Actual performance is decisive
In employment relationships, the distinction between self-employment and an employer-employee relationship is essential, particularly because of the different rights and obligations involved. A recent ruling by the subdistrict court once again emphasises that it is not the formal agreement, but rather the actual implementation thereof that determines the legal classification of the relationship. In this article, we discuss this ruling and explain what consequences it may have for you.
What were the facts of the case?
A woman performed work for PureCE, a company active in the medical devices sector. Initially, she was employed through a temporary employment agency. In October 2022, the parties entered into a management agreement and the woman was registered as a statutory director. Although this formally gave the impression of self-employment, this turned out to be different in practice. The woman was in fact the only employee and worked under the direct supervision of PureCE. When PureCE was forced to significantly reduce the remuneration for her work due to financial difficulties, the woman agreed to a new management agreement under pressure. Not long after that, she was informed, without written confirmation, that this agreement would be terminated on 31 January 2025.
The woman initiated proceedings before the subdistrict court and argued that she performed her work on the basis of an employment contract, not as a self-employed professional. She argued that she worked full-time for PureCE, did not run any entrepreneurial risk and was fully under the authority of PureCE. After all, she received clear instructions and the amount of remuneration for her work was determined by PureCE. Moreover, this remuneration was continued to be paid during illness and holidays.
PureCE contested this position and argued that the woman was a self-employed professional, as she performed her work through her sole proprietorship. In addition, she was appointed as a statutory director and had control over the performance of her work. According to PureCE, there was no authority relationship and the remuneration was paid on the basis of a fixed rate.
What was the subdistrict court's ruling?
The subdistrict court ruled that the classification of the employment relationship must be based on the actual performance of the agreement. Not only the wording of the agreement is important in this regard, but above all the manner in which the parties actually implemented the agreement.
After all, the woman worked exclusively for PureCE. She was managed by PureCE and did not run any entrepreneurial risk. The fact that wages continued to be paid during illness and holidays also points to the existence of an employment contract.
The termination of the (employment) contract by PureCE therefore did not meet the legal requirements, as there was no permission from the UWV for dismissal on economic grounds and the woman had not agreed to the termination of the contract. Furthermore, the dismissal decision by the shareholders' meeting was invalid. The termination of the employment contract is therefore not legally valid. The subdistrict court ordered PureCE to pay fair compensation, a transition payment and the costs of the proceedings.
Read the ruling here.
Conclusion
This ruling confirms once again that the actual implementation of an employment relationship carries more weight than what the parties have put on paper. Even if a person formally acts as a statutory director and performs work through a sole proprietorship, this may still constitute an employer-employee relationship in legal terms. The decisive factors are the requirements of work, remuneration and the authority relationship as set out in Section 7:610 of the Dutch Civil Code. It is therefore crucial for both employers and employees to critically examine the actual nature of the contractual relationship.
Would you like to obtain clarity about the status of an employment relationship within your organisation or would you like to know whether you are legally protected as a self-employed professional? SPEE advocaten & mediation is happy to help.