself towards the other party (the employer) to perform work for a certain period of time. This work is performed in service of the other party and in exchange for payment (article 7:610 Dutch Civil Code).Especially the following conditions are relevant for the qualification of an employment agreement: ‘work’, ‘wages’ and ‘authority’ (in service).

Once it has been determined what parties agreed upon in terms of rights and obligations (the explanation phase), it must be assessed if these rights and obligations meet the definition of an employment agreement (the qualification phase).

The qualification phase

In the qualification phase it is determined if the determined rights and obligations meet the definition of an employment agreement. Whether parties intended to enter into an employment agreement is not relevant for the qualification. This means that clauses such as ‘Parties did not wish to enter into an employment agreement’ or ‘This agreement qualifies as a services agreement’ will not be helpful to prevent the agreement of being qualified as an employment agreement. Instead, the actual performance of the agreement by the parties is important.

When determining if parties entered into an employment agreement not one circumstance is decisive. The different rights and obligations that parties entered into should be assessed in relation to each other.

Labour

Labour concerns the work that is performed, which can be mentally of physically. Labour could be active or passive. Sleep shifts may also fall under the definition of labour.

Wages

Wages concern the payment the worker receives for the labour that is performed. Tips do not fall under this definition.

Authority

Whether there is ‘authority’ leads to most of the discussions as this distinguishes the employment agreement from other agreements pursuant to which work is performed, such as the services agreement.

An important characteristic of authority is that the employee performs his or her work in service of the employer or according to the instructions of the employer. The employer should have the possibility to further specify the work task. It is not required that the employer makes use of such authority. The following circumstances could be relevant for the presence of authority:

• prohibition to work for third parties and not having other clients;
• obligation to work at set times;
• not having the possibility to be replaced by a third party;
• obligation to work at a certain place;
• the amount of the payment is not decided by the worker;
• receiving financial incentives related to the (amount of) work performed;
• requirement to use company goods; and
• the work performed concerns the core business of the company.

The foregoing means that even if parties thought to be entered into for instance a services agreement, their relationship could afterwards still be qualified as an employment agreement. This will have legal implications given the fact that in such case the person performing the work (the employee), will be entitled to minimum wags, holiday allowance, holidays, salary during sickness and dismissal protection.

(European) legislation

Legal presumption employment agreement 

On 9 December 2021 the European Commission published a proposal for a directive on improving working conditions in platform work. The proposal includes, amongst others, a legal presumption with respect to platform work(article 4). Under the legal presumption it is assumed that parties entered into an employment agreement if at least two of the circumstances as included in the proposal are met, such as the platform determining the level of remuneration, the platform restricting the freedom to accept or to refuse tasks or the platform limiting the possibility for the worker to work for third parties. Once the European Parliament and the Council of the EU accepted this proposal, member states should implement the directive within two years.

Webmodule

The Dutch government intents to implement a so-called ‘webmodule’, which includes online questions that companies could fill in before hiring freelancers. The goal is to give more certainty of whether a certain assignment can be performed without having an employment agreement. After the questions are answered there are three possible outcomes: i) the service may be conducted outside of an employment relationship, ii) no judgment can be given or iii) indication that there is an employment relationship. The webmodule can be found here. Given the fact that the webmodule is currently in pilot no rights can be derived from the outcome.

Practice

If parties do not intend to enter into an employment agreement it would be advisable to agree on rights and obligations that are not typical to an employment agreement and to make sure that there is no authority over the person that will be performing the work. Including that parties do not intent to enter into an employment agreement is not relevant.

Would you like to know more about the qualification of an employment agreement or do you have any questions about the aforementioned?

Feel free to contact Jaouad Seghrouchni, attorney-at-law at our Employment, Employee Participation & Pensions department and is specialized in flexible employment relationships.