Breaking news: Dutch Supreme Court gives further guidance in a fundamental case on the qualification of a paid employment relationship | JD Supra

On March 24, 2023, the Dutch Supreme Court ruled that Deliveroo riders in the Netherlands are employees despite having entered into services contracts as independent contractors with the company. This ruling will have an impact on independent contractors and the companies hiring those workers. In this alert, we provide you with a summary of the ruling, future legislative plans by the Dutch Cabinet on this topic, and recommended steps forward in practice. For those not yet familiar with how to determine whether a person is working as an employee or as a self-employed individual, we begin with a brief explanation of Dutch law.

Employment agreement

Companies and self-employed persons are jointly responsible for the labor relationship they enter. They must ensure that their legal relationship is clear in order to prevent it from eventually being considered a paid employment relationship.

For both tax and civil law purposes the requirements for paid employment are currently as follows:

1. The labor is performed personally;
2. There is a relationship of authority (hierarchy), where the employer determines how the work must be performed and the employee has to comply with the employer’s instructions;
3. The employee receives remuneration for the work that exceeds an expense allowance.

If any of these requirements are not met, there is no employer-employee relationship and therefore no wage tax/employee insurance obligations for the employer.

On November 6, 2020, the Dutch Supreme Court ruled that the material work relationship between parties is key and that the intention of the parties prior to the performance of labor is of no importance. This ruling was more aligned with the interpretation of employment for tax purposes, where substance over form is mostly key.

Deliveroo ruling

In this new piece of case law, the Dutch Supreme Court emphasizes that all the circumstances of the case must be considered for the assessment of a paid employment relationship. According to the Dutch Supreme Court, the Court of Appeal’s judgment in the Deliveroo case can be upheld, since all circumstances of the case were duly assessed.

For the requirement of having to perform the labor personally (set out under i. above) the Dutch Supreme Court has now ruled that the fact that the riders were allowed to get someone to replace them, which points towards independent contracting, does not stand in the way of qualifying the relationship with the contractor as an employment agreement. The other circumstances of the Deliveroo case made that were nonetheless considered employment contracts. The court took into account that the practical importance of the replacement option for the riders was minor. The same applies to the freedom to work or not to work.

Regarding the second requirement of authority (as set out under ii. Above) the Dutch Supreme Court clarifies that a court may also look at whether the work being performed is organizationally embedded, i.e. whether the work forms part of the company’s core activities, and is therefore part of the normal business of the employer’s company. This must be determined based on how the work is actually performed, in line with case law of the Court of Justice of the European Union and future legislation by the European legislator for the codification thereof. Consequently, the further guidance of the Dutch Supreme court in relation to the hierarchy requirement is not considered decisive, but just one of the factors that should be taken into account when qualifying whether there is a paid employment relationship. This goes against the Advocate General’s plea in her advisory opinion to the Dutch Supreme Court on 17 June, 2022.

Future legislation

The Deliveroo ruling does not stand in the way of the Dutch Cabinet’s plan to reform and future-proof the labor market as published on July 5, 2022. The Dutch Cabinet has highlighted the need for more equality in the treatment of workers, regardless of the form of contract. Whether a person is working as an employee or as a self-employed individual should also be easier to identify under the Cabinet’s plan. This mainly involves clarifying the relationship of authority (hierarchy). 

There are also plans to introduce a legal presumption, meaning that the onus will be on the employer (and no longer the worker) to provide evidence that no employment relationship exists. We will keep you posted on any developments.

Finally, efforts will be made to restore compliance with the rules surrounding work and the assessment of employment relationships. This will mean, among other things, that the monitoring and enforcement of pseudo self-employment will be intensified, with the current enforcement moratorium by the Dutch tax authorities abolished no later than January 1, 2025.

For further background, please refer to our Dutch employment law update: Latest developments over the summer.

What you should do

• Review your contracts with self-employed persons to ensure there is no uncertainty about the qualification of the labor relationship. Although the Dutch tax authorities do not monitor this actively at the moment, the risk of claims from self-employed persons is real.
• To the extent necessary, renew your agreement(s) with self-employed person(s)
• Follow our updates on future legislation and developments at the Dutch tax authorities.